In this episode of the McKinsey Global Institute’s Forward Thinking podcast, co-host Janet Bush talks with Ann Mettler. Mettler is Vice President, Europe, at Breakthrough Energy, working on cleantech innovation in pursuit of a net-zero-emissions future. Before her current role, she worked for many years in European public policy. She was head of the European Political Strategy Center, the in-house think tank of the European Commission, from 2014 to 2019. In this podcast, she covers topics including the following:
- Investing for climate impact
- The challenges in Europe’s clean energy technological ecosystem
- Useful innovation beyond new products
- The new priority of energy security accelerating the net-zero transition
Janet Bush (co-host): Michael, looking at new challenges we face in the energy arena—the invasion of Ukraine, the spike in inflation, worries about energy supply chains—are you more or less optimistic about the net-zero transition?
Michael Chui (co-host): If I am being honest, I am not sure whether we will get to the 1.5 degrees target that some people have put out there. Nevertheless, there are some optimistic signs about diversifying away from fossil fuels.
Janet Bush: In Europe, at least, our guest today is very much in the optimistic camp. She looks at the recent disruptions and thinks it’s going to accelerate our progress.
Michael Chui: I look forward to listening in to the conversation.
Janet Bush: Welcome to the podcast, Ann.
Ann Mettler: It’s great to be here. Thank you for having me, Janet.
Janet Bush: You’re very welcome. So listen, we always like our listeners to know a little bit about you, where you came from, your childhood, where you were educated, and how did you end up in public policy.
Ann Mettler: It’s a long story. In terms of my background, I’m a quintessential European. I have a German father, a Swedish mom. I was born in Sweden but raised in Germany. I’m a child of the 70s, so my dream was always to study in the United States.
That wasn’t very easy in the early 1990s. So I decided to sort of take a short cut and actually begin my studies at the American College in Greece. So I moved to Athens. I was 19, studied there for two years, studied business. I thought, at the time, I wanted to study business, but then realized I actually wanted to study political science.
Then I managed to get a scholarship at the University of New Mexico. I moved from Athens to Albuquerque, in New Mexico, where I first received a bachelor’s and then a master’s degree. I really wanted to move to Washington, DC, and really experience politics. So I just packed my bags and moved to DC.
I got very, very lucky in the sense that I ended up working for a senator, John Glenn, the former astronaut. That year in Washington, DC, was transformative for me because I got to really experience public policy in a way that I just hadn’t. But it also really gave me the urge to want to go back to Europe.
So I moved to Bonn, Germany, for a year. I got my second master’s. And then, bizarrely, I actually ended up moving to Switzerland.
I got a very attractive job offer at the World Economic Forum. I started out in the North America team but then was made, at the time, the youngest director ever, in charge of the Europe department. It was an incredible opportunity.
By then, I was in my early 30s. And my lifelong dream—and I consider myself, really, an entrepreneur at heart—was to run my own organization. So I quit my job after a few years and decided that I was going to co-found a think tank in Brussels. It’s called the Lisbon Council. The slogan was “Making Europe fit for the future.”
I’ve always thought a lot about preparing Europe for the future. And I ran the think tank for 11 years, until I was approached by the team that supported the new incoming president of the European Commission back in 2019, Jean-Claude Juncker. They asked me if I wanted to run the European Political Strategy Center, the in-house think tank.
I became a director general in the European Commission, came in from the outside at the highest level. It was really quite daunting, I have to say. But I was very glad to serve the entire term of five years.
Towards the end of that time, I was approached by the private office of Bill Gates to see if I wanted to open up an office in Europe for them to work on energy and climate change, which, as you know, Bill Gates very much cares about, and really was looking to Europe as a best practice in climate policy and in the energy transition. So I decided to accept that offer.
Janet Bush: It’s very interesting that you worked in Europe when the large enlargement happened and our Eastern European neighbors came into the European Union. Looking back, it was challenging at the time. How do you see it now?
Ann Mettler: Honestly, that moment with the Big Bang Enlargement was a moment just so ripe with opportunity. We thought democracy had prevailed, and now this was going to be the foremost governance system, that the entire world would embrace. And I think today, we’re in a very different spot.
I think public policy is probably always very intense. But I feel like we are just living through changes that are so profound that sometimes it can be really difficult to even wrap your minds around it.
It was difficult at the time to always understand what is on the horizon. And I won’t lie about it, it was oftentimes unsettling, because we didn’t like a lot of what we saw coming.
Janet Bush: So, talking about big issues and uncertainty, you are now engaged in the business of climate change, sustainability, cleantech. That has to be the biggest challenge for all of us.
Ann Mettler: Absolutely. And this is maybe one thing to say, that towards the end of my time at the Commission—this would have been 2018, 2019—it was very evident for me that at least with regards to the EU, that the energy transition was going to be the biggest thing going forward.
And I wanted, with all my heart, to help Europe to succeed in this cleantech revolution. And I say it as someone who accompanied Europe pretty much from the very beginning of the internet till now, and seeing how Europe just fell further and further behind when it came to digital technologies.
Janet Bush: Tell our listeners about Breakthrough Energy, what you’re doing.
Ann Mettler: Breakthrough Energy is an extremely eclectic and interesting organization. It’s very much a brainchild of Bill Gates. It is about investment, but not investment in a traditional sense—with a return-on-investment frame of mind, but the investment thesis is very much centered around the climate impact.
So, the technologies that we invest in, what is their potential at scale? And we will only invest if we believe that it has the potential to reduce CO2 emissions by half a gigaton a year. It’s a very high threshold for an investment. So it’s investment, but done differently.
Number two, it’s also philanthropy. You asked about my job. When I look at Europe, what Europe needs is perhaps not so much just to focus on climate, because broadly speaking, Europe gets this. However, where Europe lacks is in the innovation ecosystem. It’s essentially in not only developing these technologies, but deploying them at scale. So a lot of our philanthropy is actually focused on the innovation ecosystem.
Then I would say that the third element is really very centered around public policy, because in energy, you don’t lift a finger without having to focus on what’s the regulatory and public policy environment.
Coming back to my own work, we are sort of a microcosm of the larger organization in the United States, but also very focused on the particular challenges that Europe has. And as I said, in Europe, broadly speaking, there’s consensus that climate change is real. We have very ambitious targets. We have climate law. All of that is in place. But we really need to show up our performance when it comes to scaling up these technologies. And this is what I’m committed to do.
Janet Bush: What are the shortcomings of the ecosystem, the technological ecosystem in Europe that is needed to make this happen?
Ann Mettler: I wish there was one. But broadly speaking, if you look at an innovation cycle, it goes from development to deployment, scaling up. And Europe is very strong in the early stages of the innovation cycle. And that’s a real strength. Breakthrough innovations, technologies will come out of Europe.
Where things then go astray is a little bit beyond the R&D phase. We’re getting better at producing promising start-ups, but where then things really break down is in the scaling up. Europe does not have a great track record in helping young companies to grow big. And that is becoming a problem.
It’s really very much around the deployment of the technology, rather than just the development. And that’s what I spend a lot of my time on. I would say more recently that Europe has also lost some leadership in manufacturing, frankly.
I’m very concerned, if I can say that right now, about the wind industry. Europe stood up the solar energy and lost that, and Europe also helped stand up the wind industry, including offshore wind. And I worry that we are sleepwalking into a situation where we will lose the wind industry as well. So that’s problematic. I think that we really need to have this on our radar screen.
Janet Bush: You talked about Europe’s opportunity in cleantech. The commitment’s there. The opportunity was there. Do you think that the opportunity is lost, or can it be regained?
Ann Mettler: It’s not lost. Nothing’s ever lost. And Europe will always have niche areas where it can be strong. But broadly speaking, and if I look now on the other side of the Atlantic, and the transformative changes that have been brought about by the Inflation Reduction Act, which really has put the US on the cleantech agenda in a very short period of time, then I worry that Europe is not necessarily maybe losing ground, but others are getting faster, because we’re not standing still.
This is one thing that I realize, in comparing to when I started my job back in early 2020. Europe was really sort of a leader. But that was before every other geography got into the cleantech game.
My point is the entire world is looking right now, “How can I get a piece of this pie?” So it’s not necessarily that Europe is falling behind so much that others are going faster and are being more ambitious. And this is what we’re trying to remedy.
Janet Bush: What is it about Europe that makes it so slow at things?
Ann Mettler: It is slow. But I will also say when it does move, it’s a little bit like a tanker. It won’t move fast, but when it does move, it is palpable. And so I always want to give the EU the benefit of the doubt. It is cumbersome. It is slow. But I believe we need to find the solutions within the system.
Janet Bush: So when you look at the innovation that is happening in Europe, what most excites you? Give us some examples.
Ann Mettler: There are amazing start-ups. I said before that cleantech plays to Europe’s strength. We have a very strong industrial base. We have deep expertise in deep tech and engineering. We have a lot of entrepreneurs who really worry about climate change. They are really dedicated.
So there isn’t one sort of innovation that I am excited about. It’s more the nascent ecosystem around these technologies that I am trying to strengthen by connecting the start-ups at the technology frontier with bigger corporate players. This is what I consider my job.
However, I will also say—and I thought a lot about what kind of innovation Europe needs—I think we are too stuck with an intellectual paradigm that looks at innovation in cleantech as if we were developing sort of a new iPhone. That’s not the case.
If I look at what kind of innovation Europe needs, it can be much more around speeding up certain developments. How do I speed up processes? How do I deploy technology faster through process innovation? What kind of innovation do I need to be able to mass manufacture again? Also, using the same standards, and thereby accelerate the deployment of a technology?
The point that I’m making, what I’m learning about cleantech, is that oftentimes, because the innovation is so undifferentiated that we need to take a different path than we sometimes do in other areas of innovation.
What do I mean with that? So for instance, if you fly on an airplane that flies with sustainable aviation fuels, it won’t palpably feel different than if you fly on an airplane with kerosene. So you won’t have the typical sort of user experience, right, that underpins an innovation, a product innovation. But you will have a much more expensive airplane ticket.
An innovation can be, “How do we manage to increase to scale to bring down the cost?” What Bill Gates calls “the green premium.” That can be an innovation, too. So I’m trying to sort of steer the debate more into what kind of innovation do we need so that we get out of our paradigm that an innovation always needs to be a new product.
Janet Bush: Are you making progress on that front?
Ann Mettler: Yes. Absolutely. We’re seeing now that speeding up permitting has become a major issue. We’re seeing that policy levers that can be deployed to reduce the cost of clean energies, such as what’s called carbon contracts for difference. This is where the government pays the difference between a CO2 -intensive product versus a clean product, so that you start using the clean product. So carbon contracts are different. There are some exciting developments in Germany.
The next frontier here is to bring back some manufacturing capacity.
But still, it’s still too slow. It doesn’t scale fast enough. So this is where, really, we need to focus in on the speed, the scale, the simplicity. These regulations have to speak to companies so that they have confidence in investing. So this is what I would be focusing on if I were still in my old job.
Janet Bush: The three Ss, very important. So putting all of this into the context of a more fractured world, a more contested world, a less certain world, a world with inflation for the first time in 20 years, and the rest of it, a world with Russia and Ukraine, how does this impact the chances of cleantech and, in general, the net-zero transition unfolding as it should?
Ann Mettler: My prediction is that it will accelerate the energy transition.
And, at least here in Europe, when natural gas became weaponized by Russia against us, it was very clear that we would have an urgency to get off fossil energy, and natural gas in particular, that we had never felt before. I wanted to use that opportunity and really, really, really use it to accelerate the energy transition because honestly, between the urgency of climate change and the urgency of a war that is based on the weaponization of energy, if you cannot muster the resolve to really speed things up then, then I don’t know if you ever can.
I was, at the time, and I continue to be optimistic, that it will accelerate the energy transition away from fossil energy. But, I think there’s no global consensus around it.
And so the question is, “What do we do about this?” I personally believe that climate action has always been plagued by a collective action problem, that those that moved ahead the fastest thought that if others don’t pull along, that it is too much of a risk.
I think that perception is changing now, and that essentially now that energy has become a security issue, that prioritizing what I call energy resilience will become an overriding focus. And I think that, at least in Europe and the United States, that’s been understood.
Janet Bush: It’s very interesting that MGI did some work called The complication of concentration in global trade. And it shows that many countries source what they need from a very, very small number of trading partners. And we’re seeing that changing, because people know that they have to diversify for resilience.
But we’re also seeing, in some cases, new oil licenses being granted, new coal-fired power stations being built in different parts of the world. So there’s an element of going back to fossil fuels at the same time as forging ahead with clean energy.
Ann Mettler: Yes. I don’t dispute that, which is why I believe our approach is so important, because essentially, unless you can make a business case that the clean energy is the better energy, I think this is going to be exceedingly difficult.
For instance, the renewables have now proven themselves. They’re cost competitive. They’re cheaper than fossil energy. And this is the promise of standing up a new generation of clean technologies, because imagine how much less hope we would have today if we didn’t have renewables, if we didn’t have wind, solar, if we didn’t have batteries—but also how much more hope the world would have if we had green hydrogen at scale, if we had sustainable fuels, if we had carbon dioxide removal technologies, if we had long-duration energy storage, if we had geothermal at scale.
My point is really, from a policy perspective, my recommendation is focus on the business case, make it profitable to do the clean energy business, and then, essentially, things will fall into place. But we don’t have time. Climate change is a reality. With wind and solar, it took 40 years. What took 40 years in the past, we now need to do this decade. It’s a tall order.
Janet Bush: It’s interesting. A previous podcast guest was Claire O’Neill, who was the British representative at COP in Glasgow. And she said it was interesting that in the final communiqué, business wasn’t even mentioned. The word “business” did not appear. But is it business, really, that is going to make the change?
Ann Mettler: I don’t think we can bring about the desired change without business, so it’s not sufficient on its own. I will also say that business is not some homogeneous lump. Business is a multitude of actors.
What I have been focusing on recently is more at the interplay of large industry players and start-ups at the technology frontier. I think this is not sufficiently explored, because especially energy—and I hope no one will take offense—on balance, energy is an innovation-poor sector.
One must, in fairness, say, energy has never been told to be very innovative. The goal of energy was be cheap and be reliable. And broadly speaking, that’s what was supplied. This is what we got.
Now, we have all sorts of expectations in the energy sector on what they should do. And this is why I’m saying bringing them together with these start-ups that are working on these breakthrough innovations and breakthrough technologies is really a fruitful way of going about. And what I learned, and it’s anecdotal, but I know that, for instance, in China, big corporations get subsidies from the government to work closely with start-ups. And then they take these breakthrough innovations and technologies and bring them back into the big company, which of course has global value chains, has just capacities that a small business doesn’t have.
I think we need to understand better how we can bring the innovative prowess in these young companies into the bigger companies and then help them to jointly scale the technologies and bring the innovations to market. I know that in Europe, this has not been sufficiently explored. It has not been sufficiently incentivized. So oftentimes, let’s be very clear about this, when we talk about business, we talk about economic industry incumbents. More often than not, they are not the ones at the technology frontier. They are often the ones that feel very threatened by new technologies. They fear the disruption that innovation brings.
So I think we need to be more nuanced in our approach to business. We can’t do it without them, but we must show that we really bring the totality of business, and here in particular those that are at the technology frontier, really around the table.
Janet Bush: It’s exactly the same in biotech, by the way, the same thing as in cleantech. There’s a lot of innovation in Europe. You can’t scale it. You can’t commercialize it. There isn’t an ecosystem. Same thing.
Ann Mettler: The best example of that is BioNTech, which developed the mRNA vaccine for COVID-19 but essentially couldn’t mass manufacture it, which is how they ended up collaborating with Pfizer. But that’s what I’m saying—here it was incentivized. We understood what are the strengths of each player and brought them together in conducive ways. Why can this not be done in energy?
Janet Bush: Are you seeing movement on that front in Europe and in the US?
Ann Mettler: In the US, yes. And one thing that I really like about the IRA is it does not discriminate. You deploy the technology, you will get your tax credit.
In Europe, the subsidies are, at the European level, handed out through what are called the IPCEIs—Important Projects of Common European Interest. More often than not, these are big industry players, there’s a really lengthy process to qualify, et cetera. I don’t experience, per se, that the environment for cleantech start-ups is super empowering in Europe, that they have the same access to subsidies, or to public policy, for that matter. So I think we really stand to improve here.
And as I said, this is not only about the start-ups. This is really about this interplay really bringing the right actors together so that we can deploy, because let’s face it, you have a new company that’s sort of an exciting start-up in, let’s say, low-carbon cement. Until they can really rival the four to six global companies that dominate the cement market, it will take, at a minimum, a decade, if not more. We need to think creatively. How do we do this in a much more fruitful way?
There should be a lot of opportunity in Europe because we have a lot of big global industry players. So we have what we need. We have the start-ups. We have those players. But we have no systems to bring them together and to really create meaningful projects that have the policy support, the focus. Also, from a derisking perspective, so that they can then deploy the technology and scale faster, much faster than they otherwise would.
Janet Bush: So beyond the system points, which I absolutely see, is there enough money going into cleantech, overall?
Ann Mettler: There’s obviously never enough money, but probably not. I’ll give you an example. If I look at Europe, since the beginning of the [Russia-Ukraine] war, European governments have subsidized the continued use of fossil energy to the tune of €600 billion. We have a project that we call the Energy Resilience Leadership Group. There is a fabulous company that has come out of X, the Google accelerator that does long-duration energy storage in coal mines. And they need about €2 billion to deploy this technology. Two billion euros sounds like an unbelievable amount of money. And it is. It is for an individual start-up. But then if you compare that to the €600 billion, it’s a drop in the bucket.
What I’m missing is a master plan—being much more strategic. Of course, we were in a complete crisis situation, a panic situation in Europe—you really can’t say it any other way—after the war started and we were looking at a winter with real distress. So I get it.
But now, we are in year two of the war. We need to start shifting away and really deploying a lot more money into these emerging clean technologies. It’s just a fact that it costs a lot of money and that for these individual companies, it’s too much of a risk, including for a lot of investors.
So we need to think of ways that we can socialize these risks, because honestly, especially in this summer, where we’ve had a lot of extreme weather events, however much this would cost, the cost will pale in comparison to what these extreme weather events will cost over time. So as I said, it’s never enough money. And we need to deploy that money in a much smarter way than I think we have done to date.
Janet Bush: What do you mean by “socialize the risks”?
Ann Mettler: That means that right now, that if you are an investor and you come across very promising clean technologies, you shoulder a lot of that risk. And then, this is without any sort of understanding, “Is there a market on the other side of this? Will I really be making money? When will I be making money?”
That’s what I’m saying. If you have a traditional return-on-investment perspective, a lot of these technologies continue to be very risky. And this is where governments need to step in—and, in fairness, do step in—and try to derisk. But it’s too slow moving.
I remember when I started my job and I saw that Europe was really doubling down on renewables, which of course is completely laudable. But I’m like, “How is this supposed to work without long-duration energy storage? Because both wind and solar are intermittent sources of energy. So what do you do if there’s no wind and there’s no sun?”
But back then, at least, long-duration energy storage was not on the radar screen at all. I remember talking to previous colleagues and saying, “We need targets. We need funds. We need to make this a big policy priority.”
Now, we’re getting there, but it’s pretty slow moving, I have to say, all things considered. And the same on green hydrogen. We’ve spoken so much about green hydrogen, but it’s not really deploying. There’s not really a market. No one’s really buying it.
We really need a reality check and not just have ever-more-ambitious targets, but really looking at what are the final investment decisions, is anyone buying these clean technologies, and is there real demand? Because without that, only the clean technologies that are actually being used will decarbonize. If it’s just something that exists in a lab, at the end of the day, it won’t really make a difference.
Janet Bush: What do you think would unlock the potential of green hydrogen? And who will unlock it?
Ann Mettler: That’s a good question. What I learned about green hydrogen is it’s more complicated than, let’s say, batteries. I was part of the team that put together the European Battery Alliance. And building a battery value chain, honestly, is peanuts compared to green hydrogen, because with green hydrogen, you’re talking system change, and that’s always extremely difficult to do.
First of all, I think what no one really realized is that in order to have the green hydrogen, you need abundant and cheap renewable power, which only exists in very few places in Europe. So mostly in northern Sweden, and the Nordics more broadly, because of wind and hydropower, and then in the Iberian peninsula because of sun and wind.
If you’ve been really slow in the rollout of your renewables, chances are you’re not going to be a leader in the production of green hydrogen. Then you need electrolyzers, which is a very nascent industry. Can we produce these electrolyzers at scale and at an affordable cost? Also big question mark. But that being said, we have great companies in Europe.
Then you need to transport green hydrogen, which is notoriously difficult. So many issues that we need to think through. But one issue that I learned from my days in digital technologies that I would really encourage us to think about is, I saw this because Europe really had a very difficult time with the data economy because, as you know, the data protection, a very restricted use of data was only made possible.
I worked on the artificial intelligence strategy at the time. And artificial intelligence was the flavor of the day. Everyone said, “We want to be leaders in artificial intelligence.” And I said, “That’s not going to happen because if you cannot work with data, where does the intelligence in AI come from? It comes from volumes of data that you can aggregate.”
And I feel the same here. We want to be leaders in green hydrogen, but we’ve been really slow for many years in the rollout of renewables. I’m sorry, this is just sort of a reality check. And from a public policy perspective, I would very much encourage understanding a cascading effect that technologies can have, where new technologies build on an old or mature technology. And I think we don’t sufficiently build that into our thinking and to our strategies.
Janet Bush: What about the climate issue? Where are you on that? Optimistic, pessimistic?
Ann Mettler: Optimistic, because you have to be optimistic. And I believe that the way to make progress is to lead, essentially, a race to the top, is to demonstrate that clean technologies are safer, better, make us more resilient. And that’s the game that I’m in.
Janet Bush: What one piece of advice would you give to our listeners?
Ann Mettler: Just to understand that the world is changing in profound ways. To really keep your eyes wide open, to not look at issues just from a unidimensional perspective. I always used to tell my team, “Look at every issue from a 360° perspective, because nothing is what it seems anymore. And this is what I always try to encourage, so also stress-test my own assumptions constantly.
Janet Bush: Sounds very sensible. Thank you, Ann. That was absolutely fascinating.