AMPLIFY  VOL. 36, NO. 11
  

Energy supply in Germany is in transition. And nowhere has the pressure to transform been as visible as at LEAG in Lusatia, Germany. Until recently, energy from LEAG (the country’s second-largest electricity producer) was almost exclusively sourced from lignite. But in 2019, the government decided that Germany would phase out coal by the end of 2038 at the latest — LEAG faced a slow but steady demise.

When I started as LEAG‘s CEO at the beginning of 2022, I was immediately excited by the potential of the traditional eastern German company with its 7,000 employees. It quickly became apparent there was only one chance for the company to continue playing a key role in Germany’s future energy supply: LEAG must go green.

We believe the inevitable end of conventional fossil fuel energy must be followed by a complete transition to renewable energy, with a focus on wind and photovoltaic (PV).

Energy Supply Uncertainty

Lusatia’s position in this endeavor is unique. We have more than 33,000 hectares of post-mining land that is largely low conflict when it comes to setting up PV and wind systems. We also have four lines feeding into the transmission system, a long tradition of energy production in the region, competent specialists in our sphere, and a clear will to change (provided the plan is well thought out and solid).

Nevertheless, our announcement about turning LEAG into a pioneer of renewable energy that would be unique in Europe came at a time of uncertainty. The open-pit mining and power plant teams were already under extreme pressure from circumstances caused by the pandemic. Russia’s war with Ukraine exacerbated the situation. To safeguard the country’s energy supply, reserve units that had been shut down were brought back online. We sought, and found, hundreds of new employees, who gave their all and remained motivated against the backdrop of a planned coal phaseout.

For decades, Germans had enjoyed a reliable energy supply. Then, the state of electricity and gas supplies became the number one topic of discussion in the country. Hardly a day passed without mainstream media questioning whether Germany’s energy supply was guaranteed. It was a common topic at conferences, in discussion groups, and on talk shows. Would we get through the winter? Might we experience a blackout?

At first, this did not seem like a good time to announce LEAG’s transformation. In reality, it turned out to be an opportune moment to open a new, secure, long-term perspective for our company in the midst of global uncertainty.

Introducing GWF

By 2040, LEAG plans to produce up to 14 gigawatts of PV and wind energy, build H2-ready power plants with more than 4 gigawatts of output, have 3 gigawatt hours of storage capacity in batteries, and make electrolysis power available. This will create a high-quality, green energy pool of 20 gigawatts.

We named the project GigawattFactory (GWF) because it is unique in Europe in its size and concentration of renewable onshore energy. We plan to invest up to €10 billion by 2030 (about US $11 billion) with the goal of delivering high-quality green energy on an industrial scale.

With large battery storage and electrolysis plants to produce green hydrogen, GWF will generate clean energy that can be used regardless of the season, weather, or time of day. This means baseload green electricity in new amounts and without lags or lulls. Hydrogen-capable gas power plants or pure hydrogen power plants are scheduled to go online by the end of the decade. Documents have been submitted for approval for a large part of these systems, so when important framework conditions (e.g., the power plant concept and electricity market design) are finalized by the government, we can get started.

The new power plants will be built at our existing lignite power plant locations so they can leverage infrastructure already in place, including transmission grid connections. Connection to the gas or hydrogen network in eastern Germany, which has yet to be built, is in the early planning stages. It will also be possible to use the green hydrogen produced for sector coupling for things like municipal public transport or district heating.

GWF combines large amounts of green electricity, storage options, and sector coupling to create a comprehensive, efficient green energy system for an entire region and far beyond. As Lusatia becomes a green energy powerhouse, it can carve out a unique position in Germany and Europe, becoming Europe’s special green energy zone.

However, even with a convincing vision and favorable conditions, there are challenging years ahead. The project is complex, ambitious, and dependent on navigating our way through many regulations and external factors, including political decisions. All this takes place during a time of economic strain, tense discussions about secure energy supply, questions about the right energy policy for the future, and the comprehensive transformation of the German energy industry. That’s why we need broad support from lawmakers, our workforce, and the general population.

Old Strengths for New Challenges

What are the differences between the old and the new LEAG? What has changed? A lot, I believe.

We Are Suddenly in Demand

For many decades, we were part of an infrastructure that was taken for granted. When Russia invaded Ukraine, everything changed. Suddenly, we, along with other energy producers, were on the speed dial of administrations in Berlin, Potsdam, and Dresden regarding energy supply security. Even though these issues seem more under control now, we continue to receive many questions regarding our business. What are you planning to do? Can you really do this? What do you need? It’s a new experience for a company like ours that had generated safe, reliable electricity for decades with no fanfare.

Outbound Instead of Inbound

In the past, our business model was clearly defined, both inside our company and among external stakeholders. In this new era, we need a completely different type of dialogue with the public, local and national government, the media, and nongovernmental organizations. New contacts need to be convinced that our intentions and plans are feasible, real, and relevant. An established lignite company suddenly entering the green energy business in a big way leads to a paradigm shift for all stakeholders.

Powered by Partnerships

We cannot operate many GWF trades and services ourselves, so we’ll need suppliers committed to taking an active role. This will fundamentally change the way our company operates, moving from typical contracts to cooperation and joint idea development. Fortunately, eastern Germany has a strong, growing science and research community; many productive initiatives will undoubtedly spring from collaborations between business and academia.

Learning to Live & Work in Parallel Energy Worlds

When we presented our GWF plans in autumn 2022, many asked how LEAG could continue to operate lignite-fired power generation during the phaseout period (which runs until the end of 2038) while promising billions in investment in its green powerhouse. In truth, the two fit well together — coal-fired power generation can finance the transformation to GWF.

That means we are learning to live and work in parallel energy worlds, which poses some problems, especially for long-time employees. Fortunately, we have something that unites everyone, whether they work in lignite or with PV and wind: we supply safe, reliable energy. Indeed, LEAG must be competitive in both energy-production systems. Fulfilling this is hardly business-as-usual. Rather, it’s an additional challenge some overlook in the midst of a transformation to newer, cleaner forms of energy.

One thing is certain: we can’t afford to forget “old” energy. It’s still our core business and is (as mentioned) financing our transformation. We must organize ourselves such that the traditional business can be managed in a highly professional manner and continues to receive the attention and resources it needs. Just because the new areas of our business are more talked and written about than our traditional ones does not mean our present is less important than our future. In parallel energy worlds, both are equally important, and we must clearly convey this to our employees.

A New Story in Response to Uncertainty

Of course, these parallel energy worlds will not last. We will remain an energy supplier, but our work will be completely different. We are simultaneously dismantling, building, and rebuilding. Anyone who does not understand the “why” and “how” of these changes might sow doubt, which will contribute to an environment of uncertainty, especially in an industry used to long-term planning and implementation cycles.

We must keep retelling our story and describing the GWF vision. This can be done with billboards, brochures, and social media, but the truth is that our most important audience is our employees. We need them to take our message home to their families, friends, and community organizations. If the conversations they have there reflect why we are repositioning ourselves, and if the majority of comments about our transformation are neutral or positive, we’ll have achieved a major goal. We need the support and expertise of our employees — after all, they are the ones who will build and operate GWF.

It will take time for our story to take hold, just as it will take time for LEAG’s transformation and the reasons for it to find its way into the conversations of our employees. But I believe in our story, and we will keep telling it.

Transformation Instead of Cruise Control

We plan to reorganize our company, bring new energy sources online, and work differently in just 10 years — a blink of an eye in the energy industry. If we achieve this, it will be a transformation of enormous magnitude. We know the destination, and we have a compass, but we don’t yet know the exact path because conditions are constantly changing. Here are just three examples:

1. Without a new electricity market design, which determines the profitability of energy production, no manager or shareholder can make investment decisions that run into the billions.

2. Without the consent of local and state government, we cannot build the volume of renewables we need.

3. Without a hydrogen connection (or if that connection is implemented too late), we cannot use H2-ready power plants.

These external conditions will play a huge part in determining the success of our transformation and GWF. Although they are fundamental to our development, our options for exerting influence over them are limited. Fortunately, there are several crucial factors we can exert control over.

LEAG Transformation Success Factors

Theory is gray; the reality of transformation is colorful. If you succeed in making people attentive and curious, and if you can bring them around to your way of thinking with regard to new goals (even partially), transformation can begin. This is both self-explanatory and crucial. It’s why everything I describe below has to do with people and the possibility of winning them over to new ideas. Persuasiveness, equal exchange of ideas, productive debate and dialogue, and clear communications are prerequisites, and no one should underestimate the time and resources required.

An Idea with Legs

There is room for debate about the details of how GWF will be implemented, but most people understand that GWF is a unique opportunity for LEAG, Lusatia, and Germany. GWF’s purpose must be communicated again and again with both passion and intellect. We must concentrate on the big opportunity: green, safe energy on an industrial scale that will future-proof attractive jobs in the region, give manufacturing and processing companies a reason to locate here, and create a new level of green energy systems for communities in the area. It’s important to talk about these opportunities and to refine them: that is what will create the energy needed for our transformation.

Acknowledging Pressure

We know the lignite business is finite. We also know we can build what the region and Germany need: renewable energy of exceptional quality in large volumes. The need for a medium-term system change in energy supply is beyond question. External and internal pressures are present every day, but I believe piloting, exploring, and conceptualizing has gone on long enough. It is time for action.

At the same time, it is important to acknowledge current pressures and impatience. Employees are willing to fully concentrate on a topic or task if they understand why it is so important to our present and our future. Comprehensive communications and exchange is critical to this undertaking.

Celebrating Progress & Aligning Jobs

We are all shaped by our experiences, so it’s crucial to focus on challenges that have been successfully overcome and to celebrate progress, no matter how small. This is the simple, effective antidote to fear, insecurity, and paralysis. It is also why empirical knowledge is so important: it can strengthen basic confidence in our abilities and potential.

Because of the government’s decision to phase out coal by 2038, many employees will leave LEAG, many young people will reorient themselves within the company, and employees with new skills will be added. Lusatia will receive billions of euros to compensate for the coal phaseout, but money alone does not buy a successful future. If LEAG and others can demonstrate how the transfer from the old energy world to the new one translates into job opportunities (some requiring training), we can inspire confidence in our plans. This is something we must work on tirelessly.

A Culture of Error

Sometimes it is better to make a wrong decision than to freeze and make none at all. This has become known as a “culture of error,” and it’s a requirement in a dynamic transformation situation. Indeed, this viewpoint can give individuals and teams the strength to create exciting new things and move us all forward. It goes without saying that this type of culture requires strong, supportive (and demanding) leadership.

Flexibility Is Key

Flexibility is crucial in a major transformation. Parameters change fast, sometimes daily. What seemed sensible four weeks ago may be wrong tomorrow or four weeks from now. That’s why identifying trends, opportunities, and obstacles and reacting to them quickly is vital. This may mean reprioritizing projects with very little notice, so adaptability is essential. Ultimately, management must develop more options than will be needed. This can lead to irritation and disappointment both inside and outside the company, but it is essential — concentrating on just one path to a goal would be damaging. Of course, this way of working requires plenty of dialogue and mutual idea exchange at the management level, within teams, and to stakeholders.

Cool Head, Warm Heart

What sounds like a contradiction at first is a prerequisite for a successful transformation. Everyone should be passionate about the mission and encourage others to come along for the journey. At the same time, we must deliberately stop and make sure we are on the right path (does commitment X or investment Y still make sense for our goals?). This can lead to disappointment but is a reality in a major transformation. When it comes to costs and profitability, unbiased analyses are always necessary. LEAG’s transformation is not just about a huge amount of money, it is about energy security in Germany. We are fortunate that our shareholders fully support us and our plans and share our vision of an energy company that is positioned for the future.

Stakeholder Management

A project like GWF involves many stakeholders with legitimate expectations, demands, and interests. They include employees, shareholders, customers, suppliers, cooperation partners, legislators, and a variety of governmental organizations. All bring with them their own experiences, interests, and questions. It is essential to understand their expectations and opinions while helping them to truly understand GWF’s potential. This falls squarely on the shoulders of the CEO, especially in the case of a heavily regulated market in the midst of a comprehensive transformation. An information and dialogue system must be quickly established and continuously updated to answer questions and communicate the project’s progress.

Final Thoughts

In conclusion, I believe LEAG will succeed in this transformation. After all, the opportunities this challenging endeavor presents are simply too big, too important, and too fruitful to not give it our all.