Executive Summary:

People are key to the energy transition

“A workforce without drive and passion is like a machine without an engine. We can only achieve the UK’s ambitious Net Zero goal if we are powered by a highly motivated workforce^[1]”. National Grid

What is the current sentiment amongst people that work in the energy industry? This paper summarises the output of a survey carried out in the summer of 2021^[2].

The participants in the survey saw the energy transition as a big change with little staying the same. Change is never easy and people being resistant to change was identified as a barrier to change along with changing business models.

A number of challenges to be addressed which were identified are associated with the current organisational model such as culture, speed of decision making. Furthermore, diverse thinking and being more inclusive by working with partners and adapting ideas from other industries were also highlighted as being required in the future.

New challenges are coming such as the opportunity data and analytics bring, as well as how we interact with customers and new entrances like storage, electric vehicles and new fuels. The energy industry needs to learn lessons from the past like the Dong/Orsted transition and the slower speed of intelligent fields development compared to the Internet of Things.

On the positive side, respondents felt strongly that this transition is something that the energy industry could deliver and they had confidence that their leaders could deliver. The majority of participants also saw positives in the transition around career opportunities and more interesting work. What is also clear is that there are a lot of companies communicating strategy with their employees, however, companies are doing less at the individual level in terms of career and skills development. On the other hand, individuals are actively networking and proactively setting time aside to investigate and understand the energy transition.

What is clear is that the pace of this change is fast and we need to learn from past lessons to survive and thrive in the world of energy transition. People and how organisations are set up to allow individuals to solve the issues and deliver business opportunities will be key to success. The key areas that leaders need to consider are:

• How to engage, develop and include individuals to bring out the best talent to deliver the transition
• How to utilise that talent to find and develop the business opportunities and solutions to the energy transition
• Define the business models are needed for the future, understand where are the gaps now and what steps are needed to close them.

Introduction

The objective of this white paper is to present the results of a survey carried out in May/June 2021 across the industry to gauge current sentiment around the energy transition and challenges that we face and to present some solutions on what to focus on now.

Energy Transition is a big change but doable

In terms of people surveyed everyone agreed (100%) that the energy transition is a big change for the industry. The only difference was whether they saw it as having significant change that was manageable (58.1%) or massive change with a large number of unknowns (49.9%). This was consistent with people’s view that very little would stay the same at an organisational level with only (1.35%) saying their organisation’s business model would stay the same. 

Despite the challenge, overall people appear to be positive that the industry can deliver the energy transition with 50% reasonably confident and 25% extremely confident.  This result is consistent with a multi country survey which showed 54% of people believed there was still time to save the planet.^[3] However the fast pace of this change is something like we have not seen before and 76% saw the speed as one of the biggest threats to their organisation.

How well prepared are we? What can we learn from the past?

So how well prepared are we? As an industry 82% of people think that we are starting to get ready whilst only 30% of people think as organisations we are as ready as we can be.

What can the industry learn from the past? Technologically the energy industry has made big advances over the last 100 years or so, just consider the types of deep water, high pressure and temperature wells than can be drilled commercially now vs when oil was first discovered. Orsted has demonstrated that it is possible to shift your business model from fossil fuels to green energy. Dong transitioned to Orsted in less than 10 years from setting its intention, despite thinking it would take 30 years. However, those changes occurred in an environment where the pace of change was not as fast as it is now and there are more external pressures.

So, what did the survey respondents say.

People Resistant to change is a big challenge

One of the key barriers highlighted in the survey was individuals being resistant to change. The survey identified that 70% of people felt people being resistant to change was either a high or very high barrier for the organisation.

Change is hard and when individuals face uncertainty there is a tendency to focus on what we know and resist the new. People’s resistant to change is a large factor in many transformation failures (70-80% of transformations fail^[4]) and this isn’t something we can allow to happen with the world’s climate and future at stake.

One of the key things for leaders to overcome resistance is to provide a compelling vision and how and what people are doing fits into this. Individuals have commented when working on difficult demanding projects, they have been really motivated when management continually showed and explained to them how these projects were helping towards achieving the Net Zero targets.

This was highlighted in the survey where, in overall, people saw positives in the energy transition and the results from the survey showed that 72% of individuals anticipated career opportunities in this transition and 58% a more rewarding work. Additionally, a UK wide survey^[5] showed that the general population as a whole is highly motivated by the transition to clean energy with 78% of UK adults wanting to play a part in achieving the UK Net Zero goal and 57% wanting to work for an organisation that helps to get there.

It is clear that companies are starting to communicate their net zero vision and what it means as 53% of people say their organisation is doing this. However, there is still uncertainty in the transition and a lack of visibility in what actions are needed alongside corporate restrictions and job losses. We must not forget that people are the heart of this change and so understanding the issues behind individual’s resistance is key, as well as looking at the organisational barriers and threats which resist the change and contribute to people’s resistance.

The energy transition will bring big changes in business models

One of the key things that driving this transition is a shift in business model. 73% of respondents to the survey saw this as a very high or high change with only 1.35% seeing no change. New markets or products were one of the highest scoring threats people saw to their organisation with over 80% scoring this high or very high. This can be seen across the energy sector with BP^[6] and Shell^[7] radically restructuring their businesses and shifting their investments from oil and gas to renewable. In the oil service sector companies shifting from the oil and gas sector to the renewables sector, Subsea 7 now has a growing renewables business^[8] and Baker Hughes is now focusing on being an energy transition company vs an oil services company. The utility sector is also seeing changes in business models with regulation and new entrances and also new companies are starting to become visible with new business models. There are increasingly new companies that are emerging to deal with challenges like electric vehicles, charging and storage.

The environment is changing rapidly as identified by the survey participants and one of the learnings Orsted^[9] took from its transition (it took them 10 years vs the 30 years predicted) was to expect exponential change. So, companies need to be prepared to act quickly and decisively to stay ahead and drive value, otherwise we will have a number of kodak failures in this industry^[10].

Organisational barriers need to be understood to change an operating model

When business models change, organisational development is needed. In the survey, 47%^[11]  of respondents identified faster decision-making and 38%^[12] working more closely with peers as barriers that the energy sector needed to address. Similarly, threats identified at an organisation level were lack of industry corporation (36% high 14% very high) and the culture of the organisation (45% high, 21% very high).

With a shift towards non fossil fuels the dynamics of business change. So, whilst on the face of it building a wind farm is similar to building an offshore oil production facility there are different commerciality factors and faster decisions are needed. To be successful it is not as simple as just changing the type of projects you do, you need a different mindset. You need to consider your organisation’s set up, culture and what are your decision making, capital allocation or project management processes are like and whether they are really fit for purpose.

The energy sector has a culture that is consistent with long-term thinking with big capital infrastructure projects and the need to balance health and safety. Whilst the industry has shown its ability to utilise technology, for example in the oil and gas sector to produce increasingly more technically difficult to access resources it is not known for its speed to change. Consider how quickly a technology company puts a new application out even if it is not perfect and continually develops till it is, compared to how long it takes a new technology to become standard in the energy industry. This element of the culture in particular needs to change quickly or potentially not all the companies in our sector will survive.

Many companies in the sector are undertaking a series of M&A transactions to grow their new energy/renewable businesses. Whilst this is a fast way to grow their portfolio and make an impact on the new strategy if the organisational elements are not taken into consideration, then these efforts will fail. Bringing in fresh ideas, voices and new ways of working bring an opportunity for diverse thinking, and a more entrepreneurial spirit for a faster moving culture, which the acquiring company can benefit from. In many cases, the full opportunity of these acquisitions is lost as the acquiring companies impose their gold-plated/restrictive controls over IT, finance and other processes on the companies, hindering their culture and pushing the innovative and fresh thinking talent to leave.

Customer focus and the changing nature of data bringing new opportunities

Adapting to be more customer focused was one of the lower scoring areas that respondents saw as a change in the industry at 38%^[13] (compared with 52% for people resistant to change). However, 32% said they were not sure. On the other hand, respondents scored this factor at 66%^[14], much higher at an organisational level. This disparity may well be due to the lack of certainty of how we will interact with customers.  In the future, there will be an opportunity for customers to be much more involved. The roll out of smart meters and smart devices is allowing individuals to monitor their consumption and make choices. Increasingly, larger buildings and sites are changing how they source their energy, with the ability to generate and store energy, will all drive different interactions with their suppliers. This isn’t the case just for utilities, increasingly, oil companies are working to reduce their carbon footprint. In the future, will consumers prefer to have a “lower CO₂” oil product than another? Will they pay a premium or as Thundersaid Energy suggested could oil companies invest in carbon offsetting so you buy an oil product and mitigate the CO₂ at the same time^[15]. However, this happens, how we interact with customers will drive a fundamental organisational and cultural change, particularly, with the increase in digital assets and data. These kinds of changes have already been seen in the Banking and Telecoms industry.

Part of the change in customer interaction will come about due to data and the ability for both suppliers and customers to see usage and make decisions. 74%^[16] said that data management and analytics was a change they expected in their organisation. We have experience of changing data use in the last 15-20 years in the digital oil field or smart utilities, and much work went into this. However, the advances are significantly less than the comparable development of internet of things and this industry needs to learn lessons from this.

A key factor that is often forgotten is what is the business imperative behind this data? What questions do we want to answer to generate business value? This is critical as that will drive data analytics uptake and start delivering answers. Companies are starting to share their data and encouraging people to help them to solve problems^[17]. This is important as it starts the industry interacting with voices from both inside and outside the industry bringing more diverse thinking. Data on its own won’t deliver the energy transition. It is about knowing the questions we need to answer and then working out how we can use the data to do that which will be key. This imperative will then drive people to get the data into the right form and utilise it as then people will see the value. We must not also forget that we also need to collaborate and share data to get the maximum value from data and as identified in the survey this is a barrier^[18].

Skills transition

The energy transition will require more people working in the renewable sector. National Grid expects a doubling of the workforce in renewables^[19] and there is reduced activity in oil and gas exploration and development. IEA states that no new oil and gas fields need to be found as the current assets in development or production are sufficient for the future energy scenarios^[20].

51% ^[21]of the survey participants identified new skills development in the existing workforce as a barrier and 75% of participants saw new skills as one of the impacts on them personally for the energy transition.  One of the challenges we have is whilst a number of jobs in oil sector are being reduced, we have yet to see the increase in numbers in the renewable sector and there is no clear direction on future skills requirement. As we transition given the newness of area, years of experience are likely not to be an issue, so that gives the opportunity for new people to enter. This creates the opportunity for a more diverse workforce to be built bringing new thinking and that needs to be considered from the start.  Figures from the recent EI barometer study back this up with 50% of people wanting more action from their sector in this area^[22] which is consistent with what people are seeing in this survey. Whilst people are currently highly motivated there is a risk of wasted energy and people getting fatigue if that motivation is not well directed.

How individuals are getting prepared

Overall Individuals are positive about the change and 43% of respondents feel confident in their leaders to deliver the change. Most of the respondents were working on readying themselves for the change with 43% starting to get ready and 39% as ready as they can be. Over 60% of people from the survey said they are taking time out of their day job to learn about new technology and policy changes. Another 60% are actively networking to understand the opportunities and 40% working on transferable skills. It is clear from this that at an individual level there is a desire to be part of this transition. However, whilst organisations are spending time presenting their vision, there is much less activity at an individual level to train and develop skills 12% of respondents or being part of career conversations 18% of respondents.

It’s clear from the earlier part of this paper that people are key to this change and whilst there are uncertainties more effort to help individuals see and understand their role in the energy transition is essential.

In conclusion, People are essential to a successful energy transition so leaders and organisations need to focus on how they can engage and develop their people and build organisations that can deliver the change the energy transition needs.

The energy transition is a big change that people in this industry recognise and organisations and individuals are getting ready for it. There are a range of views on how ready we are as an industry and organisations; however, this is a change that is happening at a pace and it is a fundamental shift. We do not have all the solutions to deliver the transition nor have the alternatives scaled up to deliver our current energy needs (without fossil fuels) let alone those of the future.

Whilst technology and engineering play their part in delivering the solutions, it is people that will make the difference and make this transition a reality. There are three things’ leaders in this industry need to consider:

• How to engage, develop and include individuals to bring out the best talent to deliver the transition
• How to utilise that talent to find and develop the business opportunities and solutions to the energy transition
• What business models are needed for the future? Where are the gaps now? And what steps are needed to be taken to close them?

How to engage, develop and include individuals to bring out the best talent to deliver the transition

The survey shows that a large number of individuals see opportunities and more interesting work in the transition and Individuals are clearly highly motivated to work towards a Net Zero vision. It is clear when individuals can see a clear link to the work they are doing and net zero, they find this highly motivating. Leaders need to think hard about how they can create that clear link to what individuals are doing day to day to the energy transition. This is difficult when the journey is not clear so leaders need to be careful not overpromise and guide people through uncertainty. It’s also very important to review how engaged your employees are and how your messages are being perceived on a regular basis so you can take action.

Skills transfer is a challenging issue as it’s not clear yet exactly what will be needed. However, there are still things that can be done to prepare, one of the key things that will definitely be needed is an ability to manage change and work through uncertainty. Whilst there are change methodologies out there, tools on their own will not deliver the change. To really deliver the change the ability to build trust, overcome resistance and have the resilience to keep going is essential. Working with experienced practitioners in the field can allow you to significantly build your organisational change capability.

In times when you need individuals to step up, develop new skills and take directions that were not envisioned, having a strong career development and annual review processes are essential. This process allows the quality conversations to support individuals through this challenge and develop your talent pool along with workforce planning.  We should also not forget that there is still a place for fossil fuels for several decades so ensuring those that want to work in this area are encouraged and developed too.

What is certainly clear is that the mix of talent in the future will be different to now and there are increases in clean energy jobs and reduction in traditional energy jobs. At the same time new skills will be needed and the industry will really benefit from experience elsewhere. In this industry diversity is increasing, however, we need to ensure diverse voices can transfer easily into this industry. The “you need 20 years’ experience” mentality before you can do this job is no longer relevant, but may be holding some people back from recruiting talent without an energy industry background. Those diverse voices need to be heard and utilised. Statistics show that innovation and increased performance occur in more diverse organisations^[23]. Diversity without inclusivity is pointless and so effort needs to be put into not just how to attract different talent, but also how to transition them into the organisation, and how to support them so they can speak up and be heard.

How to utilise that talent to find and develop the business opportunities and solutions to the energy transition

In the transition to Net Zero, we are already seeing a lot of opportunities as new areas start to grow such as electric vehicles, storage, batteries, system balancing and trading, to name a few. As well as growth in more mature areas such as wind and solar. All of these bring with them new business opportunities, which will evolve. Organisations need to be able to adapt to changing needs opportunities, and constantly evolve.

The way the industry interacts with customers will be different in the future. Those companies that are able to pivot their business models to understand and anticipate customer needs will be more successful in the future. This isn’t something that the energy sector is known for so companies need to build that capability to be successful in the future.

Technology will bring answers to the transition, however, without people being engaged in the technology the full benefits will not be delivered. Historically, the focus has been on the technology and getting it perfect, rather than engaging the organisation and changing processes and products to fully utilise the benefits. Finally, creating a learning/continuous improvement culture is important so as the technology is utilised further opportunities can be realised and developed.

Data is a big enabler for the future, but if not handled correctly it could just be an expensive noise. Whilst it is important to get data into a form it can be utilised and shared, the number one question that needs to be asked is what business problem do I need to solve? And then trying to work this out.

What Business model is needed for the future? What are the gaps now? And what steps are needed to close them?

As we progress along the journey to Net Zero there will be different challenges, different fuels and product demand. What is clear that companies that will be successful in the future, will have the following characteristics:

• A Culture that is entrepreneurial, agile, shares knowledge, thrives on diverse views to come up with new solutions and is open to change
• Fast and effective decision-making processes in place
• Business aligned to Customers and stakeholders needs
• Leadership that are prepared to take risks
• Able to move quickly and change faster than expected
• Talent pools where skills can be transferred within the organisation, and transferrable skills are recognised, as well as new skills can be developed
• Have processes in place to operate effectively the new ways of working, with automation to minimise wasted effort

Understanding where your organisation currently fits and what you need to do to create a model that will evolve as changing needs is essential.

Success in the energy transition despite the optimism shown in this survey by the participants is not guaranteed.

People are essential to a successful energy transition so leaders and organisations need to focus on how they can engage and develop their people and build organisation that can deliver the change the energy transition needs.

Image:IHME Helsinki commission 2021 To Burn Forest Fire Katie Paterson copyright Veikko Somwerpuro https://helsinkibiennaali.fi/en/event/katie-paterson-to-burn-forest-fire/

[1]Building the net zero energy workforce National grid report January 2020

[2] 72 respondents across all sectors in the industry and all levels of experience and a mix of genders

[3] Guardian Small majority believe there is still time to avert climate disaster Sandra Laville

Mon 5 Jul 2021 https://www.theguardian.com/environment/2021/jul/05/small-majority-believe-there-is-still-time-to-avert-climate-disaster-survey

[4] The figures range for example Gartner puts it at 85% and McKinsey at 70% Forbes Magazine Why Transformations Fail and What You Can Do About It Matthias Schramm March 2^nd 2021

https://www.forbes.com/sites/forbeshumanresourcescouncil/2021/03/02/why-transformations-fail-and-what-you-can-do-about-it/?sh=19b9ee617e11

[5] Building the net zero energy workforce National grid report January 2020

[6] https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bernard-looney-announces-new-ambition-for-bp.html

[7] https://www.forbes.com/sites/palashghosh/2021/02/11/shell-to-freeze-salaries-halt-bonus-payments-as-oil-giant-overhauls-to-focus-more-on-renewable-energy/?sh=4726b3c27d26

[8] https://www.upstreamonline.com/energy-transition/subsea-7-aims-for-revenue-rise-from-sustainable-and-robust-renewables-business/2-1-971116

[9] https://www.oedigital.com/news/489333-baker-hughes-earnings-hit-by-restructuring-charges

[10] Kodak went bankrupt in 2011, despite being known as the apple of its time, it was the leading company in photographic film with a profit of $2.5 billon in 1999 and being the largest digital camera maker in 2005 in the US.

[11] Sum of high and very high

[12] Sum of high and very high

[13] Sum of very high and high

[14] Sum of very high and high

[15] Scottish Energy Forum The roadmap to net zero: what opportunities for oil and gas? “

– with Rob West, Founder and Lead Analyst of Thundersaid Energy 25^th March 2021 https://www.scottishenergyforum.org/events-archive/the-roadmap-to-net-zero-what-opportunities-for-oil-and-gas/

[16] Sum of Very high or high

[17]Portuguese utility company has been publishing data since 2018 as it publishes data it also sets a challenge for data scientists outside the company to help it address problems facing its business units. A recent example was reducing the carbon footprint so 3 years of data were published on their boilers and the challenge was to produce an algorithm to predict slag production Enabling Open Energy Data: launch webinar with UK Power Networks Regens;  Thursday 13^th July Fanny Goldschmidt from Opendatasoft

[18] 38% (sum of high and very high) of the survey participants identified working more closely with peers as a barrier

[19] Building the net zero energy workforce National Grid January 2020

[20] Net Zero by 2050 A Road map for the global energy sector IEA

[21] Sum of very high and high

[22] Energy institute barometer 2021 https://www.energyinst.org/barometer/2021

[23] https://powerfulwomen.org.uk/business-case-for-diversity/ Powerful women business case   “ Different perspectives and experiences prevent “group think” and bring new thinking, essential for the energy transition. Companies with above average diversity on their management teams report 19% higher innovation revenue.”