The Future of Energy: How can traditional energy companies transform?

A business case for sustainable transformation

Ramez Naam, the Co-Chair for Energy and Environment at Singularity University, points out that batteries will continue to become cheaper, and electric cars will ultimately have a lower purchase price than conventional cars.

One of the things that has kept oil majors from fully engaging in clean energy and mobility has been that the return on investment has not appeared as attractive. But several European oil and gas majors like Equinor, BP, Total and Shell have already put money in the renewables market and gearing up to accelerate their sustainable journey.

Avoid the corporate immune system

However, for traditional energy companies to change and embrace the new, they first need to overcome the challenge that all large organizations face: The corporate immune system. New ideas and innovations are incompatible with the traditional way of doing things and will be pushed back by people acting as ‘antibodies of change’.

Ramez proposes following the Center for the Edge approach, resisting the temptation of ‘going to war’ with the organizational antibodies of change, and instead innovate at the edge of the organization.

Change needs courage

In addition to internal resistance, radical change also meets resistance from investors. Ramez points out that companies will need courage to introduce an innovative long-term strategy to stockholders, using an example from the world of technology: 

— People forget that the business model of Netflix was to send you DVDs in the physical mail. When Netflix announced their move to online streaming, their stock price fell in half. It looked like self-cannibalization. 

We will come out strengthened 

Describing himself as a concerned optimist, Ramez points out that we have a long history of overcoming our problems. 

— Even though it looks a bit dark now, I am optimistic. When we come out of this, a couple of years down the road, we will see a strengthening of our international institutions.

Resources and Industrials Lead for Deloitte Nordics, Johannes Wiik, comments:

“For the oil and gas companies that have already adopted a ‘zoom-out’ view embracing the inevitable transition to a low carbon economy, recent crises have not altered that long-term view. On the contrary, it only speeds up the industry’s need for change.”