Market Concerns Lead to Energy Execs Rethinking Transition Strategies

Energy Transitions

(Credit: Pixabay)

by | Nov 16, 2022

Energy Transitions

(Credit: Pixabay)

Volatility in the market has energy industry leaders rethinking their energy transition strategies, and some are going back to traditional sources of coal or oil; most, however, are generally accelerating their use of cleaner sources, a survey by Womble Bond Dickinson finds.

With high fuel prices, especially in the wake of the war in Ukraine, 79% of executives and 72% of investors say they are adjusting their energy strategies at least a little since 2021, according to the energy transition outlook. Increased prices and demand outpacing supply also have energy industry leaders looking to coal and oil, with nearly a third of the executives saying they are putting more focus on the latter.

However, renewable energy remains a priority for the majority of the respondents, with 64% of investors and 54% of executives saying they are accelerating their transitions in that area, especially as the price of fuel remains high. The survey was completed by 137 executives and investors, who overall view the three main areas of energy transitions to be energy efficiency, electrification in areas like smart buildings and transportation, and expanded development and use of biofuels.

The findings come as energy crunches, especially from high fuel prices, are impacting areas like Europe where significant conservation measures have been taking place. Additionally, fossil fuel use has come under fire at COP27 where there have been several calls from scientists and the United Nations alike to end support of the traditional energy sources.

“Given the uncertainty of the times, energy leaders seem to be trying to extend the life of coal as much as they can, as a hedge,” says Jeff Whittle, global head of Womble Bond Dickinson’s energy and natural resources sector. “But the use of renewables is clearly on the rise across the board.”

Natural gas also is seeing an increased focus from investors to spur energy transitions, with 54% saying they are accelerating its use. More than 40% of investors and executives say they are looking to increase the use of decarbonization technologies.

Interest in hydrogen and geothermal energy is of interest to most of the respondents, but they believe impactful energy transition results are at least five years away. Respondents say costs, infrastructure, complex distribution systems, and the pace of development will slow the widespread implementation of hydrogen.

Geothermal energy is seen by 56% of executives as having an impact on clean energy within five to nine years, especially because it is a vast resource. The challenge, respondents say, is figuring out how to harness the energy.

The respondents also have concerns about the increased adoption of electric vehicles, despite incentives to increase use and targets outlined in the recent infrastructure law. The high cost of obtaining vehicles and a lack of charging infrastructure are the top concerns of the executives and investors. The United States did approve charging plans for 35 states earlier in 2022.

There is also no consensus about overall emissions targets in the US, which include at least a 50% reduction by 2030. About a quarter of respondents say decarbonization goals are very likely to be met, while nearly the same amount say they are very unlikely to be met. In terms of emissions reduction goals, 29% of the respondents say energy companies are very prepared to meet those targets while 19% say they are not prepared.

Those who are optimistic about decarbonization targets say they feel that way because of technological advances and government incentives. Those who are more concerned are worried about compliance costs and lack of infrastructure.

Overall, 70% of executives say they have implemented ESG goals, which suggests ESG metrics have become a part of energy company operations, according to Womble Bond Dickinson. For those saying they have implemented policies, fewer are being pressured by boards or regulators, which suggests the industry may be seeing successful results in ESG initiatives, the report finds.

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