Energy Disruption

The energy transition is vital for the world, for our future generations and I’ve previously explained how moving toward sustainability is a change and there is pain associated with it. And I’ve also used the term disruption then. This time, I want to look at it from the perspective of disruption to the energy industry itself.

The energy industry acted like a chain, passing on hydrocarbons from one segment of the chain down to another, processing it in different ways until you get energy. That’s why there is the upstream (which is mainly exploration, drilling, extraction), followed by midstream (transport vessels, pipelines, etc) and downstream (power plants, internal combustion engines, marine and aviation fuel engines).

Trying to decarbonise this energy value chain inadvertently changes the dynamics of that ecosystem that has been working for quite some time (if you consider just Oil & Gas, that is recent but if you consider Coal, then it’s been centuries). The players used to work together and despite the commoditisation of these products, the connections and relationships within the industry means there is some degree of coziness with the structure of who does what and how.

When an international oil company now wants to be sustainable and sees themselves not as an oil company but one that supplies energy (which they technically have been doing in the past), they are now having to sever ties with some midstream players and competing with those who were their downstream customers. All of a sudden, they are bidding for renewable energy projects against the independent power producers whom they counted on to purchase their fuels.

Transitions have knock-on effects and eventually becomes disruptions because things displaced don’t fit well naturally elsewhere. Are you ready for them? Is your business ready for them?