Edoardo Garrone is the chairman of Erg, the multinational that over 80 years of history has moved from oil refining to renewable energy production. We interviewed him.
Why interview Edoardo Garrone? The answer is simple: because he is the chairman of a multinational with a well-established industrial history that has evolved over the years, profoundly changing its core business by seizing new trends in the energy market, moving from being a leading oil operator to a company that leads in renewable electricity production.
Founded in Genoa in 1938 by his family as an oil refining and trading company, over the course of almost eighty years of industrial history in the energy sector, Erg has been able to read shifts in the market and take different paths, without ever turning its back on its history. The result is that today it is Italy's leading producer of wind energy and among the top eight in Europe, and it is on the verge of making a final exit from the oil world with the sale of Totalerg, the fuel distribution company it holds jointly with France's Total, in order to focus entirely on renewable energy.
Listening to Edoardo Garrone recount the history of his company, founded by his grandfather of the same name, is like following a river in full flood that traces the passage of time and the evolution of the path taken with energetic force. Listening to him is a little like travelling back in time through the world of energy, through the made-in-Italy story of industrial families who built Italy from the postwar period up until just a few years ago. But the Garrone family, rather than selling its businesses to some foreign company and stepping back or moving into other markets, decided to keep betting on Italy by investing in sustainable activities, because — as he describes himself — they are "renewables industrialists".
What drove you to change Erg's business model?
For about fifteen years a technological revolution has been under way in the energy sector. The main driver has been, and still is, the process of decarbonising energy consumption, thanks to climate change control policies introduced in recent years in various parts of the world, starting with Europe. During this epochal — and above all rapid — shift, Erg, anticipating other competitors, was able to change quickly and successfully integrate renewable technologies into its own business model.
How much did the environmental and ethical dimension — the green company image — weigh against the economic factor?
Our initial choice was not driven by image but by substance. In 2008, the year we began the process of divesting our oil activities, the idea had been to sell part of the refinery operations in order to become a multi-energy company and seize the opportunities offered by the green sector. Then we made a sharper decision: to progressively abandon the oil sector and focus exclusively on renewable sources, in the conviction that, over the long term, renewables would prove to be unstoppable and irreversible growth. And so, a large part of the proceeds from the disposal of the oil activities was reinvested in renewable energy production. Efforts focused in particular on two areas: wind and hydroelectric. Now that we are one of the leading independent European producers of electricity from renewable sources, I can say that as well as having been capable of staying ahead of the curve, we take pride in playing a leading role among industrial operators in building a world that respects the environment and is mindful of future generations.
Why do you still hold assets in the oil sector?
The only oil asset we have, held jointly with Total, is Totalerg, a company active in fuel distribution that is currently the subject of a sale process. With this final disposal — for which bids are currently being evaluated — Erg will make a definitive exit from the oil sector. For the coming years, Erg confirms the strategy it has pursued of consolidating its industrial structure: growth in renewables, internationalisation and geographical diversification within the European Union. In addition to Italy, our target countries are Germany, France and the United Kingdom — countries where the regulatory conditions and, more broadly, the reference framework are stable; in order to plan and invest we need certainty. As far as our own country is concerned, a major opportunity is presented by the repowering of old wind installations. The first wind farms installed have now reached twenty years of operation and the turbines need to be replaced, but a streamlined approval process and adequate support mechanisms are required; otherwise the risk is that investment in this sector will be discouraged.
What were the greatest difficulties in this transformation process?
Believing in it wholeheartedly, and above all helping the people who work at Erg to believe in it — the problem stemmed from the fact that, culturally and professionally, they came from a different world, that of oil. The transformation that Erg underwent required a profound change in the way of operating within the company. It took three phases of reorganisation to bring the company structure to where it is today.
The change also had an impact on the workforce because green technologies are simpler and more "agile" than traditional ones; this means that they require proportionally less labour, but greater flexibility. This is an aspect that could have proved problematic at a social level, but which we managed both by investing heavily in training and retraining our people, and by paying the utmost attention to safeguarding jobs during the asset disposal phase. Moreover, thanks to the expansion of the new business, over the past two years we have resumed hiring and continue to invest in the development of human capital, which is one of the core principles of our way of "doing business" and for which in 2017 we were recognised with the award for the best "Career website".
What advice would you give to other companies looking to transform their business with a green focus?
First of all, I would advise placing the concept of "sustainability" at the heart of all business activities. It is possible to pursue development and well-being goals while respecting the planet, making better use of the renewable resources available to us, and producing less waste. The path of sustainability is now an "obligatory choice" if we want to guarantee a future for the next generations. We know full well that it will not be easy to achieve a goal for which a collective effort at the global level is essential, with no one excluded. The Paris Agreement reminds everyone — institutions, citizens and businesses alike — how much commitment, tenacity and determination are needed to tackle and complete the transition towards a substantially decarbonised economy, in which renewables will play an increasingly central and strategic role.
I would then advise not to fear change. Our history has taught us that the key to success is an openness to change, the ability to assess and adapt to shifting circumstances ahead of others, while maintaining a mindful, transparent and rational approach.
Finally, I would suggest focusing not so much on one's own size as on the approach with which one opens up to the new. We did so, for example, by preserving our industrial DNA, which we applied to wind energy by managing plant maintenance in-house. Today we like to describe ourselves as "industrialists of renewables".
Have you encountered resistance from local communities when building wind farms across the country?
Erg today sells and produces green, sustainable electricity, managing around 12 TWh of energy. It is Italy's leading wind operator with an installed capacity of 1.1 GW (out of a total of almost 1.8 GW), Italy's ninth-largest hydroelectric operator with 3 per cent of total hydroelectric output in 2015, and it owns a 480 MW high-efficiency natural gas cogeneration plant in Priolo, certified as "high-efficiency cogeneration". To achieve these results we divested approximately 3.3 billion euros from oil activities, reinvesting nearly 4 billion euros (from 2008 to 2015) in renewables (61 per cent in wind and 25 per cent in hydroelectric).
All of this was made possible not only by the skill and professionalism of our people, but also thanks to the good relationships we have always been able to build with the local communities where our plants are located.
Coming from a sector — refining — that has always been under scrutiny for its potential environmental impact, we have historically distinguished ourselves by the great care we take in what we do, in how we do it, and towards the communities in which we operate. For us, sustainability means above all an open, transparent and constructive approach to the local area, an interaction aimed at developing shared and jointly agreed projects, capable of generating added value for the communities of the places where we operate.
As chairman of Erg, I cannot help but feel satisfied with the journey made so far; but I feel even more so as a citizen and, above all, as a father. It fills me with pride to think that all the energy we produce — which on its own could meet the electricity needs of more than 3 million households — is generated in a sustainable and responsible manner with regard to the environment, and therefore to future generations.