08 Dec Identifying the challenges facing energy companies heading towards net zero
Energy companies stand on the cusp of a transformational era as the sector moves towards net zero. Challenges ahead include a forecasted growth in global energy demand, the surge in renewables and how this will impact consumers and energy users.
The added complications of the pandemic this year has given the industry an unprecedented view of human reaction to change. And the clearest conclusion on this is that it’s unpredictable. People don’t always follow the science, or a logical path when required to change their behaviour.
So, what dictates the energy sector’s transition to a drastic cut in emissions? Technology, fiscal demands or society’s decisions? All of this and more was discussed by a range of C-suite energy company leaders at a recent Round Table chaired by Hogget Bowers called Healthy Energy for a Fitter Planet.
Tackling the energy sector’s journey towards sustainability
Present at the discussion were representatives from major energy companies, including Drax Group, Crystol Energy, EDF Energy and SSE among others. The aim of the discussion was to identify some of the issues facing the boards of energy companies.
Three areas evolved from the Round Table. They are human behaviour, healthy energy and partnerships. Below I’ve summarised each section of the discussion. Refer to the report for full details.
- Impact of human behaviour
The impact of consumer behaviour is now recognised as important as tech and fiscal concerns. Research cited in the report says that in the UK, consumers say that they would be happy if the Oil & Gas industry was shut down. However, there is a great deal of resistance to paying higher prices or change behaviour in ways that would result in a truly low carbon energy sector.
And this, according to the discussion panel, is the real challenge, which they have split into two specific areas of challenge: heating and transport.
- Heating: this is a major challenge for residential and commercial consumers. The group’s conclusion is that current policy must be expanded to ensure new build construction in the UK is at a higher standard. There should also be a range of incentives to encourage much more retrofitting of old properties with modern heating tech.
- Transport: this is less of a problem than heating because people have more choice. However, a working infrastructure for electric vehicles (EV) must be in place. In the long-term commercial vehicles should run on hydrogen or small scale LNG. It’s expected that there will be a rise in competition between the rail industry and short haul flights.
2. Why we need healthy energy
For all energy providers, sustainability is key. The entire energy value chain must improve to ensure that end users aren’t put off by premium prices of low carbon energy. The answer lies in understanding that decarbonisation is not about one single issue for energy companies. It spans every aspect of our lifestyle and, in simple terms, the world needs a much healthier global economy, a healthier environment and healthier people. There is no way to avoid the fact that achieving this by reaching net zero emissions will be extremely expensive.
COVID-19 has sped up the debate on all of this, as the world realises how fragile its response to crisis really is. But we now need much more than good PR and lip service, it’s all about accountability for energy companies. This doesn’t necessarily mean getting rid of nuclear or fossil fuels, and they will clearly be part of the energy mix for the foreseeable.
Investor scepticism is still with us, particularly as major energy companies continue to move their sustainability targets closer. But moving into renewables will mean they need the Oil & Gas revenue to provide the funding. This juxtaposition must be dealt with.
3. Partnerships and collaboration
To speed up investment, ideally there will be an improvement in UK Government and private sector collaborations. The framework isn’t yet in place, and businesses must take responsibility for their actions in this area. However, the Government needs to step up too.
The group found that there must be a cohesive industrial policy to maximise the export potential of local equipment. For example, even the UK is one of the biggest markets for offshore wind, there is no major manufacturer here.
Energy infrastructure is, of course, about long-term investment. But now is the time for a push on proven renewables tech and finding new ways to collaborate. We are seeing barriers between some sectors falling, and major energy companies are acting as venture capitalists by funding tech start-ups.
Climate change affects everyone
The conclusion of the discussion centred on the fact that climate change applies everywhere, regardless of national boundaries. Global co-operation has to be the way forward in line with society, governments and investors.
As the demand for energy increases, there must be a global plan aimed at meeting the IPCC’s goal of ensuring global temperatures rise by no more than 1.5C by 2100. There isn’t even yet a UK plan.
Affordability remains the biggest issue at an individual consumer level and at a national level. Lifestyle changes may well be needed – how will the industry overcome resistance to this? COVID-19 has in some ways raised the importance of energy transition, and in other ways kept it out of the headlines. Regardless of this, its future impact is enormous.
Read Jan Egil’s previous article where he discusses carbon neutral oil and gas offshore platforms and the carbon footprint of the sector – Assessing the Viability and Cost of Carbon Neutral Oil and Gas Platforms