Ignacio Galán Chair of Iberdrola: Energy transition, permits, speed and values.

0:00Hi everyone, and welcome to our podcast in good company. I'm Nikolaj Tangen, the CEO of the Norwegian Sovereign Wealth Fund, and your host today. In this podcast, I talk to the leaders of some of the largest and most interesting companies in the world, so that you can learn what we own and meet these impressive leaders. Today, I'm speaking to Ignacio Galland, the executive chair of the world-leading renewable energy company, Iberdrola. Iberdrola supplies energy to close to 100 million people across the world and plays an important role in the energy transition. We own over 3 % of Iberdrola, translating into 2.6 billion US dollars.

0:39Galan has led Iberdrola for more than 20 years and saw early on the opportunities in the energy transition. What does it take to reach net zero? Stay tuned.

0:56Ignacio Galan, it's a pleasure having you here on the podcast. Thank you very much for having this opportunity to stay here in London with you today. Fantastic. Now you've got a green tie and green tea and it's all quite green. Now, where did you... and you've been a visionary when it comes to renewable energy. Now, where did you see the light? How did it come about? Well, I think I joined the company. I was in my professional life. I was in telecoms. I was the founder of Airtel, today Vodafone, Spain. I was already reconverting the shipyard, the Spanish shipyard, into aeronautics. And I was previously a battery engineer.

1:35I was designing, manufacturing, and selling batteries and making international expansion. So I joined the company beginning of 2001, so almost 23 years ago. I think always I've been very much aware about what we are doing with the planet. Perhaps my roads are already grew in a village, in a small village, 11 ,000 inhabitants. and always the nature for me was something crucial. And I think I read a lot about Kyoto. Kyoto has already been signed a few years before. And I said, why does this company, electricity company, have to continue generating with coal, with gas, with oil, with fossil fuels, which is not a sustainable resource.

2:19Once we have already wind, sun, and another resource, hydro, electric as well. my great-grandfather was one of the pioneers in the hydroelectric in Spain. And I think we made a plan in which was to close all our coal and oil power plants and transform that one into already investing in renewables. At that time, it was already the most efficient work we're not sure, and I think we started investing in renewables. We started transforming our hydroelectric in reversible in order to make already pumping and generating. And I think, and that was, all this was very easy. So my board approved, yes, investment plan of 16 billion euros.

3:05At that time was a lot of money. So, easily. Well, I actually don't think it was that easy, but tell me. But I think, let me, let me, the green. But I said, we have to change the color of the company. And when I said to change the color of the company, we traditionally was in blue color, because hydro, blue. So there's no way, no way. I need three board meetings, changing the blue to green. Finally, they said green, but green Alcantara. Alcantara is the name of one of our dams, our hydrolytic power plant. So that's why it was probably the decision taken by my board, I need to make more effort to convince them.

3:46So that's why all our people are recognizing, therefore, we made for that one. And that's why we are using all green in this moment in the company. Now, you come from a small village close to Salamanca. Yeah, in the western part of Salamanca province, close to Portugal. Does any of these, do any of the values from your upbringing influence the way you run the company? Well, first, the sense of family, the sense of friendship, the sense of the word given. I think if you break a word, a promise, I think in this village, three generations after, somebody will remind that your great-grandfather was not a really serious man.

4:26The sense of the austerity, the sense of use of the resources as better as possible, what is today we call circular economy. It was not used this name before, but I think we try to use our resources in different manner. But I think mainly those ones. And I think the easy access to people, I think, is not to be arrogant, to be as the people of the countryside, which are simple people. No, I can underwrite that. I have now traveled with you yesterday across Spain, looking at your installations. You for sure treat everybody like a family. Now, zooming out a bit. So you are at the forefront of the renewable energy revolution, but only 30 % of energy now globally are from renewable.

5:19Why is it going so slow? Even less. So even less, I think in the total, I think if the last latest number which I got is something like 25 % is electricity and 75 % is fossil fuels. And this electricity, half of it, almost half of it is already generated with fossil fuels. Why that? So because nothing has been done for many years, and now we are not doing enough. As in the fact, during the last energy crisis in the last two years, if instead of being so dependent of gas coming from a single country, mostly Russia, in the case of Europe, we had already invested much more than other. The problem we had already been facing had been minimized.

6:06And why has that taken such a long time? What are the challenges? For many reasons. So I think the long-term vision, I think we talk about Europe, but we can't talk globally. The long-term vision, everybody agrees about 2050, almost everybody agrees with 2050. We've been for many years discussing if the responsible of the emissions is the fossil fields are responsible for everything. So now everybody agrees the fossil fuels are already generating a problem in terms of the contamination, in terms of the global warming, et cetera, et cetera. And I think everybody agrees for almost everybody agrees for 2050 that we have to diminish the temperature, so, so, so.

6:43But when we talk for 23, or when we talk for even 2030, so they start the discussion. And why? Because the short term, systematically, in most countries, in the decision-making process of the government, the short term is always overlapping the long-term vision. So even having already targets, short-term targets, if anything is happening, they automatically change the rules. So last year, last two years. So we were not, electricity weren't responsible for the increase of the prices of European energy. It was the gas. But politicians were penalizing trying to reform the electricity market. It was not electricity.

7:34It was the gas, the source of that one. Now they recognize. But what happened? If they start putting taxes, charges, whatever, the people stop. And that is up and down, systematically on that one. And how are you working with the regulators and politicians to try to change this? Because also, there's quite a bit here in terms of permissions and getting approval for projects and so on, which is very, very slow. So we are, I think, our sector, we have the same, let's say, customers. The citizens are receiving the electricity in a continuous basis. And I think we are serving the same population. But the point of this is, and we have very close comments.

8:18For instance, in all those things that I was mentioning before during the last two years with this intervention in the electricity market, Some countries start trying to make crazy changes in the way how the pricing in electricity is fixed. So what they call the energy electricity market reform. So things of the conversation, we had already had with regulators of Europe, of the European authorities in different countries. What's been approved is something which has much logic. So which I think, sometimes I think they're talking with many people in different sectors and they have to try to make the best.

8:55But we are already really good understanding, especially with the European Union authorities or European Union Parliament. They are not so stressed for the short-term problems without pushing the public opinion into the government of the different member states. But why is the approval process for new projects taking so long? Well, because there are too many authorities involved. I think if we are depending on the national authorities, in national authorities, different departments, departments which are concerned about environmental, departments which are concerned about real estate, departments which are concerned about the transmission and interconnection, departments which many of those.

9:39But same thing is replicated at a regional level, same thing is replicated at the local level. So in such a way that each of them can already put some restriction and delays and delays and delays. So, for instance, for making already, for presented a plan of, an environmental plan, we need already almost to make previews to present it almost two years of studies. It's two years, but we are looking what is the birds, what are the animals, and we present the big museum. And that goes to the different authorities. We did revise with... And one after the other, never in parallel. Exactly, exactly, exactly.

10:18That is my point. And second thing, now thanks to this conversation with European authorities, I'm very pleased that a few days ago the European Parliament has approved two measures which for me are crucial. I was saying why, if it's so urgent, the carbonization, we are going to apply the national interest for accelerating the process. It was made in the past. I was living in Germany in the 80s after the reunification. and they apply the national interest for accelerating the process of the Eastern Germany. Why are we not making something like a European level? So now the parliament has already approved a bill in this sense.

10:57We have to be translated to the national legislation. It's already put in a target, a target for maximum two years for obtaining the permits. There are countries which are working themselves, the authorities, to make all this analysis. Instead of we make analysis one by one, all the people we are making, that we are going to make the investment. In such a way, they provide this territory where you are allowed to make this and this and this. Instead of make, to present, they say, no, no, no, they say, here, you can make that one. So the transmission, they facilitate the things in order to have the connection.

11:30Prior, we are asking for the connection. So the other thing, we are already moving in this direction. The point is that we are seeing that the climate change is a reality. We are suffering every time more and more. But a part of the problem of the effect of the climate change, I think, is the self-sufficiency. I was insisting to the European authorities, the 5th for 55, which is the target of reduction to make 55 % of the electricity by renewable sources by 2030. So instead of 5th for 55, let's call 5th for self-sufficiency. Probably the people will understand better. The only way to keep their lives on is to have our own electricity, our own resources, natural resources, sustainable one.

12:25Changing tack a bit here. Yesterday, we saw green hydrogen production. We saw hydropower and pumping. We saw wind. We saw solar. We saw a lot of different things. So when you look at all these technologies, what are you most optimistic about? It depends on the countries. It depends on the territories. It depends on the resources. In my opinion, it's no sense to invest in solar in areas which are not very much sunny. In my opinion, it's no sense to invest in onshore wind in areas which is not windy. And in my opinion, it's no sense to make already offshore in areas which are very far from the soil and it's very costly today.

13:09But that's why I think it's a combination. So for me, the solution is not one technology, another one. All technologies are needed. All technologies. We would like to achieve the target. Where does offshore wind come in here? What are your views on that? Well, I think we've been pioneers, you know. I think we had already since 13 years, some offshore wind fire in operation. We have in the Ivory Sea, we have in East Anglia, we have in Germany. Now we are building in France, we are building a couple of them in Germany. We are building and that's the year it started production. The first utility scale offshore in the United States in the coast of Massachusetts.

13:50We have several projects, they are onshore more in Britain, it's in the East Anglia 2, in the East Anglia 1 North, and on the East Anglia half, and in the north in the Scotland and the other, including one of floating. So we are pioneers on that one. And floating, how do you see that? So I think it's a technology which is not enough mature. It needs time for that as well. So I think it's much more costly. still the technology. There are several choices for the floating system devices. We are making tests with different ones. But I think it's a technology that will have their own use in certain places if you have not another alternative.

14:32I think in countries where for ready the seabed, the waters at 40, 30, 50 meters, it's no sense to make floating. But you are in countries on island, which I think the shore, the seabed is at much deep. So you need some solution. How far do you think we are from full development of floating technology? Probably 10, 15 years. So I think in the 30th decade, it's going to be offshore, floating offshore. And until then, what are the risks with floating? Well, I think as far as I know, no one is not anyone make already in a large scale up to now. So I think all of us we are doing development, but no one we are putting already real money on that one.

15:22I think this project together with Shell is up to 3 ,000 megawatt floating, I think. But I think what we are making now is all the civet analysis, civet studies, biology, designing different designs, a test of different floating. But I think the large-scale investment is going to be made probably up to the beginning of next decade. What about fusion? There's been some breakthroughs lately. So I think I finished the university in 1972, so almost 51 years ago. I think it was already hope. But now they have actually done some breakthroughs, right? It was done already. The fusion was done, but without control.

16:08Now it's done with some control in a very small scale. And so I'm not already in the short term optimistic. And the second thing, I'm not sure what is going to be the competitiveness of this technology. But could we end up in a situation where electricity is free? Well, free, I think that is something which, let's say, some of people which is, let's say, with certain political characteristics, because they don't distinguish the difference between to have already only fixed costs or to have variable costs. They feel that those things we have, they have fixed costs, is free. It's not true. So I think you can already, you have already the capex.

16:59We have to be paid. We have the financial cost. We have the operational cost. It's true that you are not free. But today you are not free for the onshore. You are not free for the solar. You are not free for the wind onshore. But I think you have a cost. So it's not free. Well, interestingly, we are today kicking off an MBIM-wide training program on the energy transition. So we have more than 230 people out of 630 who have signed up for this. So it's an eight-course module that we are putting in place. So really, we share your view on the importance of upskilling. But how do you develop the leaders then?

17:35So these are all the employees. Now, how do you personally develop the leaders? I think the new times with the telework is something which I'm especially concerned. I think leaders are the ones where they need to touch people. When you're only touching just a screen, I don't know how the leadership can be built. So we are trying to, our people, we have fortunately, dozens of hundreds of works in the moment project, which are in operation. And I try for all means that our young people, with the people with high potential, apart of making a wonderful master. We have a master in management and whatever with Starclay University and with Yale University, with MIT, so all those things, but to touch people.

18:25And I think we are putting young people in front of a small project to make a solar power plant with 100 people or 200 people to lead with and to force them to delivering time, delivering costs, negotiating with the local authorities, negotiating on vendors, and to learn the reality. I think perhaps I'm extrapolating my experience. I think when I finished, I was designing batteries, but I was already managing a factory of batteries. And then I learned a lot about that. How to live with trade unions, how to deal with local authorities, how to deal with lawyers, because always is impossible everything, how to deal with the numbers to make, anything that make to grow these people.

19:06When somebody has been managing a project of 50 million capex, This guy after can go to make already a project of 200 and after I have to go to project familiar. How many people in Iberdora do you know? A thousand. I spent 200 days per annum traveling around. I think I met, I was last Thursday with 400 people coming from all over the world during. So you got 200 travel days? Yeah. You are 73 years old? Yeah. Every day I brought it. Where are you talking about you run an energy company? Where do you get the energy from? What is your charging station? My horse, my bike, my cows. Is that your energy?

19:51Is that your charging station? Your farm? Well, I think normally when I need to take a hard decision, so normally it's not the joke, it's the reality. I used to go to my ranch. I take my horse. And I used to walk on my horse and chuk, chuk, chuk, chuk, chuk, chuk, chuk, chuk. And afterwards I came down and I started writing, chuk, chuk, chuk, chuk. And I came with a paper, so yes, I'll write about the ideas. And I think that you see the work in a different manner. I cannot take a decision looking at war. I can't. I need open spaces.

20:29Could you just drill down a bit more here on the… So you are from, you know, Salamanca. You talk about, you know, your farm, the family. It's very clear when I travel around with you that you have a special way of treating people. Just tell me a bit more about it. Well, I think for me, human being is the most important thing of the economical activity. Without the people, without the persons, I think you can never succeed. So I think I remember my, I have a yes-to-do education. And I remember some of my professors, even some of my initial bosses, they used to say to me one sentence, which I always try to apply.

21:13Your success is the success of your people. And the failure of your people is your failure. So try to put always around you people with more capability than yours. And never, never, may then they are guilty, you are guilty, either make any mistake. And how does this translate into the time frame of your thinking? So short term versus long term? Well, I think the long term is something you, I think when you are at the top of a company, you are, we are 24 hours a day. We have to be making our brain work. So it's not rest. I think you have, you can have good ideas when you are riding horse, when you are cycling, when you are in the office.

22:02I think it's 24 hours a day. But nothing that is the long term. The long term ideas normally appear, thinking and looking different things, which are coming from here, from here, from here. In one moment, everything is combined. So the short term is already you need to put in your life targets on that one. And targets, measure targets. I think is as well, you cannot already relax saying the things are going to happen. They need to happen now. So they say, no, you're not making this properly today, it's going to be properly tomorrow. You have to make every day the things properly. The total quality starts from the very beginning of the process, not at the end.

22:52So, but another one, the vision, we are not changing the vision every day. We are not changing the strategy every day. I think we have a vision for 22 years. We believe in a world to carbonize. We believe in a world where we can provide the energy the world requires using natural resources. We believe in certain of those. That is the vision. Well, you know, we transact with many companies, and we do think that transacting with Iberdrola is a bit different. It's more relational, less transactional, and it's more long-term in nature, and I think it's really good. It has a higher level of trust, more long-term thinking, more give and take, and we really for sure appreciate it.

23:42And another reason why we really like it, you have exceptional project execution. Now, you mentioned the word German here previously. Five years in German. Now, tell me about how you run projects. Why are they so good? So first, because we try to define clearly all the details prior we started the construction of a project. I think we are trying to fix all the details prior we started FID. But second, the people which are thinking that one are committed with it. So it's always, I can't, people, people, people. I think when the people feel the ownership of the project and the pride. You saw yesterday, this guy has already built Cortez Lamuela.

24:32He's proud of what he has already done. These people are transmitting. I think there are many of those, they are already their family as well, brothers or or son of the family inside of the company. So they are proud to say, I did that one. I executed that one in time. So that is a sign of ownership that makes. And I think that that is very important. I think in this, my continuous trip around the company, I think that is what I perceive from these people. Then they set off of pride what they are doing. So in that way, they execute because it's their pride to make that one in time, in cost. And that's it.

25:12I was, at the beginning of September, I was visiting a couple of offshore farms, one in France, St. Brugge, and another one in Germany, Baltic Giger. So you see, they're French people and they're Germans. So, well, Germans and other countries because they were all mixed, different nationalities. How proud they are showing to me where the drilling system they had invented for putting the foundation of this one. And they are proud of saying, Joel, we invented this one for making that one. I mentioned to you yesterday how they invented some system for avoiding then the whales have already suffered because of the noise of this one.

25:52And they are proud of this one. And that makes them that happen. How do you inject a sense of urgency into the organization? How important is speed in what you do? So perhaps because I always ask for everything for yesterday. And this mind is coming to everybody when somebody comes to me and says, I know yesterday is tomorrow. And that is moving everybody in this direction. Do you micromanage? I mean, how do you get the balance right between having an eye for detail and letting people have freedom in their decision making? So we have a structure, a matricial structure, which is each of the CEOs of the different countries.

26:34And we have already the business area. So responsible of networks, global responsible of renewables. We are responsible of marketing. But I think we have every morning, every Monday morning, everybody is coming to our operation committee. And no one decision left. We take the decision. So the paper is coming here for taking the decision. Every month, the people knows the thing is done. And it's passing through people from different areas, from the department, explaining their project. Go. So we know very much in detail what is happening everywhere. But I think at the same time, the globalization of the company through the business heads are already just defining in the same direction for everybody.

27:24Is it challenging to operate in so many different markets? Well, I think more than a challenge, it's an opportunity. You are in Spain, UK, Brazil, US, Mexico. Australia, Germany, France, Greece, Hungary, Poland, Portugal. But I think it's an opportunity. So we learn very much it's another. For instance, our network operation in the United States is managed by Brazilians. And by Brazilians? Because the grid of the state will be present in New York, Connecticut, Massachusetts, and Maine. The design is very similar to the design we have our distribution companies in Brazil, which is very different of the design we have in Scotland or the design we have in Spain.

28:13So I think in that each another learn a lot. So we have already a British, which are already in the global purchase, Charles Jordan, which I think is a guy which has very good relation with Iran. So and I think that that adds a lot of value for the whole group. So people from different nationalities, different mentalities, different skills, then we are moving around. Talking about nationality, so China controls a very big part of the solar and the battery market. How is that impacting your strategy? With a part of solar panels, we are not already much in relation with the Chinese industry. So I think solar, we had already in the past, Gamesa was our vendors.

29:00It's one of our vendors' turbines. They have a factory in China. But I think we are buying in Europe. I don't know where they buy the components. But in terms of equipment, probably the largest part of our purchase is just solar panels, which is coming from China. China and countries around, which is Vietnam and which are made by Chinese. We have not much relation with China.

29:26Changing tack a bit here. We have a lot of tens of thousands of young people listening to this podcast. What is your advice to young people? Sorry? Okay, I'll do it again. Now, we have tens of thousands of young people listening to this podcast. What is your advice to young people?

29:46To have not a threat. To be courageous. To be all life learning. The things are rich with effort. Don't feel that the things are coming by free. They have to work. They need to work hard. And they have to be continuous, continually learning and to take decisions. They have not to mind if they make mistakes. If they make mistakes, they have to continue taking decisions and to try to correct the mistake they did. But, valientes, to be courageous, not to have a threat. The world is offering hundreds of opportunities for them, more than ever. Yeah. Well, you for sure have been very courageous in your life.

30:37And what I'm looking forward to is that when we both have retired, and five, ten years after that, I will bring some marinated salmon, grouse from the Norwegian mountains. I'll pick some mushrooms outside Oslo. And we exchanged some pictures yesterday. And I'll come down to your farm, and you put on some of your jamon because you have pigs and cows. We can cook already, yes. a wonderful you you based in fish myself based in meat and I think we can make a wonderful meal together and you are also a big producer of Rioja wine so I'm very much looking forward to that and then we will sit there and we will toast to all the work you have done to transform the global energy system well done thank you very much I'm very pleased and very proud to have partners like yourself to work together with the same long-term view and to try to collaborate for making a better world because we have not another world.

31:35If we destroy that one, we cannot pass this world to our future generation. It's our obligation not to make mistakes in this sense. Absolutely. Thanks for being on the podcast. Thank you, Tujo. Thank you.