Lost in transition: the findings

Energy transition

Energy transition at speed and scale

The world needs to transition faster to meet the Paris Agreement targets of reducing greenhouse gas emissions 43 percent by 2030. While there is no master blueprint for doing so, there is much that can be done to move ahead in harmony with other global priorities — continued prosperity, resource efficiency, social mobility, public health and of course, the secure supply of reliable and affordable energy.  

This edition of the Future of Infrastructure, Lost in transition?, helps navigate the energy transition with practical, profitable, predictable and people-centric approaches to achieve net zero.

Based on the views of nearly 850 senior executives covering nine industries and 22 countries, we explore how to accelerate the journey toward a sustainable energy future.  

Every organization will enter this era of transformation and proceed along its own route, influenced by industry and regional pressures that will impact the pace and pathways possible. The key for leaders is to know where their organization stands to determine priorities and the practical steps to take next. Wherever you find yourself on the energy transition continuum, there are ways to close the gap between aspiration and implementation.  

Troy Rudd
Chief Executive Officer, AECOM
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The energy transition continuum:
where we stand

The energy transition is different for every organization, depending on its inherent strengths and challenges. Leaders must understand their position to prioritize effectively and take proactive steps in the global shift to sustainable energy.
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There’s a strong correlation between the expected impact of the energy transition and how quickly and proactively an industry is responding. There are legitimate reasons why some industries, organizations or regions may be starting from further back though. Their legacy technologies, lack of infrastructure, cost and other factors come into play.  

49%

are adapting proactively.

"There is no one silver bullet. We need to use every tool in our toolbox. We need to use everything we can as quickly as we can. And we need to work with everybody: citizens, businesses, organizations, institutions. Those partnerships and connections are going to be critical as we look to scale up and speed up."
Carolyn Bowen, Director of Climate and Environment, The City of Calgary, Canada

Nonetheless, many organizations are taking bold steps forward. Organizations we surveyed are three times more likely to be adapting proactively to the need for energy transition (49 percent) than just reacting to rules and external pressure. And almost half (47 percent) say they are adapting very quickly. 

47%

are adapting very quickly.

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Navigating urban mobility policy in the age of energy transition

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The energy transition needs a multi-faceted, system-wide response from government, industry and the professional services that support and integrate them. Thriving through the transition requires organizations to overcome a diverse range of practical obstacles, to explore new business models and routes to profit, and to equip their people with new skills and experience. All this will take place in an evolving regulatory environment, so policymakers are urged to provide a predictable and consistent landscape so that businesses feel confident about investing.

A practical transition:
getting implementation right

Organizations are ramping up their energy transition, but most are still early in their decarbonization journey, grappling with high costs and slow emission reductions. To move ahead, start with a tailored energy plan, then tackle small projects that demonstrate clear benefits to build momentum.
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Many organizations say their work is speeding up. Almost three-quarters are now significantly accelerating their adaptation to the energy transition. But less than a quarter have reached an advanced level on their core decarbonization ambitions. Where there are lower barriers and a sense of urgency, progress is being made.

About a quarter of organizations surveyed, for instance, are pleased with the progress they have made on improving energy efficiency in their facilities and buildings. And progress is also happening in areas threatened by external factors, such as geopolitical risk.

Wherever the starting line, every organization needs a tailored energy plan for transformation. This long-term, evolving road map should involve an advisor with knowledge of the increasingly multifaceted energy infrastructure landscape, plus implementation experience of new and coming technologies. Focusing on the smaller and more affordable initiatives first will bring early results that help to build momentum. 

74%

reported their organization is now significantly accelerating their adaptation to the energy transition.

17%

reported their organization has reached an advanced level on their core decarbonization ambitions.

Cultural changes will also be necessary if organizations are going to put aside traditional rivalries and work together to meet targets. The majority (56 percent) of those in our survey believe competing companies should share data, resources and expertise with rivals to accelerate and optimize the energy transition. Companies and governments simply do not have all the skills, financial muscle and appetite for risk to go it alone, so partnership of all kinds will be essential.   

Respondents who reported their organization is at an advanced stage of progress in the pursuit of the following energy transition goals.
"There are too few resources available for competitors not to work together. Our markets have been set up on the idea that competition leads to lower costs and better outcomes, but in the case of energy transformation we need to allocate labor and equipment effectively. It’s the overall result for decarbonization that matters, not who gets there first."
Jacqui Bridge, Executive General Manager of Energy Futures, Powerlink, Australia

It may be challenging — in some industries or sectors — to see the energy transition as an opportunity in the current economic environment. While 20 percent of organizations say the transition will significantly drive up their costs, more than twice as many (41 percent) say it will drive costs down. The imperative to decarbonize society remains and significant funding in clean technology continues to flow. 

41%

report that the energy transition will drive costs down.

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"Our development into new markets is always about the partnership strategy. Each time we enter a new market, we partner with local champions. It’s so important because offshore wind projects are highly regulated, policy driven, capital and technology intensive, with elevated risks."
Anna Su, Chief Executive Officer, Synera Renewable Energy, Taiwan

Want more sensible advice?

Read the insights from our expert contributors and key recommendations for a practical transition.
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A profitable transition:
ensuring prosperity for all

The move toward clean energy is a promising business opportunity for many organizations. Partnerships, supportive policies, customer engagement and showcasing benefits can accelerate the transition, making it a win-win for both communities and businesses.
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The energy transition can be good for business. In our survey, three times as many believe this transformation will drive a significant increase in revenue (49 percent) as those who believe the opposite (14 percent). And 46 percent say it’s business opportunity that’s driving their response to the energy transition imperative, which is more than any other factor.  

49%

believe the energy transition will drive a significant increase in revenue.

What factors are the biggest drivers of your organization’s response to the energy transition?

But nearly half of organizations say that a lack of certainty about returns is undermining their confidence in investment. In some sectors and geographies, the proportion is significantly higher. This could reflect the difference between current sentiment and long-term potential, but it also suggests a lack of clarity (or requisite support) from regulators and policymakers.  

Targeted and committed support for the energy transition can be the impetus that markets need to become financially viable and sustainable. Still, many new projects will only be viable — financially and in terms of competency — when several partners come together. The energy transition is driven forward by bankable projects — the ones that make business sense — but in many cases, it takes time, ingenuity or wider changes for the necessary elements to align on those projects. 

Uncertain investment: almost half of respondents are prevented from progressing by uncertain returns on investments in energy

Yet, prosperity means more than profit. The energy transition represents an opportunity to benefit several important groups in a variety of ways — everything from saving money for individual consumers to entire infrastructure upgrades for communities and the social value that comes with it. Organizations considering investment naturally want to see returns, but more than one-third of the organizations in our research say their response to the energy transition is driven by an ethical responsibility.  

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Resilience in the next generation of power grids 

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"The best way to get to net zero is to bring customers with you. We have a number of single wind turbines that are serving local communities, and customers in those communities get low-price electricity when the wind is blowing. When we’ve publicized that model, we’ve had a tsunami of communities writing to us to say they want their own turbine. You’re starting to create a very different story about what the energy transition is all about."
Rachel Fletcher, Director of Regulation and Economics, Octopus Energy, United Kingdom

Looking for a win-win?

Our expert contributors share their experiences and key recommendations for a more profitable transition.
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A predictable transition:
managing regulations

A stable regulatory environment is essential for the energy transition, but adjustments are needed as the market evolves. Consistent and predictable legislation encourages investment and progress, while early and transparent communication about change helps businesses prepare.
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A crucial piece of the energy transition is a supportive policy and regulatory backdrop. This doesn’t necessarily have to come in the form of subsidies or other state support, but the organizations in our research say they need consistent, coherent regulatory frameworks to take decisive steps through the energy transition. 

 

73%

say stable energy and emissions regulations encourage more capital and better terms from financial institutions.

Building predictability in times of change is vital, however, policymakers need to evolve and adapt legislation as the transition advances. In many industries, the existing regulatory framework is no longer appropriate or even relevant. In other places, regulators must adjust to a changing marketplace or recent technologies. Some regulatory changes are inevitable — often necessary — but businesses need as much time as possible to prepare for new rules. Early and frequent communication with all stakeholders is essential. 

Nearly three-quarters of organizations say that stable energy and emissions regulations encourage more capital and better terms from financial institutions. The same proportion say that laws should be passed to keep energy and emissions regulations consistent over time. Most organizations we surveyed see the potential benefits of greater liberalization and increased competition.  

Beyond financial support, governments and regulators also play a vital role in orchestrating transformation across the whole energy system and all associated infrastructure. Strategies should be developed in tandem with relevant non-governmental stakeholders. By working closely with all interested parties, governments can ensure that the transition keeps moving forward, equitably.  
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How do you govern an energy transition?

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"A lack of support doesn’t stop us from investing. But it does help broader investor confidence if the government is positively and unapologetically supporting what we're trying to do in the green transition."
Susannah Wood, Vice President of Public Affairs and Sustainability, Statkraft, Norway

Like knowing what to expect?

Read the full report for all the insights from our expert contributors and key recommendations for a predictable transition.
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A people-centric transition:
addressing skills and adoption

Skills and expertise gaps pose significant challenges in the energy transition, highlighting the need for workforce development and recruitment strategies focused on re-skilling and training. Collaboration between all energy partners will also be needed to enable social acceptance, community engagement and sustainable infrastructure development.
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A big challenge for many organizations is expertise: they lack people with the skills needed to make progress on the energy transition today and into the future. Yet this transformation must be driven by people with both technical expertise and the softer skills required for collaboration, persuasion and leadership. People will have to work together, share information and consider the needs and interests of various groups in order to progress through the energy transition continuum.  

67%

say they already have the skills needed for the energy transition.

"Human capital bottlenecks are increasingly beginning to manifest. There is a major need for engineers, and the people knowledgeable about how to achieve these outcomes from a technical standpoint — these areas are deficient right now."
Landon Derentz, Senior Director and Morningstar Chair for Global Energy Security, Atlantic Council Global Energy Center, United States
The human transition – skills and digital/data-driven ways of working

Nearly two-thirds of organizations in our research say they already have the skills needed for the energy transition, but it isn’t clear that they have enough of the skills needed to meet the scale of transformation required. 29 percent say their industry doesn’t attract the kind of skills needed for change. New demands for skills will continue to emerge as the energy transition gathers pace, so organizations will need to adopt new techniques to close the gap.  

We’re also likely to see energy companies increasingly engaging non-traditional partners, such as community stakeholders and nongovernmental organizations (NGOs), to drive progress on transition-related themes. Fostering social license is essential to build and operate new energy infrastructure in communities. For governments and regulators, this can involve ensuring that all policies fit within a wider, structured plan that protects and promotes communities.  

Importantly, we need new approaches to ensure that energy is accessible, affordable and people-centric, all while also addressing the need for decarbonization. A significant proportion of the energy transition will involve the very human element of adoption and effective use of new technologies. The right incentives can encourage support and cooperation in energy-saving and sustainable practices.  

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What do you need to build the energy workforce of the future?

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Searching for a more human approach?

Read the full report for all the insights from our expert contributors and key recommendations for a people-centric transition.
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The path to a better world

While there isn’t a standard outline for navigating this transformation, there are a multitude of actions that organizations – anywhere on the energy transition continuum – can take to accelerate a practical, profitable, predictable and people-centric transition to net zero. Our full report illuminates lessons learned from our expert contributors around the world. We share their insights, recommendations and success stories to explore how we can all progress along the path to a better world.
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