The future of energy: whatever you have come up with is wrong | Deloitte UK has been saved
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The future of energy is being rapidly reshaped. Not least with the UK government’s recent announcement of ambitious plans for a green recovery. The 10-point plan includes £1bn next year to make buildings more energy efficient, the intention to make the UK “The Saudi Arabia of offshore wind” (blimey!) and my personal favourite, bringing forward by 10 years to 2030 the ban on sales of new petrol and diesel vehicles. The various components of this plan will affect your business in powerful ways. A myriad of possible outcomes lie ahead as many driving forces disrupt on multiple fronts.
ROI means Risk of Inaction, not Return on Investment
Energy players recognise a “wait and see” approach is clearly not an option given this pace of change. Every business has formed a view on how the energy system will evolve and is making investment decisions today based on that view.
Yet the stakes are very high. Make the wrong capital choices at the wrong time, and suffer a gaping hole in your balance sheet. Fail to move quickly enough and you your business model is rendered irrelevant, a casualty of the energy transition.
Preparing for outcomes through scenario planning
Scenario planning is a well-established tool for engaging with an uncertain future. The energy industry is particularly familiar with this. Its value lies not in predicting the future, but rather in providing context to help think through different futures and the choices that must be made in each.
Frankly, the only certainty is that whatever scenario you have come up with is likely wrong… because none of us has got it right! Yet that does not at all diminish the value of such planning in managing your business in the face of uncertainty.
Creating advantage is about uncovering the best options given your capabilities; balancing risk and return probabilities; and judging where your organisation can best play and win. Most organisations recognise the critical issues for them. But many model only a small handful of uncertainties.
Scenarios can help organisations understand the dozens of driving forces affecting them and predict potential futures. They can then prepare themselves for the most likely outcomes, and make the right investment decisions for their journey. They must also monitor how the world is unfolding on a real-time basis and pivot as that situation plays out.
We have seen organisations successfully develop scenarios and model a very complete picture of the future, but then falter on real-time monitoring and ongoing planning – crucial steps for fine-tuning their models and associated decisions. These organisations then run a higher risk of making the wrong capital choices at the wrong time.
Not a handful of forces shaping the future of energy – but 92!
The future of energy has many moving pieces: consumer and societal behaviour, technology change and innovation, policy and geopolitics. These uncertainties will influence how each situation could play out. Technology developments, such as battery storage for example, will not only create a path to a particular future but also dictate the different pace at which consumers opt to adopt and supply chains scale.
Deloitte’s Future of Energy Scenario Planning toolkit identifies 92 high-impact forces that shape the future of energy in ways both predictable and unpredictable. Working through the implications of these driving forces will help your organisation understand your role in the energy future, the competition, and the right choices to succeed based on your market, your business model and your capabilities.
Mark is the Global Technology Strategy & Transformation Leader and leads Deloitte’s Energy & Resources Consulting business in EMEA. With over 25 years of Consulting experience, Mark has led numerous business and digital transformation programs, most notably in the energy and utilities sectors. As a UK Consulting Technology Partner, he leads the CIO Program and Technology Research & Insights which includes The Annual CIO Survey, Tech Trends, CIO Transition Labs, and The Next Gen CIO Program. Outside of Deloitte, Mark is passionate about sport, with extensive involvement in the London 2012 Olympics and sports coaching. He has served as the Chairman of the Board of SportsAid, a charity he was a Trustee of from 2006 to 2019.