Against a global backdrop of environmental crisis and armed conflict, there is a growing need for meaningful change in the energy sector. While CO2 emissions continue to exacerbate the climate emergency, the ongoing war in Ukraine is serving up a reminder of the fragility of energy supply in times of unrest. With energy and ecosystems facing a future of uncertainty, the call to action is clear: the sector and its partners must pull together to transform the way they work.
Fortunately, change has already begun. As Arthur D. Little unearths in its recent report, Disruption Is Now, three trends are shaping transformation efforts across the energy spectrum: decarbonisation, decentralisation, and digitalisation. Each trend presents its own raft of challenges, but those challenges are met in equal measure by opportunities, ready for the taking.
Decarbonisation
From soaring temperatures to changing landscapes, the climate emergency is unfolding before our eyes and at COP26 commitment was secured to halt – possibly even reverse – the damage. Putting pen to paper at the 2021 conference, many of the world’s biggest economies pledged to achieve net zero emissions by 2050 and double their efforts to curb the global temperature increase to 1.5°C.
It is not just a governmental affair; there is private sector resolve to support nations on their respective ‘road to zero’ journeys. In fact, during COP26, the Global Financial Alliance for Net Zero announced that its participants had committed $130 trillion of private capital to effect meaningful change.
The significance of decarbonisation cannot be overstated. It will be nothing short of the most important overarching trend shaping the strategic thinking and investment decisions of companies – not just in the energy ecosystem, but in sectors across the board.
Arthur D. Little Middle East
Arthur D. Little Middle East
Decentralisation
The impact of the Ukraine conflict on the global energy supply is indicative of a broader problem that has long been brewing. In a world of uncertainty, there is a pressing need for a more localised solution where service delivery is concerned, rather than a reliance on a much wider national or regional infrastructure.
The mission for energy stakeholders is to create future-proof infrastructures that can accommodate technologies such as intermittent and decentralised generation. Towards that goal, tried and tested solutions include siting wind farms close to urban areas or using micro-generation such as photovoltaic (PV) rooftop panels on new housing developments and encouraging energy users to take greater responsibility for how they consume it. All these elements are feeding into new business models that are focused on much greater sustainability – a thread that runs increasingly through every component of society.
Digitisation
As the Industrial Revolution 4.0 continues apace, organisations across sectors and industries are increasingly turning to digital transformation in order to compete and survive, and energy is no exception. In fact, the digitalisation and automation of processes and practices in the energy sphere will be critical to the success of efforts to transform the sector. By digitising operations, energy players can reduce costs, increase revenue streams, and deliver superior service to customers. Importantly, digital solutions also enable companies to minimise waste and maximise operational efficiency, with clear sustainability gains and benefits for the environment.
Attesting to the importance of digitisation to the emerging energy paradigm, ADL’s report reveals that, besides massive investments in the energy grid itself, the increasing digitisation of operations and flexibility dominate investments.
The power of hydrogen
Another area attracting both investment and global attention is hydrogen (H2) – so much so, the global H2 economy is expected to be worth $700 billion by 2050. Green hydrogen in particular, has been identified as a key technology to meet decarbonisation ambitions and support the transition toward a greener future in hard-to-decarbonise sectors.
Worldwide, collaborative R&D efforts are underway to maximise the potential of hydrogen within the global energy matrix. Recently, the UAE and the Netherlands joined forces to boost their H2 efforts and advance the formulation of projects and initiatives to support the Paris Agreement on climate change. Germany and Saudi Arabia have also announced a strategic alliance on green hydrogen development that will see the two nations collaborate on the generation, processing, use, and transportation of clean hydrogen.
The Path Ahead
In a context of climate crisis and supply uncertainty, the need for energy transformation is resoundingly clear, and the way in which industry players position themselves today could determine the success or failure of global efforts, as well as their own competitive advantage, for decades to come. From hydrogen to digitisation, the insights revealed in Arthur D. Little’s report provide a toolkit to help the sector’s decisionmakers to start moving towards their vision of a decarbonised future.
