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Industry approaches to the global energy transition

9/3/2022

6 min read

International Energy Week 2022 panellists sitting on seats on stage Photo: Energy Institute
‘Mission possible’ talk from International Energy Week, Thursday 24 February 2022. From left to right: Chantal Beck, Partner, McKinsey & Company; Louise Kingham, Senior Vice President, Europe and Head of Country UK, BP; Anthony Hobley, Co-Executive Director, Mission Possible Partnership; Dr Christian Thiel, Chief Executive, EnergyNest; Michele Fiorentino, Executive Vice President of Strategy & Business Development, Baker Hughes Photo: Energy Institute

The global energy sector is undergoing seismic shifts as it begins its attempts to decarbonise. But these changes will need to grow in magnitude and momentum over the coming decades to achieve a just transition. What form this transformation will take in order to meet the 2050 net zero target was central to many International Energy Week 2022* discussions. Charlie Bush reports.

How can technology help us to decarbonise? What is a just transition to you? How do you encourage governments to abate emissions? These were some of the questions pitched to the panellists during the morning talks of 24 February. 

 

Representing a broad spectrum of the energy sector, from oil majors to tech start-ups to financiers, the speakers had a range of opinions and predictions about what shape the transformation of the world of energy should take. Nevertheless, there was consensus around certain themes, most notably the importance of scalable technology, the need for governments to create enabling regulatory environments, and the requirement for greater collaboration between stakeholders.

 

Technology the great transformer 

Several speakers demonstrated optimism that this metamorphism can be achieved through the application of technology. Phil Spring, Senior Partner of Sustainability and Electrification at IBM emphasised that technology is key since: ‘The thoughtful application of technology will support us with new business models.’ This sentiment was echoed by Greg Jackson, Founder and CEO of Octopus Energy, who referred to the storage capacity of electric vehicle (EV) charging and the automation of home heating systems as solutions to the issue of intermittent energy sources. 

 

Dr Christian Thiel, Chief Executive of EnergyNest, also referred to technology being employed to improve the efficiency of industrial heating by delivering ‘intelligent ways to capture, store and release heat at peak times throughout the day to help customers manage resources more effectively’. However, he added an important caveat to blind faith in technology: ‘It’s not all about innovation, it’s also about scale.’ 

 

Scaling technology

With regards to scaling technology, Anthony Hobley, Co-Executive Director of the Mission Possible Partnership, described the extent of some of the changes needed: ‘To get to the jumping off point by the 2030s, we need to have over 70 green steel plants operating worldwide and in Europe we need 900,000 zero-emission trucks on the roads with some 900,000 charging points.’ But reaching scale is possible. The share of wind and solar in the global power mix reached 9.5% in 2020, a meteoric rise over the past decade. 

 

Dr Nick Wayth, Chief Executive of the Energy Institute, pointed out that last year saw a record deployment of solar in which the UK became the largest wind generating country in the world. This would not have been considered possible 20 years ago.

 

Representatives from the fossil fuel industry appeared confident that scaling clean energy technology would be feasible. Patrick Pouyanné, Chairman and Chief Executive Officer of TotalEnergies, whose 2021 name change reflects the company’s increasing adoption of renewable sources, spoke about leveraging the knowledge and expertise that oil and gas workers have in expansive projects, and transferring that to large-scale renewable proposals. 

 

He spoke about how TotalEnergies’ oil and gas employees, experience and supply chains in places such as Aberdeen and Nigeria can be transferred to offshore wind and other large-scale renewable projects.

 

Collaboration across the sector

Pouyanné’s comments highlight another key consideration. Besides scalable technology, reaching net zero by 2050 will also require unprecedented levels of collaboration to expedite the process. In some cases, cooperation does appear to be extending across the energy industry. Jane Cooper, Director of Regulatory and External Affairs for the UK at Ørsted said that it was ‘weird how parochial [Ørsted] was’ when she first joined in 2015, ‘but it is opening up and shifting and that’s great as we need a transition of people and skills to create systems that work together’.

 

We need this transfer of people and ideas between start-ups, large corporations, and policy-making institutions to ensure that knowledge, innovation and best practice examples are shared. In the words of Charles Hendry, former UK Energy Minister: ‘It is no longer about my industry can do more than yours – it’s about what can we all do.’

 

However, in other areas, this congruity is still lacking. Julian Mylchreest, Executive Vice Chairman of Global Corporate & Investment Banking for Bank of America described the difficulty of measuring the extent that organisations are ‘greening’ due to the fact there are around 10 environmental, social, and governance (ESG) rating providers. These ‘vary greatly among their ratings for companies’ with differences of about 60%. This needs to be improved through clear definitions of ‘whether something is valuable or useful’ that can be implemented to assess companies on their ESG. 

 

Louise Kingham, Senior Vice President of Europe and Head of UK for BP was also supportive of greater cooperation in order to meet net zero targets. ‘We need to accelerate the pace, which means working harder at collaboration and finding pragmatic solutions to make progress,’ she said. Indeed, there was a general awareness amongst the representatives that reaching net zero is not the problem; achieving it by 2050 is the real challenge. 

 

Reflecting on the tight deadlines, Hobley commented: ‘Normal market forces will get us there slowly but nowhere near quickly enough. We need something as organised as the Marshall Plan in Europe after the Second World War’. 

 

‘Normal market forces will get us there slowly but nowhere near quickly enough. We need something as organised as the Marshall Plan in Europe after the Second World War' – Anthony Hobley, Mission Possible Partnership

 

The role of governments

Several speakers also pointed to government action as fundamental to meeting the deadlines. ‘We need decisions moving CCUS forward from the [UK] government at pace,’ said Andy Lane, Managing Director of the East Coast Cluster and Vice President of CCUS Solutions at BP. The industry had a perception of regulatory environments as restricting the advancement of various measures to reduce emissions. 

 

Michele Fiorentino, Executive Vice President of Strategy & Business Development for Baker Hughes, described the situation as: ‘Not about choosing the best horse in a race. We need the regulation that allows the race to happen in the first place. This is an important role for governments.’ 

 

Fiorentino’s metaphor underscores the synergistic nature of the energy transition. There is no single technology or solution that can be applied everywhere to solve the conundrum, nor can any individual organisation, sector or even country make much meaningful progress on its own. 

 

EnergyNest’s Thiel argued that governments need to take more action to regulate significant sources of emissions such as industrial heat. At the present it is a problem because there is: ‘no punishment for releasing it and no incentive to store it’.

 

Similarly, Mission Possible’s Hobley asserted that: ‘We need some governments to create the enabling policy environments to allow this transition to accelerate.’ He outlined a strategic approach to reduce emissions quickly. Referring to carbon intense sectors such as aviation or steel production, which have value chains across multiple countries, he maintained that sectoral approaches need to be brought in which ‘only require certain countries to change, not everyone’ in order to slash the entire sectors’ emissions. 

 

Nonetheless, Hobley also reminded everyone that: ‘[It is] dangerous to only focus on easy emissions cuts we can make today. We need to be thinking about the critical technologies we need to invest in and scale by the 2030s and 2040s.’ Although there are calculated ways to abate major sources of emissions sooner rather than later, ultimately the transition requires long-term planning to completely overhaul the world’s energy systems. 

 

The transition as a source of opportunity

Some participants clearly viewed the changing nature of the energy sector as it strives to meet net zero as an opportunity rather than an obstacle, both for the industry and society at large. Jackson’s subscription to this perspective was apparent as he said: ‘The transition to a clean energy system could be hugely beneficial for people worldwide. In developed countries, people can live in a quieter and cleaner world. In developing countries, people can grow up with access to reliable, consistent and clean energy.’ 

 

Besides the advantages for everyday people, Morten Bo Christiansen, Vice President, Head of Decarbonisation, Chartering & Decarbonisation at AP Møller - Mærsk also picked up on the corporate gains decarbonising can offer. He said: ‘Being able to label products as green or zero carbon can enable the seller to charge a premium on them,’ mentioning that AP Møller - Mærsk is seeing a ‘growing number of customers who are willing to pay’ this premium. 

 

According to the panellists, the behaviour of consumers is evolving in response to their growing appreciation of the urgency of combatting climate change – and businesses can use this to their advantage. Ørsted’s Cooper discussed this in the context of her experience at telecommunications provider Orange, outlining how: ‘To avoid the need for more infrastructure, we incentivised customers to change their behaviour,’ by offering them cheaper rates for using texts and minutes at times of low demand. 

 

In another example of the importance of cross-sectoral collaboration, this principal is also being applied to today’s energy price crisis. Octopus Energy’s Jackson advocated the smart use of green energy to capitalise on increasingly cheap renewable energy such as offshore and onshore wind. In his experience, you can encourage consumer behavioural changes which are beneficial for both the company and the customer. For example: ‘Telling people they will receive cheaper energy if it’s renewable will encourage them to use it smartly and efficiently.’ 

 

Equally, he said that building a wind farm outside a village causes people to ‘buy EVs that they can charge up cheaply’ and motivates ‘people who use large amounts of electricity to move there’. Each step has wider consequences and the actions being taken to advance to net zero could have colossal and beneficial repercussions for society. We just need to combine scalable technology, enabling regulatory environments and broad cooperation to achieve this goal. 

 

*International Energy Week took place in London as a hybrid (online and face-to-face) conference on 22–24 February 2022.

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