What motivated BASF to found the BASF Renewable Energy subsidiary last year?
Renewable power has turned into a strategic feedstock for BASF. For this reason, we decided to found a dedicated company to manage all processes related to it, from sourcing via PPAs, to direct investment, trading, billing and risk management. That set-up allows us to consolidate our expertise and achieve the sustainability targets of our core chemicals business. Beyond being a global center of expertise for the company’s renewable power activities, BASF Renewable Energy operates units to supply our European facilities with green power consistently, as we have access to European power markets. We are an in-house provider and do not see ourselves as another utility provider. Our main purpose is supplying BASF sites with renewable energy.
What proportion of BASF’s energy consumption presently comes from renewable sources and, more broadly, how does BASF address its emissions footprint?
Within several European markets, already 100% of the energy supply comes from renewables. For other markets, such as Germany, we are working to get further access to renewables. Our objective is to significantly reduce our CO2 emissions in the coming years. Concretely, our long-term goal is net-zero by 2050 (in Germany by 2045) and our climate protection and circularity efforts ultimately result in the broader carbon footprint of our products. We are producing ca. 45.000 chemical products and, as a leader in the chemicals industry, we can have a huge impact on all downstream sectors. Our customers rely on low CO2 and CO2-free products to reduce their own emissions, so we see ourselves as the first and, therefore, crucial component in the value chain.
To achieve the objective of offering such environmentally friendly products, we have a concrete plan consisting of five elements. First, we are increasingly meeting our electricity needs through renewables (the mandate of BASF Renewable Energy). Secondly, we are augmenting our reliance on electrification for steam generation. Thirdly, we are developing fundamentally new low CO2 and CO2-free processes for a more climate-friendly chemicals industry. Next, we are replacing fossil-based raw materials with alternatives. And finally, as part of our operational excellence activities, we continuously increase the energy efficiency of our plants.
Could you introduce us to the BASF ‘energy concept’? What are some of the most interesting projects that you are currently working on to service its purposes?
Our energy concept is based on a ‘make and buy’ strategy. ‘Make’ means selectively investing in building and expanding our own renewable assets to secure long-term supply. For example, our Hollandse Kust Zuid joint offshore wind park in the Netherlands, built together with our partners Vattenfall and Allianz, is to be the world’s largest offshore wind park and the first subsidy-free wind farm in Europe once fully in operation at the end of 2023. This project makes us particularly proud because we are one of the first investors in unsubsidized offshore generation. As for the ‘buy’ component, it consists of purchasing green power from third parties with long-term supply agreements. As an illustration, we signed a 25-years contract with Orsted for a German offshore wind park, which is also unsubsidized and is coming into operation in 2025.
When the war in Ukraine started last year, there was much concern that the chemicals industry in Germany would suffer heavily from perturbed gas supplies. With some hindsight now, do you believe that these disturbances actually helped BASF accelerate its transition to renewables?
Yes and our way out to reducing the dependency on natural gas, which has been characteristic of European industries in the past, is precisely via the aforementioned ‘energy concept’. Rather than relying on natural gas to produce steam, we should focus now on utilizing more green power-based electrification, as an instance. That goes hand in hand with a risk management strategy regarding natural gas supplies to Europe. We are constantly working on resolving the challenges to building our renewable portfolio, but, without a doubt, we need new climate-friendly technologies to reduce our natural gas exposure as Europeans.
In that regard, what challenges are still to be overcome if European industries are to become independent of fossil fuels?
Generally, having access to renewable energy at competitive prices can only take place properly if two conditions are fulfilled. First, governmental investments in the right infrastructure are key. Secondly, the right regulatory framework must be in place to provide security for investors.
Investments in the right infrastructure entails expansion of the supply, but it is especially important now that the market is able to actually deliver these huge amounts of energy. The challenges in that respect can be illustrated by our investment in the Netherlands. Grid bottlenecks make it challenging to transfer the produced power there to our sites in Belgium and Germany, so more investment in grids is essential. Additionally, the European supply chain for building these new assets is extremely burdened at present. We expect bottlenecks across the supply chain, so governments need to support the build-up of supply chain capacities. Concerning the regulatory framework, we observe a tendency of intense market interventions that can be harmful. One example is the CfD (Contract for Difference) scheme, whereby states are skimming off profits from offshore wind farms, the result being that power cannot be accessed by industries. Such kinds of legislation go against the green objectives of the EU. We advocate for more liberal approaches.
What final message would you like to send to our readers and to everyone who will be at the COP 28 in Dubai?
Renewable energy transformation for European industries can be accomplished. Individuals and companies are tremendously motivated to get the job done. We are one of the first big industry companies that invest into renewable assets and we want to demonstrate that there is also an economic rationale behind that even without subsidies. Simultaneously, the necessity for the right regulatory framework cannot be emphasized enough. Further, technological advancements remain crucial for the successful transformation, so more investment in R&D should be everyone’s objective. Cross-sector collaboration is equally key and we are working very successfully with utility companies.
