Electrification and Industrial Competitiveness: Can Austrian Industry Compete? | Lukas Pataky, Wienerberger

Give a round of applause for Lukas, thank you. Good morning everyone. So I will guide you through the view on the electrification in the case of Austria and whether Austria can be competitive. So, is this a pointer? Okay. All right, it's a big remote. I have rephrased the question that under which circumstances can electrification lead to competitiveness? And where is Austria in the European scale? So, whether it actually makes sense to electrify here or not. But in order to go deeper into this question, we will have to go step by step. First, actually, why I'm talking and who is Wienerberger. Just two slides quickly. Then the reasons for electrification. I mean, it was mentioned here why we want to do it, but I want to go deeper in it. I introduce you to Wienerberger use case. And then I look on the competitiveness of Austria in the European scale. So why I talk and who we are? Just very quickly, I'm here with my team. And we are working for Wienerberger as a procurement. So, buying energy. And our goal is to make sure Wienerberger can produce on cheap energy meeting the CO2 goals. So, electrification is basically part of our job. And it's very important for every company. And why Wienerberger? You might have heard of us. We are a company from Austria more than 200 years on the market. Many other companies here. Important, we have 8 terawatt gas consumption across globe. So, it's not little, not much, but it's significant. And we have already electrified three plants. So, we've experienced with electrification. We have opened one in Utendorf, which I'm going to present as well. We have one in the UK and one in Belgium. We have more than 200 production sites. So, there is maybe a way to go if you want to electrify all of them. It needs some considerations. But we are going there. So, I was thinking how to structure the presentation. And actually, in the beginning, I need to explain a little bit the electrification. Because just to put you in competitiveness, you need to understand the idea behind. Well, electrification is a high school or elementary school graph. Basically, you turn fossil fuel heat to electricity heat. Easy. Nevertheless, it should be green. Because it doesn't make any sense to electrify with coal. So, you need some good green source of energy. And let's look how much needs to be electrified in Europe. Or how much could be electrified in Europe. So, I have here the total energy consumption. This is industry consumption of Europe. And you see we have 2.5 terawatt of 2,500 terawatt energy in Europe. Out of which is 780 terawatt gas. And there are additional 500 terawatt hours of fossil fuels. So, technically, this is 2024 data. 1,200 terawatt of fossil energy we have in Europe. And this is causing some issue. So, electrification of this shall be done. Or is it the only way how to go ahead? I connect to maybe the presentation of my colleagues here. Why we want to electrify. It might seem clear one of the topic to save the planet. On the other hand, going to the hybrid warfare which you have discussed. Electrification helps us to improve the energy security. We are going to consume our own energy. So, we don't have to import gas from Qatar or Russia or even US. Secondly, a very important topic of electrification is keeping Europe competitive. No one is talking about it. But basically, importing all the energy is making bad numbers on the European trading deficit. If we start to electrify or use our own sources, suddenly European economy is going to look better. Nevertheless, if we electrify here, very likely it's going to be German, French, Danish companies who are going to electrify. They are going to invent the machines. So, we are going to help our R&D. So, electrification makes a lot of economical and social sense. And, yeah, we fight a climate change. That's very important. That's a green deal. So, I want to focus a little bit on the numbers and also, again, why we talk here. So, this is the gas. So, European gas consumption is 3,400 terawatt hours. This is a number from Eurostat 2425. Interesting. EU industry has 750 terawatts. Austria, 26 terawatts. But Wienerberger, 8. I was shocked when I saw these numbers because, basically, we managed my team 1% of European industry, which seems maybe little, but there's only one team here. There's another team from another company and so on and so on. So, if industry does something, we get a lot of job done and that's important. So, how to get rid of the natural gas to help save the planet and be more independent. So, the easiest way, and what we always say in a company, just stop using the energy. Find a way how to be more efficient and optimize. And this is being done continuously. Everybody is doing that. Then, we can electrify what is the question, how to do it, and whether we are competitive, what I talk about today. There is one more topic I'm going to mention. One slide is green gas. Because electrification is great. We go ahead. But we should not think that's the only way how to decarbonize. Because if there are people here from the ministry, so they also see the other way. I have here numbers on biomethen in Europe. So, if you see before, we have 3,500 terawatt hours of gas consumption in Europe. That's approximately 330 BCM. And currently, we plan by 2030 to have 45 BCM of biomethen. That means 10% of the gas, we're actually going to produce our own from all the manure and crops. The idea is by 2050, the EU has capacity to produce 165. So, basically, 50% of the gas can be just replaced with biomethen. EU has opportunity to do so. So, electrification doesn't need to be for all the numbers which we see. And that's something which we need to consider as well when we electrify. Because the best case would be we go to CEO and these are the numbers for electrification. Question, is there any other alternative? And there is. There's this biomethen. But going back. So, if we electrify 50% of the gas. Sorry. We green the gas by 50%. We still have the electrification. And to understand electrification, there is no single process. So, it isn't one way how to do it. It depends what you want to electrify. So, electrification is also when you just buy Tesla. Electrification is when you change your gas oven for electrical oven. So, that same applies to the company. It's not only one way how to go ahead. We have several ways. And what is important is the economics. So, when we should electrify. So, there is a simplified formula of four variables. We need to calculate the cost for heat. So, we don't need to know the megawatt hour of energy, but how much the heat is. So, we need to know what is the initial gas price. Opa. Sorry, I'm back. We need to know what is the electricity price, CO2, and efficiency. What is good with electrification, if you do any electrification, you very likely exchange some gas for power. But also, it means you invest and you improve the efficiency. So, I have here some examples, for example, how to compare gas and power prices. If you have some sim, that's for the concentration internally. You have a gas price and the price of heat, which is price of gas and the efficiency, plus some CO2. On the other way, you have electricity. You have the price and its efficiency. It's not a secret that the power is more efficient than gas. It brings instant heat. It is more efficient. So, immediately, it doesn't mean that one euro per megawatt hour for gas equals to one euro per megawatt hour of electricity. Let's look on a base case. If the ratio is 70% efficiency gas and 95% efficiency of electricity, the ratio is already 1.36. Meaning, if the price of electricity is below 1.36 times, it's attractive. But if it's higher, not. But then, that's easy. Well, we have CO2. I don't mean to go into too much detail, but you have to add CO2. So, that's extra 80 euro per tonne. Maybe three weeks ago, today, 85. Maybe 120. We don't know. Then, you have the efficiency of it. So, to basic formula, you have to add the ETS. And suddenly, you see what needs to be the ratio between gas and power in order to start electrification. And then, you can create some heat map. So, you can say, all right, when should we electrify? You put countries. So, this is a question. Is Austria competitive? You need to put prices of electricity for every country, prices of gas. And you see where Austria stands. So, let's say gas is the same in every country. Austria is 140. No. But then, you might have some other country I will mention. Maybe France. Is it 55? Yes, it's okay. So, we need to figure out whether Austria is competitive by making a proper exercise all across Europe. So, enough of this economics. I mean, you'll get it. But anyhow, it's just to explain how we think and what needs to be considered in the competitiveness. Then, the next thing is, what do you want to electrify? So, we in Wienerberger are electrifying three main plans. Meaning, we put electrical kilns, replacing the old gas furnaces. Nevertheless, first electrification is already by installing heat pump. Opa. Going back is here. Heat pumps. They are taking the heat away with electricity. Multiplying the heat. And basically, you're getting rid of some gas boilers. You can get electric boilers, again, to get rid of the gas-fired boilers. But what is the most important for us, maybe for glass industry or for steel, is to have some E-furnaces. Because you get rid of the gas-fired furnaces. You can go down, down, up to plasma. I don't know. I never use it myself or Wienerberger. But basically, the economical opportunities and technical opportunities are there, if the numbers are right. So, what we did in Austria. For your information, we identified a plant Utendorf. Utendorf is in upper Austria. Nice area. Some hills around. It was built in 1973. We bought it in 1987. So, Wienerberger was acquiring a lot of plants. In 2019, we electrified first time by putting a heat pump. And somebody mentioned here the prices of 2019. It was a very good use case. CO2 was already getting high, but there was no issue with Trump and Iran and so on. So, it looked like a great idea. So, 2021, in the corona crisis, that energy was actually very cheap. We decided to electrify the full plant, which was concluded in 2024. And 2025, we had a new neutral clay block. Perfect. Is it competitive? We're going to look at it, maybe. However, what I said, maybe just to give credit to companies which have done it, because it's a big thing. You can see here it was done also with the university. Also, an institute of technology. We got many companies which helped us. We paid 30 million for it. So, for information, we have 200 plants. One electrification was 30 million, for which we got 7 million from the state. Is it a lot? Is it little? I don't know. But that's how it is. But we saved 90% of CO2. So, that's something important. So, if you would like to get rid of 90% of the group CO2, we just need 30 times 200. How much? 6 billion? I don't know. Let's print it out. What is important to the equation, which I have mentioned before, we have done... So, this is a heat pump. You can take a look at it later. This is the kiln. Very great kiln. Powered also by PV. For your information, it creates bricks for 2,600 family houses per year. However, as I said, the equation is not just basically putting electrical kiln and putting gas and power. We needed to refurbish all the plants, because you don't put into some... You don't buy yourself... Not anymore, but into the old car, a new radio. So, we had to do new automated brick transport system. We put a PV. We have to put fully automated production, new robots, and so on. So, it is a lot of work. And actually, it became the 30 million, not just because of the furnace. As I said, we save 90% of CO2. We have some great bricks, which we produce. However, that came to question, we have good bricks. No CO2. Let's put them to the market. What now? You want to build a house. You come to some company, and how much? The land is 350,000. The costs are 550,000. You will never get anybody to finish it in time. Oh, you want to pay 30,000 extra for a greenhouse. Well, I don't know how you're going to think, but maybe you say no. Or yes. However, we are getting ready for regulation towards building materials in terms of sustainability. Meaning, there is energy performance building directive. Why I mention this? Because this was a question, will customers buy it? You don't do decarbonization or electrification just because you think it's nice. I mean, definitely, a company wants to be environmental friendly. But you need to keep your employees working. And you will not keep your employees working if you produce product no one wants to buy. So, state has to go hand in hand and put some expectations from the products which are on the market. And then it can go together. Meaning, no one will now electrify everything if it's not needed. So, that was number one. Then, we did public awareness as well of ecological living and sustainable building. And we are able to have very good environmental product declaration. But what is the first and very important? We are following a guideline. So, if OCR wants to electrify and be competitive, it needs to also follow, state needs to step in and create the guidelines which are giving its product place on the market. So, I talked about this. Takeaways from the electrification economics. It's not about comparing a year per megawatt hour of gas and electricity. Efficiency is very important. And you see, we have various technologies which you can choose from. And it doesn't mean that the latest and most sophisticated technology is the best solution. Sometimes, just a basic heat pump is enough to electrify. Further considerations. CapEx. It can be very substantial. It's not just changing one technology. It comes together with a lot of other investments. State aid is critical. So, if Austria wants to be competitive, let's say, there needs to be some money from the taxes which you pay. And other topic, I didn't go in detail, but grid capacity is becoming a big constraint. Why talk about it? We had in Utendorf one megawatt connection before of electricity. And suddenly, we needed 10. So, if you went to Netze Oberösterreich, that's where it is, and say, okay, I want to electrify and just give me 10 times bigger cable. You can imagine. He was like, what? So, we managed. We succeeded. We had very good cooperation. However, if you would go to every plant and every company goes to every plant, to every distributor, I don't believe it's feasible. Because the grids are not built up for electrification. Therefore, you need to really focus on which product you need to electrify and maybe use the others. I have 15 minutes left. So, let's go now maybe on the topic. Is Austria competitive in electrification? And I compared Europe. So, first, if you look on the equation, we said you need CO2, gas, efficiency, and electricity price. Everyone knows, everyone knows, the gas price in Europe is very similar. So, if you buy TTF in Netherlands, use it in Finland or Bulgaria or Italy, you might pay a certain premium. But nevertheless, the gas has a very similar cost base all across Europe. CO2 is European ETS. ETS and efficiency doesn't matter where you are because it depends by the technology. So, let's look on the electricity price as a whole where Austria can be competitive in Europe. So, I have here a chart from yesterday. Many lines. Focus on one, the black one. You know where's the black one? Ah, Austria. So, see the Austrian base load actually is one of the most expensive in Europe. More expensive is Italy and Hupex. But Germany is cheaper, Netherlands, Belgium. Here we have the winners, France and Spain, Nordics. So, if you look from this perspective, is Austria competitive purely on electricity price? Well, it's better than Hungary. But, yeah. On the other hand, Joe, better than Hungary, if you look from this perspective, all Eastern Europe almost runs on Hungarian index. So, this is from our data market price on our countries, where we are as a Wienerberger. So, we are a lot in the East as a company. So, actually, Austria looks fine, because all the Eastern European countries are mostly on Hupex or PXE. And suddenly, Austria seems to be fine. Yeah, we are better than the others. Nevertheless, Nordics, France and also Benelux is better off in this way. But, okay. Everybody knows it's not just a commodity. You have also the non-commodity. So, we looked on that as well for a regular plant in our company. And I was surprised, positively. Okay, Austria is not doing the bad job. Yeah? It's here. So, this is average non-commodity price for a standard plant in Wienerberger. Look at the British people. Oh, they have to be very mad. But, basically, there are a couple of countries. Again, Nordics and France, interestingly. And then the others here. So, let's see how it looks together, if you combine market and non-commodity. And it's here. So, this is a combination of the total power price for a plant of an industrial user. This data was prepared also by my team. I want to give credit. Very nice. Thank you. Austria is actually quite competitive if you compare it in the region. We are better than Macedonia, Serbia, important, better than Germany. I know we have some complex on Germans. So, we're better than Germany here. So, yes. In the region where we are, Austria is better off. And that comes to the point, what is the product? If you want to electrify in Austria and you produce a product like we, bricks, you will anyhow not ship them from China because they are very heavy. So, yes, it's competitive. If you want to electrify a product which is going up and down and has no weight, then definitely there are countries which are going to be much better than you are. So, regionally, it's okay, but could be better. What I have here is, so, commodity is blue. Non-commodity is this dark color. I don't want to guess it. But what we have here is yellow. It's a state eight. So, this is a state eight which we receive on the power prices. Interesting. If you see on Austria, it's very little. So, I don't want to say we want more from the state because Austria is doing fine. But if you look on Belgium, if you look on the Germans, and maybe Hungary, also Belgium, state can always try to incentivize more industry by giving some schemes to have the final power price more competitive. So, we saw we are good on non-commodity. States are so. Commodity is expensive. Can we, Austria, more competitive on the power price? We have here better experts and better graphs than me on this information. But I tried to look at it. What can Austria do with commodity price? So, I got this merit order of Austria, where the power comes from. Everyone knows most of the power comes from PV wind, a lot of hydro. However, we have this end of the merit order, which is gas. And that's the problem. Why is it the problem? Gas and import exports. But why is the gas problem? We know Hormuz, Trump, and so on. So, basically, the price is created by the marginal produced megawatt hour, which, in many cases, if abundance of wind, solar, is going to be the gas. Here are the gas price, together with the electricity price, as of May until now. Nice rally. This is some relative, but okay, how much is today? I don't know. A lot. But what you can see, gas went up and down, and electricity as well. What I want to say, we cannot reduce the power market. We cannot. It's difficult to reduce power market price in Austria if the gas stays high, as long as we have gas-fired power plants. On the other hand, so if gas falls, power price falls. What means in the equation, which we have gas price, power price, and CO2, it doesn't matter how much gas goes, power will be always following, and you have the same result. So, is there any other competitive advantage of Austria? So, we said power is so-so, but what is better? So, I have here a picture of some power plant, possibly Fairbund. Austria has relatively fine energy mix. This is... Yeah. So, okay, 10 more minutes. It works. It works. So, we look here, what is the energy mix? On the bottom are the countries with the best energy mix in the sense of carbon-free energy, and up are the worst ones. So, Austria is looking good. We have a lot of hydro, there is wind, solar, and this is the green gas. So, you would say, okay, 75% is green. Great country to electrify, because you're going to have green energy. And I will not talk different than my colleagues before. However, question is, is the mix healthy for decarbonization, for industry? Because, okay, it should be 100% carbon-free in 2030. Internet says so. But is it healthy? Will it be good enough for the new greenhouse gas protocol? Because we know greenhouse gas protocol is coming up. They talk about hourly matching, maybe local matching. And then, okay, how it's going to be. So, I try to look on it one more way, how much baseload green energy sources each country has. Meaning, I took away wind. I took away solar. Why? Because, okay, solar, you have 1,000 hours. That's it. Wind. Not today. So, going back. Austria has full dependency on hydro, if it comes to the baseload green sources. Which is, again, better than some countries. But we have, again, France. We have Finland. We have Sweden. So, again, those countries, we have cheaper energy, have also better mix. So, we will not be able to compete against those. But we are better than some other countries. It's interesting, the runner here is Slovakia, which I was surprised because I'm Slovak. I was like, whoa. But that's nuclear, and you don't like the nuclear from Slovakia. But if you put nuclear energy in Austria, maybe you're higher. Why I put this picture? This is the patch in Hungary of last month. You have 50% hydropower. There will be a presentation later. I will not go into detail. But if you are electrifying in Austria, you want to have reliable green energy, and you rely on hydro. You run big risk. Suddenly, you come to a year where you will not be able to fulfill your EPD. Because you will ask for the green energy certificates. They come to you, sorry, it was not produced. So, you will not get it. Solar will come in some hours. Wind comes in some hours. But as long as you don't have some basis energy of basis green generation, which runs continuously without the impact of the weather, Austria will not be on top of competitiveness of electrification. That's basically mentioned here in some summary, which you can read after when the distribution of the presentation is done. And it's not saying anything else than what I have said at the moment. So, what Austria needs, it needs some large block of 24-7 low carbon power. I don't know if batteries will be this. So, it might be that actually installing the batteries will help it. But we know that the battery have two, four, maybe six hours. So, also, they don't run non-stop. What is the problem of the batteries is they will run the day after the energy is generated. So, if you come to Dunkelflaute, you know, one day, fine. Three weeks, as last December, there was no sun in Vienna for three weeks. And there was not really water. It's a problem. So, that's my message. Help this and Austria gets better in electrification. And last, still, is the customer ready to pay it? Because in the end, you can be super competitive. But as long the treatment of every producer in the EU is not the same, it is a problem. As long the CO2 counting on the product is not done on the lifespan, but on the production is also a problem. And as long we're going to be electrifying but bringing non -green products from China, it's also a problem. Thank you very much, Lucas. Thank you very much, Lucas. I see what Austria needs. And we got that picture. Can nuclear be part of the solution? Yes. France, Finland are on top. Sweden as well. But for Austria? For Austria? Well, they build it, but it's a museum at the moment, I guess. Can it be? Okay. I live here for some years, but I know it's a political debate that it would not go through definitely at the moment. However, with the new small modular reactors, maybe if they are sold better to the public, maybe yes, because Poland is doing it. They plan it. So I don't see it's impossible, but it needs some political support. And you mentioned grid access, which is important. To what degree does Austria really have sufficient access in the grid? No. No. So that's region specific. We have chosen the plant in upper Austria because there was grid. We have also plant next to Vienna, and the grid has more constraints. So it depends on, you have these local network operators, and it depends. But it's not easy. You also said that the state basically needs to step in and create the guidelines to support the electrification process. Do you have the feeling that this is happening enough in Austria, or does the policymakers need to catch up? Well, first of all, I don't say we need to electrify everything. So, you know, state can create strict rules to electrify, but the question is, do we need it? I think we need to decarbonize. Therefore, I also showed biomethan, because the goal is not just to electrify because we like it. We need to decarbonize. And I think the state should analyze, okay, I can cover, now I know there's a law in the ministry on biomethan in Austria. They should look on an economic scale what is cheaper to support electrification or biomethan. And then if it comes that biomethan resources are fully used, then maybe see, okay, I support electrification. And then I need to put measures to support it that also why everybody is treated equally. We are AG and we are stocklisted companies. There are small producers who are not stocklisted, and they might have different criterias. Any questions from the floor? Yes, Nathan? Yeah, in your example of the plant that you brought up on the screen, I think subsidies accounted for 7 million out of the 30 million investment costs. What does it look like when you zoom out? Is that a typical ratio? How much? Or do you not really talk like that? There was much more money available in Germany, which we applied for. However, the rules were so strict that it didn't make sense. They gave us almost a higher percentage. I don't want to go to the details. But the rules were, okay, it doesn't make sense for the company. So also government created great incentive scheme, but with stricter rules. So this 7 out of 30 is how much? It's 22%. It's on a lower scale. We did a project in a neighboring country, and we got 60% on heat pumps. So we get more. And what about in terms of a cost gap relative to conventional goods that you have to compete against? Like you said, are consumers willing to buy it? And you point to building a house, and there are some other huge factors that go into that. But how much more expensive is it when you go through your subsidized plant that produces green bricks? How much more expensive is your product demand? I can't go into detail because I see the cost. I don't see the price because of the pricing theme. But it is more expensive because you can look on electricity costs and gas costs. So it is much more expensive at the moment. Any more questions from the audience? Okay. One final from me then. So you are an optimist on this. Do you see that we are going to actually achieve a carbon-free production in Austria within 2030? No. No. Okay. On that, Lukas, here is a small present from us. Thank you very much for your contribution. Thank you. Thank you. Thank you. Thank you.