Climate-proofing for the energy industry: evolve…or die?

What was, a few years ago, merely a theory has now become a proven fact. Global warming caused by the greenhouse effect is inexorably advancing, risking becoming irreversible. Society has started paying attention to the ‘climate emergency’, and we are all changing our behaviour in order to adapt to this crisis.

Energy companies – which are in the eye of the storm – must make a stand, and that is what they are doing. The power industry is abandoning coal for renewable energy generation, just as it is moving from production to retail and, from there, onwards to energy services.  Midstream gas companies are seeking to engage more with the world of electricity, as gas remains a transition fossil fuel but is not the ultimate solution. Oil producers are in a paradigm shift, searching for their future in electricity before taking their chances on other energy sources.  Will everyone manage to survive this wave of rapid change?

It is upon these troubled waters, where conventional generation gives way to that of renewable energy, that we see the power industry attempting to navigate. Everyone is adapting as best they can. Some have made the radical choice to abandon the world of generation. Such is the case with E.On, which is looking to become the king of customer solutions following the sale of its electrical production sector. Others are following the flow of the tide by very gradually abandoning conventional generation to focus on renewable generation. Within this group, Iberdrola is a few years ahead of the game, while Engie and Enel are realigning themselves. EDF, for its part, prefers to discuss decarbonisation and is focussing, of course, on nuclear power.

There are other interesting cases, such as that of RWE, which, thanks to the acquisition of Innogy, has become one of the key players in renewable energy without having actually forgotten its fossil fuel past; then, there’s the Nordic Fortum, who has become the champion of conventional generation through the acquisition of Uniper. The most opportunistic, like EPH and Sev.en Energy, are separate cases altogether, specialising in the acquisition of ‘toxic’ coal assets so as to carry out decommissioning in the medium term.

It’s worse for the midstream gas players, such as Engie (the legacy of GdF), Naturgy (for its GasNatural side), Uniper, etc., who hide their original sin of being gas companies behind new brands as they partake in the extinction of their world. The current business model of these midstreamers is built on gas infrastructures. However, unlike electricity, which is the vector of the future, gas appears to be tolerated less and less as a transition energy. If gas fails to ‘go green’, the business will disappear. As a result, gas companies are looking for a future in biogas or hydrogen in order to fill their infrastructures, but both of these directions still appear far from being competitive. In the absence of alternatives, these companies are turning to electricity, renewable generation and energy services – with mixed success.

Oil producers, likewise, are in the midst of drastic change. The major players know that a large portion of the oil reserves that they currently have on their balance sheet will never be extracted. This pertains particularly to the more complicated oil deposits, which they alone know how to extract, and which are the key contributors to their profit and loss account. The world of oil, just like that of coal or gas, is destined to decline rapidly, and its major players along with it.

The pioneer BP, which, in the 1980s, had already developed a PV division that was to go bankrupt in the early 2000s, recently announced its zero-carbon target for 2050, without revealing the ‘how’ (apart from an ambiguous increase in ‘low-carbon’ investments and a reduction in gas and oil investments). French company Total is growing in upstream gas and advancing its pawns in electricity, both renewable and conventional (CCGTs). More surprising still, it has positioned itself within retail through the acquisition of Direct Energie. RD Shell appears to be following in Total‘s footsteps, even if it is less explicit in its goal of reducing its CO2 footprint. Finally, we have Exxon Mobil and Chevron, which seem determined not to change their historic strategy in any way, resolving to devote themselves to their lifelong business until their last breath (or the last drop).

In sum, we’re witnessing a collapse of the ‘core business’ for the energy industry, whether they be oil producers, gas companies or players in the power industry. After decades of fine-tuning excellence in its traditional profession, the energy industry must now adapt to the massive changes in its environment and  become competitive in new professions to which it isn’t necessarily best suited.  To complicate matters even further, beyond suspicions of greenwashing, the energy industry is faced with the loss of profitability of its investments and the natural discontent of its shareholders.  The choice between redevelopment (reinvestment) and return of money to shareholders (in the form of dividends or share buybacks) will also form a part of adaptation tactics. Of course, not all evolutionary strategies will produce the expected results. The only certainty is that climate change will drive a revolution in the energy industry, where we’ll be witnessing the extinction of some species alongside the triumph of others. As the old song goes… ‘Que sera sera.’

Antonio Haya

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Each month, one of our experts publishes an article describing his view on a specific topic of the constant changes taking place in the energy market, with special focus on the French market.

Profesional Experience

Céline, a young and dynamic person, had a first experience in the tourism sector as a community manager at Loups du Gévaudan, in Lozère. She joined HES team in November 2021 to diversify her knowledge: learning about the energy sector, specialising in marketing strategies in order to improve the company’s customer relations and, at the same time, developing her skills in coordination and project management.

Education

Céline graduated in Spanish and English Language, Literature and Civilisation at La Sorbonne IV (2018). She also holds a master’s degree II in cultural projects and establishments management, with a special focus on international tourism. She also studied abroad at the University of London (England) and Universidad de Morón (Argentina).

Céline Haya Sauvage

Marketing Responsible

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“Decarbonization of the Energy and Transport sectors is arguably today’s main economic driver for the industry.”

Profesional Experience

His career started in civil engineering as a Project Manager in France, Martinique and Australia. Afterwards, he became the General Manager of a subsidiary in Venezuela. In 1992, he established Dalkia in Germany (district heating, cogeneration, and partnerships) and represented Véolia in Thailand. In 2000, he opened the commercial office of Endesa in France to take advantage of the liberalized retail market. From 2006, as a development Manager at Endesa France, he led Endesa’s plan for Combined Cycle generation in France and developed the wind and PV portfolio of Snet at the same time. Philippe Boulanger worked for 3 years at E.ON’s headquarters coordinating the company´s activities in France. He was strongly involved in the French hydro concession renewal project. As a Senior Vice President – Project Director at Solvay Energy Services from April 2012 to February 2014 he was in charge of the H2/Power to gas and European direct market access deployment projects. Philippe has been an HES expert since 2014.

Education

Philippe Boulanger holds engineering degrees both from the Ecole Polytechnique and the Ecole Nationale des Ponts & Chaussées (France) and has a combined experience of more than 25 years in energy and infrastructure. In addition to English, Mr. Boulanger is fluent in French, German & Spanish.

Philippe Boulanger

Electricity Expert

HES-Philippe-Boulanger

“The world is changing. New investors pay particular attention to the energy sector while historical actors adapt their position to the market.”

Profesional Experience

Antonio started his career in the electricity sector in 1991 working as a member of staff for the General Manager of Sevillana de Electricidad (Spain). In 1997, he was in charge of the commercial regulation at Endesa Distribution. In 2000, he joined Endesa’s European M&A department. He was appointed CEO of Endesa Power Trading Ltd in 2003. He became Head of Energy Management for SNET, France, in 2004 and was appointed CEO of this company in 2008. In 2009, he held the position of Head of Corporate Development for E.ON France. In 2011, he founded Haya Energy Solutions (HES), a consulting firm which assists companies in optimizing their value chain: from strategy definition to day-to-day operations, based on a strong experience and understanding of the energy industry. From 2015 to 2018, Antonio was Chairman and CEO of 2 French CCGTs (2x410MW), owned by KKR. At the end of 2018, he joined Asterion Industrial Partners, a dedicated infrastructure investment fund, as an Operating Partner.

Education

Antonio graduated from the Escuela Técnica Superior de Ingenieros of Seville (Spain) and holds an MBA degree from Deusto University (Spain).

Antonio Haya

CEO