From talk to action

Can too much talk about energy system transformation lead to inertia and confusion about how to move forward? Jane Gray considers debate at a recent industry event.

It seems logical that better understanding our challenges should help us to move forward with greater confidence and purpose. But such is the complexity of change in the energy system today, that discussion of transformational trends often feels like it has left us none the wiser about the way ahead.

Indeed, there is so much talk about transformation in the energy system that it would be all too easy for anyone entrenched in the energy sector to build up a sense of overexposed inertia superlatives which are constantly used to describe how different elements of the system are squaring up to the trilemma, to radical change in business models and to disruptive technologies.

Is such language overblown? Duck down below the crossfire of visionary statements, and on the whole, you’ll still find a system which is functioning reliably if not always as efficiently or economically as it might, a fact which might lead us to believe the inevitability and extremity of system transformation is overstated.

And then there’s events like the recent Young Energy Professionals (YEP) debate in Edinburgh to convince us again that it is not, or at least not much.

YEP was launched in 2013 by Energy UK and EY to engage bright young things in the energy sector in debate around some of the most formative events and trends which are shaping it. The idea is that it will help them both understand and develop responses to sector challenges as they progress on their trajectory towards leadership.

At this event, participants included representatives from all rungs on the career ladder. Seasoned industry leaders through to recently recruited graduates and students gathered to address a critical question – “Where will the value be found in the GB electricity market in the coming years?”

This is an important question for companies to be able to answer – but, as discussion quickly revealed, it is not one that anyone seems to have a confident response for.

Short presentations, delivered by an industry panel before a Q&A session, highlighted the extent of this uncertainty. They showed the declining profitability of most, large, traditional energy suppliers – and struggling profitability of many independents too.

They considered the difficulties of justifying investment in new thermal generation and the unflattering light in which many investors are increasingly viewing opportunities in the energy sector– especially investments in the mid-ground of risk-reward ratios.

Other presentations referenced more heavily the trends of decarbonisation and decentralisation which are widely now accepted to be shaping the future energy system – especially electricity – and also identified that looking for value in the electricity system alone might be a mistake for traditional participants in this market. Increasingly, it seems, multi-vector value streams are emerging and this undermines the conventional market structure.

But while all these developments were recognised – a clear path through them to a stable and profitable future was much less easy to define. How, both in terms of practical operational changes and in terms of strategic intent, are companies responding to the changes we know are taking place in the energy system – and can organisations with traditionally low-risk low-reward investment profiles take their traditional investors with them on that journey?

These are questions I look forward to exploring more fully with attendees at Utility Week’s Future Networks Conference later this month!