Mission orientation

What is your mission in this world? For me, I want to be part of creating a future we want to live in; and I’ve chosen to start in the world of sustainability and environment. This is not only because that is a ‘hot topic’ right now but because I am convinced that it is one of the greatest and trickiest problem confronting mankind.

I first learnt about global warming and carbon dioxide concentrations rising in the atmosphere when I was in secondary school. That was more than 18 years ago; and subsequently I learnt a lot more about it during Junior College days as part of my geography curriculum. This little geography topic came to the fore during my university days as I became the first official cohort for the LSE100. In that year, we actually had Nicholas Stern who published the Stern Review give us a lecture on why Climate change is such challenging problem to settle from multi-disciplinary lenses considering the politics involved, the social and economic sacrifices, etc. Apart from seeing it as a problem of coordination, I recognised it also as an opportunity for the world to work together, and for businesses to move beyond their obsession with profits and work for the society.

I probably would not have expected myself to end up taking on the role of a consultant with a strategy firm that focuses on accelerating the energy transition. What I love about my job is that I get to live out that mission – a large part of it – to be working with various organisations and stakeholders across the energy value-chain to create the future that we would like to live in. Your mission may not be lived out through your work, but it still matters that you know your mission.

First Principles

I’ve written about first principles problem-solving before and what I want to share here is why that is a superior approach to a lot of our problems. There are a lot of work in the world today that is about incremental improvements and innovation. That typically involves isolating part of the difficulty or problem and then trying to deal with it by throwing different solutions. Often, you arrive at a solution by identifying a similar problem. That sort of tinkering on the edge of development, of management by exception is responsible for the solar panel costs to have fallen so much over the last decade it could be the cheapest source of electricity in many places (provided you have enough space); and for batteries to have become energy-dense and light enough to be powering ordinary cars.

But the challenge with such approach is that it gradually accumulates a lot of legacy issues in the overall system. There are parts of the system that developed solutions for problems of the past that might have gone away or there are clunky processes and work-around designed to solve problems created by another part of a system. This is why when Elon Musk set out to create Tesla or SpaceX, he ended up actually reworking a lot of supply chains for the existing products because the original supply chains had inefficiencies made what he was aimming for impossible.

A lot of our public systems have such legacy issues because they evolved by some measure of consensus over the decades or centuries and accumulate different constituencies and stakeholder groups. Which is to say that first-principle approach to problem-solving is very critical. I certainly welcome the exercise to refresh our social compact in Singapore and hope that it can be something we build from ground zero rather than be bogged down by past legacy issues. It is heartening that Lawrence Wong is actually taking time and intellectual bandwidth to ponder some of these issues; it will take decades to translate them into action but if we all can buy into the process, it’d be worth the effort to make the translation.

Story of ammonia

The Haber Bosch process for synthesis of ammonia using atmospheric nitrogen was discovered early 20th century and subsequently scaled up into an industrial process in 1910. It was perhaps an important industrial innovation that really made a significant impact in the progress of mankind that we often overlooked.

Before the process was invented, the fertilisers that were produced relied on nitrates from niter deposits and guano (the poop of certain birds and bats). These were all short in supply globally while the demand for nitrates and ammonia increased steadily. Note that at the point of human history, the global population was somewhere around 2 billion.

To a large extent, food resources was soon going to be placing an upper limit on how far the human population could go. The artificial synthesis of ammonia enabled large scale production of fertilisers, revolutionized modern agriculture as well as chemical industry. Nitrates were important for other applications beyond fertilisers, and for a long time, ammonia was an important precursor to that chemically.

Interestingly, in the more recent times, ammonia had become interesting for the fact that it held a fair amount of hydrogen, and is a relatively stable way of holding hydrogen chemically without using carbon. Hence the talks about ammonia as a fuel. It was actually used in 1942 in Belgium when there was a shortage of diesel; engineers had discovered that they could combust ammonia with the help of mixing a small amount of coal. 80 years on from that mini experiment, we are here thinking about how to use ammonia as a fuel again – not because we’re short of hydrocarbons but because we probably over-used it.

Meaning of our jobs

There is a certain quality about the modern appreciation of the meaning of our jobs and the impact we are making in the world. Of course, we have to start by appreciating that to even bother with whether our work is meaningful is in itself a reflection of privilege. It is often because we no longer have to worry that much about bread and butter that we can ponder over whether we should take on a job at a place that makes an impact or not, rather than just deciding whether our work place has a comfortable level of air-conditioning.

But so much of that is actually in story-telling. The banker likes to think that they enable the infrastructure they are financing – just consider how UOB engaging BBC Storyworks to run ads about lighting up Myanmar. Honestly, I’d say it is the businessman who borrowed the money, pulled together the resources and built the power plant who lighted up Myanmar and created jobs. The bank that provides financing shares only part of the risks.

And depending on whether you think McDonalds is bringing happiness or destroying people’s health, you might find working there meaningful or not. Or, if you care just about bringing in the dough in the most pleasant environment, you’d prefer to work at McDonalds compared to a stall at the hawker centers in Singapore that do not have air-conditioning.

So if much of our job’s meaning is storytelling, why don’t we learn to be better at that? And more importantly, why are we not recognising how our employers are trying to define those narratives, and shouldn’t we as employees be holding them accountable to the stories they are telling?

Scaling up production

At the recent presentation I gave on ammonia as the new low-carbon maritime fuel, I was asked about the ability to scale production over the next couple of years. I think the time horizon we should be looking at is over the next 8 years up to 2030 and then 10 years after that, how things are likely going to change. We as consultants are often asked to look into our crystal balls and envision the future. We try our best to do it using data, looking at trends, making assumptions and all.

For ammonia, the demand is expected to more than double over the next 28 years. That’s still a fair amount of time, and as long as it grows by a rate of about 4% per annum, the supply will be able to meet demand in 2050. Not inconceivable though from historical trends on the production figures, it seems far fetched. But that is because ammonia has traditionally been demanded only as an industrial feedstock and for production of fertilisers. The people concerned about the competition with the existing agriculture or food industries have misplaced concerns because those are the guys who have been using grey ammonia and perfectly happy to continue to do so. The new demand is likely going to require green hydrogen; which means we are going to start growing new supply of this ammonia from scratch; no legacy issues of waiting for existing facilities to ramp up.

Then there are people pointing out the challenge of getting green electricity which seem short in supply to begin with. That is true to a certain extent; Singapore is having to import electricity from neighbouring countries, using actual physical transmission lines. But most of the time, this is caused by the fact that renewable resources may be scarce where the power demand centers are. If there are far flung locations rich with renewable resources, we can still capture these sites to produce green hydrogen as well as green ammonia, then ship them out.

So I’m actually pretty optimistic about trying to hit those demand and supply numbers over the long time frame that we are talking about. It might well surpass those numbers when the market really takes off. But the key is ensuring there’s clear price signals; and if there’s proper legitimate demand for green hydrogen, then someone will have to certify it and audit the production.

Up before it goes down

I was giving a presentation over this week and the topic was around new fuels like hydrogen and ammonia. The key to these “no-carbon” fuels is how they are produced. Because hydrogen and ammonia does not occur in huge quantities in nature and is not a stable form taken to store energy, they require energy from other sources to be produced as fuels themselves. As a result, though they emit no carbon when they are combusted, there might be carbon dioxide emitted in their production pathways. In that sense, saying they are no-carbon is a bit of a misnomer.

The challenge for all the equipment, vessels, engines looking at which fuel to run on is that they have to start re-tuning themselves to be able to burn these alternative fuels but then things will not be able to switch over all at once. Greener versions of these alternative fuels still takes time to be produced. There is about 185 million tonnes of ammonia produced each year and more than 99% of them are produced using natural gas as feedstock to provide the hydrogen required. In addition, energy is used as an input to the Haber Bosch process which further increases the carbon emissions of ammonia.

Yet we all have to start somewhere and pushing along the end-use equipment to adopt these alternative fuel is a large step. Perhaps larger than producing the green versions of the alternative fuels. It’s the same with electric vehicles which are being touted as low-carbon. Well, it all depends on the grid. We can switch all our cars to electric cars but if the subsequent increase in electricity demand causes countries to reactivate their coal power plants, the overall emissions are going to increase and not decrease.

For now, it still seems like carbon emissions have to go up further in order for it to go down.

Subsea cables and biomethane

Subsea cables uses loads of materials and for power evacuation, it makes more sense to lay a really high capacity cable rather than low capacity one if one is to invest in doing it over long distances. The environmental impact to marine life is unclear; and given these electronics components, they actually might last only 25 years.

So Singapore is importing electricity through interconnectors, and the first seem like they are going to come from Laos through Malaysia and Thailand? While the deal seems sealed, it is not clear when the physical electrons will be arriving in Singapore. Next up there’s the request for proposal by Energy Market Authority around importing electricity from neighbouring countries, likely though some kind of new subsea interconnectors to draw power from some renewable energy projects.

Given the requirement for firm electricity supply, the solar or wind projects will require battery storage. The green electricity from Laos is different as they are hydropower which has much more dispatch-ready quality to them. The subsea cables, the energy storage systems as well as the solar or wind projects are going to be very costly and the fresh infrastructure is supposed to somehow displace some of the infrastructure we have already built in Singapore such as the LNG terminal etc. Since the renewable electricity should probably replace some of the local gas-generated power?

Why don’t Singapore consider greener fuels instead such as looking at biomethane and building out the supply chain in the region. It can concurrently achieve some positive impact in the region by reducing toxic palm oil waste, and hence pollution, harness waste into a resource while achieving decarbonisation by leveraging existing infrastructure. Granted, it is a long journey and might be more tedious to pull off than just calling an RFP and importing electricity through a sub-sea cable.

But don’t we want to participate more in regional infrastructure?

Double-counting

In economic accounting, there’s an issue of double-counting when a transaction is counted twice. It can lead to overestimation of costs or value of goods, etc. In particular, if we sum up the value of intermediate goods transactions and then final goods transactions, we might double-count and overestimate the value of economic production. So second-hand transactions cannot be included in national income accounting.

In the workplace, a boss may claim credit of the work of his staff while leaving the staff to also take full credit of the work. The warm glow and glory of the work gets multiplied though it is probably an happy affair.

There are cases when it is not happy. When it comes to the environment, there’s a risk of double-counting of the carbon emission reductions or avoidance when more than one party claim the same reductions. If someone is generating their own electricity using solar, registered for renewable energy certificates and then sell it for a stream of payment so that someone else is able to claim the green attributes, then the one generating the solar power can no longer claim his carbon footprint is reduced by his own solar panels. The de-coupling of actual generation from claiming the attribute is a mechanism to improve efficiency of the market but creates the double-counting problem.

This problem has been talked about since a really long time ago but there is no clear consensus on how to solve it. The worry is that countries are counting the same reductions towards their nationally determined contributions to carbon reduction. When does this really happen? Perhaps when companies take the carbon reductions they have in another country either through purchase of green electricity or renewable energy certificates and then claiming to have achieved carbon reduction in their facilities in a particular country.

Technically it should not matter if that is somewhat registered nationally and there’s a cross-border trade in that contribution but it is probably too complex for the nation’s own accounting. So as long as we don’t allow companies to make such claims and to deal with all their emissions with local abatement, that should work. But it creates some really round-about issues which is inherently a little inefficient such as the actual, physical electricity import into Singapore through sub sea cables. That’s for another day.

Choosing your battles II

Sometimes, choosing your battles is not just about the strategy that was first determined but the metrics that we choose to track our progress along the strategy. Using the wrong metrics can lead us to adopt the wrong tactics when executing the right strategies. At the end of the day, the wrong metrics causes us to lose sight of the strategy that we are pursuing and go down the wrong path entirely.

For example, there is this curious point about services job creation and de-industrialisation of an economy. A government might be pursuing a strategy of job creation and targeting to attract particular FDIs so they track their own performance by looking at the manufacturing job growth each year. Concurrently, the manufacturing companies are increasingly looking at outsourcing so the security guard at the factory is now employed by a security company rather than the factory, though he is still guarding the same facility. At the same time, the truck drivers are now hired by a logistics firm who took over the fleet of trucks delivering the output of the factory to the port. Total number of jobs that this factory created and kept has not changed but on the statistics, it would seem that manufacturing jobs have declined because those who were previously directly hired by the factory have been re-employed by services firms. The government might start thinking despite attracting much manufacturing FDI, the manufacturing job growth is low and so they might want to pursue a different strategy, not realising that they are embarking on the right strategy but just looking at the wrong metrics.

Their subsequent decision might derail the overall policy actions that was supposed to address the issue of job creation in the economy. Likewise, companies and businesses needs to think about the right metrics when they are tracking progress of their strategies. Have you thought whether your metrics are still serving you well as an individual?

Choosing your battles

When I was a junior staff in the public service, I often try to get every single thing aligned to my ideals and get rather upset when things don’t go in that direction. For example, I believed that as a public servant, our goal was to serve the public. But often, there were overriding management and leadership priorities that could detract from that even though those actions were trying to serve overarching policies which were supposed to serve these people.

Of course, I was rather disappointed and I came up with this catchy phrase for the younger people who were rather disillusioned by the jobs they had, “you thought you were working for a cause but actually you’re just working for a boss”. Yet as I mature and grew, I came to recognise that because we don’t have unlimited resources, we need to develop strategies. Strategies mean picking your battles in order to win the war. And by focusing resources and coordinating your actions, you are able to move towards your goals more efficiently.

But understanding that is insufficient; there’s a need to know which battles to pick. It has to do with being extremely clear what are the fundamental problems and issues to deal with. For example, in public service, there are fundamental challenges in the society we have to deal with that may or may not seem like we’re serving the public upfront in a single case. We may have to choose not to help a single person in order to focus our resources on dealing with more fundamental challenges.

For example, there may be a lot of good in helping a single small business to expand and grow but often, the expansion of a larger business can create more jobs and greater spin-offs whereas the single small business might just enrich a single person.