Hello and welcome to Latika Takes, a podcast with me, Latika Bourke. Hi, welcome back to the podcast. I've been on a little bit of a break, not necessarily from work, but just from the podcast over the summer. I hope you had a nice break for those of you in Europe. Today I'm in Stavanger in Norway. First trip to Norway, beautiful place. And I'm at the ONS conference, which is a slight gear shift for me because this is an energy conference as opposed to a security or foreign affairs conference.
Nevertheless, as I'm very often fond of saying, everything is security these days, and energy policy, as we have seen with the wars in Ukraine and Iran, is absolutely security policy. So I was very fortunate to have a half an hour session on stage at the ONS conference with Christian Bruch. He is the CEO of Siemens Energy, the German company that is overseeing the energy transition in countless countries, from the United States to Syria to all sorts of places, and obviously across Europe.
And we had a great chat. It turned out to be more geopolitical than I was initially anticipating, and I asked the team at ONS and Siemens if they could allow me to reproduce this discussion here because I thought it was so interesting, and also very different from me to be able to nab a business figure and ask how geopolitics is shaping boardroom decisions. And I'm very, very grateful to the team at ONS and to Christian and his team for allowing me to reproduce this chat here. I hope you enjoy it.
Good afternoon. Welcome to the final session here on this stage. My name is Latika Bourke. I am a journalist based in London for the Australian news publication The Nightly. And my guest today really doesn't need much of an introduction because even if you've spent five minutes here at ONS this year, you already know him. But please allow me to introduce him. He is Christian Bruch. He's the CEO of Siemens Energy. And not for long can we say Siemens Energy—you're having a rebrand, is that right?
We have a rebrand coming up. There's a history around it. Obviously, it's for us pretty big thing because we all love our heritage and it's always great to work for a company which has been brought up by a founder. But yes, towards the year end, we will start a rebranding process which will take some time, and then we are called Omnitara.
And what message are you trying to send with this?
Well, first of all, the message which we don't want to give—let me start this way—is that we didn't like Siemens or Siemens is not a great brand. Siemens is a super great brand, but obviously this was, when we spun off in 2020, one of the things we knew that was coming. Omnitara comes from 'omnis terra', right? I mean, the whole world. And obviously there are a couple of things in it. The one thing is we are operating in the whole world. We are in most of the countries of the world. Roughly one-sixth, one-fifth of the world power production comes from our technologies, and we take pride of being able to do business in countries which are just about to be built up, right? And that is one thing.
And the other thing is obviously we try to get our arms around a world which needs also protection and needs balance, and needs to find ways on how to get the different interests balanced out in a way where we can bring in technology, but also the ability to execute. And that was the logic in terms of Omnitara. But obviously now we have to fill it with perception, we have to fill it with life, and this will be a long journey. Everybody knows us as Siemens or Siemens Energy, so we are very well aware we have a couple of years ahead of us, and we'll start the big activities towards the end of the year.
And will we see anything from you in a business application sense that is different in Omnitara compared to Siemens Energy?
No, literally not. It's really a rebranding exercise of the company. What you do see us doing, and we are under transformation since the start actually as a company, but what you will see us becoming is more electrical going forward. You know, we do a lot of different things, a lot of different businesses, and we will continue to do a lot of different businesses, but the majority of our investments goes on this electricity growth, which is overproportional. Because you have two things: energy is growing anyway, but the share of electricity is growing even more.
We are investing a lot of money into the expansion of our own capacities, but we're also investing a lot of money into innovation and development of new products on the portfolio, particularly if it comes to the electrical side. And this is why I would say, if any change, then you would see us becoming more and more electrical.
So the whole world is going through enormous shock at the moment. How do you place your role, Siemens Energy, in shepherding your clients through these shocks, keeping in faith with your own ambitions for decarbonization, but also the new realities that have hit governments and that have hit consumers particularly hard with inflation?
Yeah, I mean, for us it's obviously also really, we are trying to be a good partner for our customers in accompanying them through this journey of, on the one side, getting access to energy, but at the same time also decarbonize our industry. Particularly at the current point in time, it's a lot about execution, much more than we talk very often about ambitions and elements. At the moment, in a world which gets more departed, where supply chains are cracking, where you have obviously to operate in areas under war threats, it's also about the ability to execute.
So what we're trying to bring to our customers is a good understanding of we deliver what we say and we bring it to the ground, because at the end it's about the physical infrastructure which gets there in time and in the quality. And this is why we take a lot of effort in terms of improving the way we operate. We always say the technology we have is a little bit the entry ticket in our markets. The way we try to convince customers is by the way we operate: how do we react on crisis? How do we react on unexpected situations? How can we circumvent the straight of if you have equipment down there? How do we keep operating while drones hitting our sites? And that is something where—
And how are you managing each of—
I'm very proud of... First of all, this is what I'm saying, we are in most of the countries of the world. We are in the Middle East, obviously relatively present; we have around 4,000 people in the Middle East. And I was also there on the sites when the drone attacks came. What we're trying to do is, first of all, keeping our people safe, first priority. But obviously coming with temporary things: how do you build temporary shelters in case drone attacks come, right? But I was very proud that we kept the operations running—
The entire time. And I think we were one of the few companies who never left. We are building at the moment power plants in Kyiv, right, where we're trying to find new ways. That is a different way on how to build power plants, on how to make sure that you can do it at this time, but also that it's a little bit more resilient against attacks. And that is a learning.
Which means what? How is it more resilient?
That's more about shelters. Do you put things in the ground which you normally would not put in the ground? What are mechanisms to at least survive the first wave of a drone attack? You cannot survive a rocket, but you can survive a drone. And that is something where the design of buildings, of walls, of housings changes. And this is what we're seeing obviously also now happening in the Middle East. Customers come and say, 'Look, what can you do to make that resilient if an attack comes?' That's new, right? But this is where we're trying to be a good partner to our customers in terms of execution.
Do you have your own counter-drone defenses now in Iran? Is this something you're looking at doing?
We are looking at doing it, and we are obviously engaged with drones anyway because we are doing the surveillance of grid infrastructure. And that has nothing to do with war, right? Just in terms of maintenance, flying over it, doing AI recognition of the pictures, and trying to figure out maintenance requirements. So we have drone capabilities anyway. Whether we are the best ones to afterwards have the interceptor drones is a different question, but we are looking at it.
Interesting. I mean, these are things you would never have thought when you took on this job.
No, I have to say. I said it before, you know, in Germany when I was young you have the system: you either join the military or you join the social service. I joined the social service; I didn't go to the military, right? So it was something very far away from me. I worked two years in a hospital instead of going to the military. And now my regular speaking partners are generals and military, and I'm part of the security conference. I'm doing this because I do see the need, I do see the necessity to strengthen the military and the army and the defense capabilities. That's a very different world.
On the one side, it's scary. At the same time, I think it is an opportunity in the sense we can really contribute something. At the end, the hope is that we can contribute something to a more secure world, to a world which has access to energy. And this is what we're trying to do, but it's different from what all I expected.
So let's go to the tension involved with this, because in Germany obviously huge amounts are now being poured into defense. We have seen security now take maybe a little bit of a greater priority over the trilemma that you deal with in energy, including of course affordability and supply. How do you see government? What is your advice to government, particularly in Germany, about finding the balance now between the path to decarbonization or, if it is a choice, having to spend that money on your defenses?
First of all, I think it's not that easy of a choice, and I think it's not even a trilemma. I always say, in the meantime, you have probably minimum five criteria. One is resilience in terms of are you able to withstand attacks, whatever it is—sabotage or I don't know what. And the other thing is speed, access to electricity, because particularly in the world of AI, speed or access to energy plays a role whether you have the supremacy on an AI model or not. So it's getting even more complex. And I think that is not an unrelated choice. We called it a trilemma because it's interconnected.
I think there is not such a fundamental change that you would say you throw all sustainability ambitions out of the window just because you move to security or so.
But I hate this straw man because it's not really about yes or no. Isn't it about the short-term pace of this journey?
The point is, and I think this is—
As opposed to the long-term goal.
Yeah. No, I think there is no short-term solution on energy. It always costs time. And what I'm trying to explain to governments particularly is the grass does not grow faster just because you pull on it. So you cannot say, 'Let's now change everything in two years.' You need to make sure that you get into a relatively long-term consistent strategy to build up the supply chains, to build the factories and everything, and having this strategy executed over decades. Our energy system has been built over decades; don't change it in five years just because you want it.
And that is something where this balance between the different things is also not so easy to flip around just because the boundary conditions change. And this is what I'm trying to explain to governments. We are on a trajectory which a lot of things, honestly, in Europe have been done well, and I think we sometimes are too negative.
Give me some examples of that. I think it is very important to actually say when Europe is doing well.
We have a strong business also on the electrical side. Europe is the most interconnected region in the world if it comes to the electricity grid or the energy grid. That's fantastic, right? And we have a very strong interconnected structure which allows us to operate very different sources of generation on it, from hydro in Norway to solar in Spain to nuclear in France to—
Well, not in Germany anymore.
Yeah, but obviously there's other things in Germany. But anyway, right? But it is a great opportunity which sometimes is underestimated. The mistake we make, I think, is, first of all, we operate lots of different markets on that same system. While the system is interconnected, we don't operate it as an interconnected system. Why do we have 27 or 28 energy markets, or 30 energy markets, in that small region, right? I don't get it. You can make that much easier and actually create value of this.
And the other thing is we should not fool ourselves in Europe that we get cheaper energy costs compared to the US or the Middle East, right?
Because the boundary conditions are different, right? You will always have cheaper renewable costs in Saudi than in the north of Germany—sorry to say, there's a difference in sunshine. And you will have different gas costs in the US with all the shale compared to landed cost in Germany.
But does that mean that's an acceptance that Europe cannot be competitive on manufacturing?
No. This is why I'm saying you have to... The question is: what is competitiveness? And if you believe that competitiveness is cheap, then you're on the wrong track. You will not be cheaper in energy just because you want it, but you can build a competitive industry on a system which is resilient, reliable, where maybe the power cost is a bit higher. But you also have to make sure that the assets you build, for example grid infrastructure, gets used to the maximum.
At the moment in Europe, one mistake I think we do: we build infrastructure relatively expensive, spend billions on it, the amount of electricity is not really increasing in Europe, but you should electrify because you want to use these assets to at the end get it per unit cheaper. And this is, I think, where we have to get better. But also this discussion around energy costs and competitiveness in industry: one thing, let me talk from my own country Germany, the majority of the business is not energy-intensive. High energy cost is absolutely a problem for energy-intensive industries—chemicals, metal, or whatever, I get it, right?
But that's not the majority of the jobs. The majority of the jobs is companies like me—factories, fabrications, manufacturing. I'm not making a decision on energy costs. If I place a factory, I make it on productivity, on availability of workforce, on bureaucracy in the country, and other things. So that is what you as a country can relatively easily influence. The energy cost is a bit a given of the boundary conditions, and then you have to see what can I do with the conditions I have.
I think what Europe can build is a relatively diverse energy system across all the generation sources, which is better interconnected between the different countries than in all other parts of the world, which gives more reliability and more resilience. And please, please, please, at one point in time, have an integrated energy market across Europe.
So I want to take you back to the tension we were discussing before about this need for Europe to rearm at the same time as progress decarbonization. We've seen, perhaps whether it's accurate or not, but a general acceptance in the public that maybe they're willing to pull back on the pace of carbon mitigation measures in exchange for a more affordable lifestyle because of the inflation shocks. Do you see this reflected at all? Do you think that the pace of decarbonizations for you is slower as a result of war in Ukraine and the Strait of Hormuz?
First of all, I would say if you don't have security and if you don't have access to electricity or energy, you have nothing, right? And this is why obviously priority is making sure that you have a resilient system. But what I'm not seeing is a deliberate move away from the idea and logic of sustainability. What I'm seeing is a more realistic discussion on how systems going to evolve. I would also have said, we are in all the areas—we are in renewables, we make green hydrogen, we do gas turbines. So I believe we are not biased on the source of energy.
But I think there were some of the discussions over the last years which were also unrealistic in the speed in terms of how to convert the system. And people now take obviously cost into account, and what we have to achieve with the energy transition is also that competitiveness does not get a victim of the energy transition. I mean, it is something which is in the equation because you need industry, you need obviously to develop. But I get a lot of questions to say, 'Do people now throw sustainability out of the window?' I'm not seeing this, also not from the investor side. If I talk to my investors or investors into projects, ESG and sustainability absolutely plays a role.
