Energy and resources: Disruption is now by Michael Kruse

As a society, we have been accustomed to energy  and resources being available and uninterrupted 365 days a year. However, the war in Ukraine, the looming climate emergency, and conflicts in the last century, such as the oil crisis of the 1970s and the Gulf War in 1980, remind us how fragile the energy supply can be. The ongoing disruptions will have long-lasting global implications on geopolitics and the energy sector at large.

Energy And Resources Sector

Most companies in the energy and resources sector will need to go through a period of unprecedented change if they are to be fit for purpose in an increasingly decarbonized, decentralized, and digitalized world. This transition has a disruptive impact, be it carbon regulation, new technologies, emergence of new market players, or convergence of industry verticals.

Such “convergence” is now one of the biggest drivers of marketplace change, creating not just new revenue streams, but also potential threats to established players. These changes are leading to the evolution of an ever-expanding ecosystem of players, something that is not just accelerating the speed of innovation, but also leading to development of increasingly integrated offerings that better meet the growing customer demand for more sustainable products and services.

Decarbonization, Digitalization and Decentralization

Three key trends are currently shaping the energy market.

The first, decarbonization — net zero — is the most important overarching trend for all sectors and the world in general. It increasingly underpins the economic policies of many countries. Inevitably, decarbonization is having a fundamental impact on the strategic thinking and future investment decisions of companies in all sectors.

The second is the need to digitize operations to meet the needs of marketplaces that are driven ever more by transparency, seamlessness, and speed of delivery. Digitalization is central to improving efficiency and enhancing the customer experience across every sector. It also has a major role to play in stimulating innovative ideas and ensuring they are turned as quickly as possible into real-life solutions for customers.

The third trend is decentralization — movement to a far more localized solution to deliver a service rather than relying on much wider national or regional infrastructure. This is evidenced, for instance, by siting wind farms close to urban areas or using microgeneration, such as photovoltaic (PV) rooftop panels on new housing developments and encouraging users to take greater responsibility for how they consume energy.

All these elements are feeding into new business models that are focused on much greater sustainability, a thread that is running through every component of society. In the energy sector, the introduction of carbon capture and other cleantech is now central to both day-to-day operations and strategic decision-making, given the growing significance of environmental, social, and governance standards on corporate thinking.

It is with these measures in mind that companies must assess their day-to-day operations and longer-term strategic decisions. While the unique situation of each player means there is no one-size strategy that fits all, the direction of travel is now relatively well established for everyone.

By Michael Kruse, Global Leader, Energy & Utilities Practice, Arthur D. Little.