Remarks on Energy Security and the Clean Energy Transition: Complementary Goals

CSIS Joseph Majkut:  Hello, good morning from Washington DC or good day to whatever time you are watching this video.  Welcome to CSIS digitally.  My name is Joseph Majkut.  I’m the Director of our Energy Security and Climate Change Program.  We’re delighted that you’re joining our program today.

I’m delighted to be joined by Ambassador Geoffrey Pyatt.  The Ambassador is now serving as the Assistant Secretary for Energy Resources at the United States Department of State, but he sits atop a long career, having been Ambassador to Greece, Ukraine and been in the Foreign Service since 1989.

The core mission of the Bureau of Energy and Natural Resources which Ambassador Pyatt leads is to formulate US international energy policy and diplomacy to ensure a low emissions and secure energy future.  The same goals that we have here on our program at CSIS, so I’m delighted to have a conversation with you, sir.

I’d like to start actually at a high level, before we get into the crazy world we find ourselves in.  You’ve spent so much of your career working in areas where energy was a key factor in statecraft.  Ukraine and Greece both.  How does that experience define your vision for how energy should be a part of US diplomacy generally and at this moment?

Assistant Secretary Pyatt:  Thanks, Joseph.  It’s a really good question and I want to start by saying I’m delighted that this event with CSIS is my first in the Washington think tank world.  I was so glad to work with your predecessor Nikos when he was here.  And incredibly proud of his new role now working with Prime Minister Mitsotakis in Greece.  But also, Heather Conley, and was really delighted to partner with Heather on some of our projects focused on developing a policy framework for the Eastern Mediterranean which was a big part of my time in Athens.

As you said, ENR does the geopolitics of energy.  That’s my responsibility and the responsibility of the team that I lead.  That issue set is more dynamic and complicated today than it’s been probably at any time in modern American foreign policy history, certainly at any time in the ten years since Senator Lugar and Secretary Clinton helped to create this bureau.

There are a couple of reasons for that.  First and foremost, of course, is February 24th, Putin’s invasion of Ukraine.  The incredible brutality he has unleashed.  But also, the fantastic disruption that that has caused in global energy prices and the global energy market.  I think we can talk about this a bit later, but it’s interesting to me, if you look at the last IEA Global Energy Outlook, two really important points there.  One, that we’ve passed the moment of peak Russia, that 2021 was the moment of Russia’s highest fossil fuel revenues.  It will never recover the status that it had as a reliable energy supplier to world markets.  And two, that by the end of the decade Russia’s fossil fuel revenues will be down by about 50 percent which is an extraordinary shift of fortunes and presents both opportunities and challenges for ENR’s core mission of energy security.

The other aspect is the climate crisis, and a lot of things have come together in 2022.  One, of course, is the realization of just how severe this challenge is and the urgency of action.  Look at what happened in Pakistan over the summer, for instance.  But the other, and importantly, just a couple of weeks before I was confirmed we had the passage of the Inflation Reduction Act.  And it’s my good fortune to be leading the ENR team at a moment when the United States has the most powerful tool set that we’ve ever had as a federal government.  $370 billion over ten years, which is going to be a game-changer in terms of the U.S. domestic market, but it’s also going to drive innovation, deployment, investment, it’s going to create opportunities for the whole world.

So, for the ENR team it’s a fascinating moment to be working on all of these issues.  My job one, of course, is European energy security given the urgency of the situation in Europe today and the disruption that Putin has caused and the linkage between that and America’s national security and our global interests, not to mention our transatlantic alliance relationships.  But we’re also focused on the whole world.

My first trip in this job was to Europe, necessarily.  My next trip just after Thanksgiving will be to Asia, starting with our core allies in Japan and Korea.  And then looking into 2023, I’m going to be eager to get back to India, a part of the world where I spent a lot of time.  A country that encapsulates so many of the challenges that we face in the energy transition world both in terms of access and justice, in terms of supply chains.  India of course being one of the few countries in the world that has a good shot to challenge the monopoly that China has sought to achieve in certain key aspects of the global energy supply chain.  And again, a powerful democracy.

So, I think of ENR’s job as marshalling the resources of the State Department, our embassies overseas, at a moment when these issues are higher on the bilateral agenda in our diplomacy around the world than they’ve ever been.  But also helping our State Department team globally to leverage the opportunities created by the energy transition, by IRA, by the hunger for American leadership in this space which was so clear to me when I was at COP last week.

So it’s a very exciting time to be doing this.  I’m incredibly proud to lead the team of foreign service and civil service officers at ENR, and very excited about what we’re going to be able to do over the next couple of years.

CSIS Joseph Majkut:  There’s so much to talk about.  I’m worried we’ve only got 20 minutes remaining on our conversation.

Let’s start with Europe.  U.S. LNG shipments to Europe are keeping the lights on with allied countries and preventing an energy crisis that could very clearly perturb European solidarity and support for Ukraine.  But this comes with tensions.  One, it’s been very costly for European allies to buy off of the global LNG market all the gas they need.  And two, it’s not clear how to build enough capacity, both export capacity here in the U.S. as well as maybe some import capacity in Europe in a way that’s consistent with European climate goals.  They’re not necessarily inconsistent but figuring out the right way to thread the needle of energy security and the climate emission that we see in Europe does seem to be a challenge.

What’s your assessment of the state of the conversation?  And how is the U.S. trying to help our European allies resolve these tensions?

Assistant Secretary Pyatt:  The conversation, the transatlantic conversation is very robust.  It’s happening at the level of President Biden, President Von Der Leyen.  I was glad two weeks ago to participate in another session of the US-EU Working Group led by the White House and by Ditte Jørgensen, the DG for Energy on the European side.  There’s a lot of agreement between us in terms of how we need to work through these issues.  The United States has significantly over-fulfilled our promise to help Europe find 15 bcm extra in LNG volumes this year.  And of course, 2022 is going to be remembered as the year when the United States became the largest LNG exporter in the world.  Our capacity is going to grow by about 50 percent in terms of exports by 2025.

But we also, as you said, need to keep working on energy transition.  It’s clear that for Europe in particular the greatest source of energy security is a renewable energy future which does not depend on an unpredictable Russia right next door.

The good news is, I think decoupling between Europe and Russian energy supplies is real and now permanent.  Nobody in Europe will ever again suggest that Russia could be a reliable energy supplier.  That in turn has incentivized Europe to accelerate its energy transition.  I saw this so clearly as Ambassador in Greece.  I of course lived in the European Union during the first three months of the war in Ukraine, but I also saw Prime Minister Mitsotakis’ commitment to leveraging Europe’s Recovery and Resilience Fund to accelerate clean energy deployment.

I’m also very proud that part of what I saw also there was the opportunities that created for American companies.  And this is happening in 27 EU member states right now.  But just to use the micro example of Greece, I was proud to work with a Texas-based company which is now the largest licensed wind power operator in Greece.  I was proud to work with a Boston based hydrogen fuel cell company that is getting $80 million out of the Recovery and Resilience Fund to lead a project focused on green hydrogen.  That’s going to repeat itself over and over again because of the billion dollars of investments and good that flow across the Atlantic because of our shared interest in advancing this energy transition and because of how our companies and our markets are intertwined in a mutually beneficial way.

CSIS Joseph Majkut:  Touching on Russia just momentarily.  A couple of weeks ago you were speaking here in Washington and you said the following: “The more successful we are in energy transition, the more effectively use our legacy of fossil fuel assets,” I think here you were referring to the United States, “the less Vladimir Putin is able to attack our democracies.”

Assistant Secretary Pyatt:  Yes.

CSIS Joseph Majkut:  It seems like there’s a lot of agreement in the high ranks of our government and in Europe on this general message.  Is that message being received throughout the world?

Assistant Secretary Pyatt: So, I think Russia has demonstrated to everybody that it is not reliable.  I’ve had conversations with colleagues in Central Asia, for instance, where there is deep preoccupation about the revanchist approach that Russia has taken, the violation of international law that the invasion of Ukraine represents, the incredible images that we all see of the human rights abuses that Russian forces have conducted.

I think the challenge is again, that Russia was this major supplier to international markets, but those IEA numbers that I talked about earlier, those are a reality and they’re not going to go away, and I think Russia has marginalized itself, having weaponized its energy and fired its energy weapon, Putin will never be able to do so again.  That has had the effect of accelerating in a positive way the focus on alternatives.  You can see it also in terms of the prices.  The fact that the marginal cost of renewable power as Russia’s actions have driven up the cost of fossil fuels and fossil resources.  It’s actually made the switch to renewables more economically compelling.  It’s made the business case.  Even if you don’t care about the climate benefits.

So, we have to be cognizant of the disruption that Russia has unleashed working with our allies, our partners, especially in the developing world in Africa, in Southeast Asia, in South Asia, to help countries manage the shock that their economies have received because of what Russia has done, because of its weaponization of its energy resources.

But I think the Rubicon has been crossed in a way that will be beneficial over the long term to global markets and has reminded everybody of the shadow cost of doing business with a repressive, abusive, unpredictable partner like Vladimir Putin.

CSIS Joseph Majkut:  Very interesting.  The energy weapon might be like the derringer – you only get one shot.

Assistant Secretary Pyatt:  And it’s been done, it’s been used.  You can’t reload it.

CSIS Joseph Majkut:  You mentioned the developing world.  You’re fresh back from COP in Egypt.  Media coverage of the negotiations seems to be pitting the developed world against the developing.  Was that the real timber of conversation?  And what was your experience on the ground?

Assistant Secretary Pyatt:  Not at all in my experience, with the caveat, I wasn’t a negotiator.  I wasn’t in the negotiating rooms.  I’ll say a couple of things that really stood out for me.

One, again, was just how dynamic this moment is but also the hunger for American leadership.  It was impressive to see the attention that the United States got, especially Secretary Kerry as our head of delegation. I would walk around and see him being stopped for selfies and things.  And it was striking also, we worry a lot about China.  The Chinese were almost invisible at COP, and I have to conclude that that was a deliberate decision.  Maybe they were more visible in the negotiating room, but in terms of the pavilions, in terms of the side events, it wasn’t there.

It was also I think important that this was happening in the wake of the IRA.  Lots of conversations about how the US energy system was going to evolve.  It was important that John Podesta was there for a couple of days also.

You had this wild mix of dynamics.  Mitsubishi engineers right next to newly elected resilient indigenous members of Parliament and the Davos set as well.  What was interesting to me was everybody agreed on the urgency of energy transition.  There was no debate on that.  Everybody agreed that the technology is moving the conversation much faster than folks would have predicted at the time of the first COP in terms of the cost of renewables.  Emerging new technologies.

I joked with my team when I came back, if you remember the scene in the Graduate where, and I forget the character’s name, but says to Dustin Hoffman, “Young man, there’s only one word I want you to remember.  Plastics.”

I came back to the team and said hydrogen.  Everybody was talking about green hydrogen and how the green hydrogen economy is evolving.  Both because of where the technology is, but because everybody agrees that’s going to be a key aspect of meeting the challenge of the climate crisis, and a lot of money is going into new investment in wind and solar connected to hydrogen, in turn connected to global shipping, connected to how to leverage and clean up legacy gas networks, especially in Europe.  So, a very exciting time in that regard.

It was also really useful for me to spend some time with some of the governments from that region.  I talked earlier about the work I did in Athens on the Eastern Mediterranean.  So, hearing from Minister Amwal in Egypt; hearing from Minister Pilides from Cyprus.  There is a lot of goodness that is happening right now in terms of this cooperation across the inner sea as the ancient Athenians used to call it.  So, very exciting moment in terms of regional cooperation there on energy, grounded on the principle of energy transition as well.

CSIS Joseph Majkut:  And does that include cooperation on things like hydrogen?

Assistant Secretary Pyatt:  It includes hydrogen, it includes electrification, the idea of deeper cooperation and bringing electricity resources which are potentially bountiful in the sun belt that stretches essentially from Egypt across Northern Africa, bringing that north to European markets.

CSIS Joseph Majkut:  Don’t get me started about big macro grids, Ambassador.

Assistant Secretary Pyatt:  There’s a lot going on there which is very positive for our climate goals.  But also positive for our interests in fostering cooperation, cooperation between democratic partners, the 3+1 process I was involved in launching with Greece, Israel, and Cyprus.  But also new and interesting dynamics in the Middle East, between the Middle East and Europe.  And then among European partners as well.

CSIS Joseph Majkut:  Let’s touch on two things before we see if we can find a question from online.  Cooperation and competition.

On the cooperation side, the American government is going out now on riding on the crest of IRA, right?  But it’s not been that with our allies with universal acclaim, particularly because of the domestic content requirements and other things that are causing real fear that the U.S. isn’t going to play nice amidst energy transition.  How seriously do you see that problem?  What are you hearing from your colleagues in other governments?  And what do you think the U.S. can do to respond and make sure we export the best parts of IRA?

Assistant Secretary Pyatt:  I’ll say a couple of things.  First, IRA is a good thing, and we need to do a better job of explaining that if there’s any doubt.  We have some trade-specific issues that have been raised, especially by our partners in Europe, in Japan, in Korea.  I think this is all manageable and will be managed, and I know that the White House is committed to the dialogues that we’ve launched with all of these parties, but they’re also fantastic opportunities.

I was talking not long ago with our Ambassador in Denmark which is a great example.  In Denmark you have two big wind power companies – Vestas and Ørsted.  Both are expanding opportunities here in the United States based on the incentives that IRA has provided.  Vestas is looking to grow its wind power manufacturing operations in Colorado.  Ørsted providing much of the offshore wind which will power our homes here in the Northern Virginia area with Dominion’s offshore project in Virginia, in Delaware.

That story is going to be repeated over and over again and especially because of the nature of our relationships with Japan, the European Union, Korea.  This will be part of my conversation in Tokyo and Seoul is all the opportunities we see for growing the trade and the investment flows in both ways.  As I said, driving innovation.  It’s inherently the case that these developments flow in both ways.

The example I always use is the Apollo program.  You think about all the innovations.  Apollo was about $25 billion of investment in 1970s money.  So smaller than the overall IRA footprint.  And think about everything that Apollo brought in terms of advanced computing and semiconductors, advanced materials, aerospace.  We all live with this stuff.  Not to mention space food sticks.

The point is, there will be bountiful opportunities for all of us in this.  We need to work through the trade aspects of it.  But these issues, these supply chains are inherently global.  One of the challenges I think we’re going to face in the IRA world and in an energy transition world is exactly the supply chain for solar, the supply chain for critical minerals.  The ENR team has an important initiative called Mineral Security Partnership to bring together the countries with an endowment of resources like lithium and cobalt with big consumers like the United States, Canada, the European Union, Japan, Korea.  Because ultimately, we all have an interest in growing this market, to driving innovation and making sure that China, a global rival, does not succeed in what it has been trying to do through the past ten years of industrial policy which is to monopolize some of these critical clean tech supply chains.

We don’t want to replace vulnerability to Russian energy weaponization with vulnerability to Chinese clean tech weaponization.

CSIS Joseph Majkut:  Let’s talk about that competition for just a minute.  Whether the frame is where solar cells are made or where critical minerals are extracted and processed, it does seem like the US and the West broadly has lost a step to China.  How do you view that as an energy security problem?  It’s different from being import dependent on oil, but how do you assess it and how does the government think about like potential trade tensions with China and building a more resilient or more strategic supply chain?

Assistant Secretary Pyatt:  As I was getting ready for my confirmation process and drilling in on some of this data, I asked exactly the same question you did.  How did this happen?  And there’s no great utility in focusing backwards.  The issue now is how do we move ahead?  And that’s where initiatives like MSP come in.

I think China got to this point through ten years of state-directed investment industrial policy.  The Biden administration has taken some big steps to reset the table.  IRA being one.  The Infrastructure Bill being another.  And the CHIPS Act being another.  All of these are intended to friend-shore and to build networks with allies and partners.  But these supply chains are inherently global.  It’s the world that we live in today.  There’s certainly no prospect that we’re going to island the U.S. manufacturing economy on these critical issues.  We have to work with partners.  And as I said, a lot of the growth that’s going to happen here in the United States is going to be driven by the Hundais and the Vestases and the Ørsteds of the world.

I had a wonderful conversation while I was at COP.  I was really glad that we had the governor of Indiana there.  He first of all had a very ambitious vision for Indiana’s energy transition in a heartland manufacturing state that had some of the largest coal power anyplace in the United States.  He was all in on wind, on solar, on hydrogen, on carbon capture, on driving electrification of the automobile manufacturing infrastructure in Indiana, on attracting companies like Vestas and others to manufacture in his state as well.  That’s happening everywhere.  And I’m a Californian so I have seen this in my own lifetime as well, and obviously California is really setting the pace in terms of the transition of an economy and the economic opportunities that creates for Americans.

CSIS Joseph Majkut:  Did you become a diplomat because you wanted to know if there was a better place no earth than La Jolla, California?

Assistant Secretary Pyatt:  I’ll tell you, I became a diplomat because, and I think the thing that affected me in terms of growing up in San Diego is, I was a child of the ‘60s and ‘70s as the process that eventually became NAFTA came to be.  It was very clear to me that the border was less a line than it was a band of 100 miles, 50 miles on each side of the border where the economies were intertwined, and the people were moving back and forth.  It really sort of gave me a sense of how important and significant those international partnerships were.

I came into the State Department in 1984, my first job as an intern working in what became the Western Hemisphere Affairs Bureau, really focused on Latin America.  And soon thereafter the State Department sent me off to India, and the rest is history, which is the nature of this profession.

But I got interested in these issues because of the importance that I saw behind the decisions and the actions that the U.S. takes and that was particularly so as Ambassador both in Ukraine and in Greece.  It was incredibly humbling to have regular folks come up to you on the street and say Ambassador, you don’t know me but I want to say thank you for what the United States is doing to help our country.  Which is humbling.

I should say a word on COP before we get off of that.  One of the most moving things that I was able to do when I was at COP was visit the Ukrainian pavilion, and I have been asked by Secretary Blinken to lead the U.S. government response to help build resilience in the Ukrainian energy economy in the face of Russia’s attacks, and it was so inspiring to meet there Ukrainian officials Ukrainians ministers, and to be reminded both of their incredible courage and resilience and unwillingness to bend in the face of Russia’s actions, but also a fantastically ambitious vision for energy transition.  For green hydrogen, for building up post-war Ukraine, and there will be post-war Ukraine, as a major hydrogen hub for Europe.

So it again reminded me of the importance of what we’re all doing.  The effort that President Biden has led to help ensure that Putin fails and is held accountable for what he has done to the whole world through this invasion.

CSIS Joseph Majkut:  If I may plug a moment, our colleagues here have been working on similar issues, not just for the power sector but for much of the effort that’s going to have to underlie Ukrainian reconstruction.  I know we’ve probably shown you that work, and we look forward to assisting you in any way we can.

Assistant Secretary Pyatt:  Thank you.

CSIS Joseph Majkut:  It’s really important at this moment.

I’d like to touch on one final issue before we close.  We have a lot of students who watch our work.  The tricky part of living in a world in transition is it’s a little hard to predict things.  What does U.S. energy diplomacy look like in ten years?

Assistant Secretary Pyatt:  A fantastic question.  If we were having this conversation in 2012 nobody would have predicted the invasion of Ukraine.  Nobody would have predicted the shale gas revolution and the fact that the United States would become the largest LNG gas exporter in the world.  Nobody would have predicted the dramatic reductions in the cost, the marginal cost of renewables, especially wind and solar.

So, I’m very humble about anything that involves pulling out a crystal ball.  But I think the two things that are dead certain are first of all, energy transition is going to happen.  We have reached an inflection point and the fossil fuel energy system era is coming to an end and we are evolving into the renewables era.  It’s not a light switch.  And it’s going to have to be managed based on the circumstances of individual countries.  But there is no turning back.  So I think it’s going to be a very exciting time in that regard.

And the second is that our international partnerships are going to be more important than ever.  I say this as somebody who – as you said, I joined the Foreign Service almost the same moment that the Berlin Wall came down.  So my career was marked by the time of American preeminence.  We were the indispensable power, as Secretary Albright used to like to say.

The next decade is going to be more complicated because we face international adversaries, China in particular which has a very ambitious vision for its future role and does not share our outlook on how the international system ought to be organized.  But that will place an even greater premium on our international partnerships.

And to come back to the point I made about COP, America’s voice matters so much.  It’s one of the great privileges of being in this role, people want to know what does the United States think?  What is America going to do?  We are still the greatest force for good in the world in terms of the international system, in terms of the openness of our economy, in terms of the democratic foundations of our political system.  We have to hold onto that.  We have to leverage that, and we have to build the networks that are going to help to advance the interest that the United States and our allies hold in common.

It’s a nice way to finish the conversation because it brings us back to where we started which is the importance of the energy diplomacy that ENR leads on and the centrality of these energy issues to shaping the contours of the global economy in the years and decades to come.

CSIS Joseph Majkut:  Ambassador, thank you very much for your service, and thank you for coming to CSIS today and your long years of friendship with our program.  I hope they continue.

Assistant Secretary Pyatt:  I look forward to continuing the conversation.  Thanks Joseph.

CSIS Joseph Majkut:  Thank you very much.