In a new blog hosted by Energy Post, POWER TALK, Ph.D-researcher Hendrik Steringa reports on his quest to find out how energy companies are dealing with the energy transition. He conducts in-depth interviews with company professionals as well as with the people they have to deal with: policymakers, NGO’s, academics, lobbyists. What do they really think? What are their real strategies? You can participate in this project too!
Over the past three years, as part of his Ph.D.-research, Hendrik has already interviewed numerous Dutch energy professionals from leading utility companies like Nuon (a subsidiary of Vattenfall), Essent (subsidiary of RWE), Alliander (a major distribution system operator) and Eneco, and from various Dutch lobby organisations, about their transition dilemmas. This has resulted in many fascinating stories (see his Dutch website or his blog posts on Energy Post).
Now he is taking his project to Brussels, where he would like to speak to YOU! In this introductory article, he discusses what his research has taught him so far. Main takeaway: it is still too early to tell whether the incumbent energy companies will survive.
In 2011 when I started my research it was clear to me that if I wanted to study the energy transition I had to focus on the electricity sector first. Although utility companies where still resisting the idea of a full blown transition, I felt this was the place where it was happening.
I couldn’t have made a better decision: in just a couple of years I saw major multi-billion euro companies plummet into a deep crisis because the spectacular growth of renewables took them by surprise.
I also saw them go through the four classic transition stages familiar to me from academic transition literature. They are quite similar to the stages a person in grief goes through:
- First denial or ignoring the changes (“Solar is a hype”)
- then changes were recognized but met with anger and resistance (“Subsidies are to blame … and there will be black-outs”)
- then acceptance (“We are in a deep crisis and we need to change”)
- and now transformation (“It is a struggle to find new business models”)
In the last stage companies try to adapt to the new circumstances. If they fail, they will shrink or disappear altogether.
If Greenpeace didn’t see it coming it is no surprise energy companies didn’t either
The struggle for companies to find a new ‘raison d’être’ is not only visible within the companies but also causes tensions between them. And they are not only related to differing interests, but also different visions of a future that is still very uncertain.
Research ‘from within’
“I know exactly what you want to do”, said André Jurjus, the then-Director of Energie Nederland, the association of Dutch power companies and member of the European association Eurelectric. In the Spring of 2012 I sat opposite him in his office in The Hague, right next to the Dutch Parliament buildings. I explained to him that I was doing research on the impact of the energy transition on the incumbent energy companies and how these companies were trying to influence energy policy to shape the transition process. This I wanted to investigate “from within”.
To my surprise I found that he held an academic degree in anthropology and therefore immediately knew how I wanted to carry out my research. He understood that I wanted to learn first-hand how people inside the companies think and act. Where better to start than at the offices of the association where employees from all major Dutch (often foreign-owned) energy companies – from CEO to lobbyist – met regularly.
It was mid 2012. Looking back, I could not have started my research at a better time. In that year the cracks started to show. The trend towards more renewable power production started to pick up pace. It was a process the companies had tried to ignore for a long time. Suddenly, however, they were forced to react.
Four transition stages
As I talked over the years, formally and informally, to hundreds of people from major power companies, startups, government agencies and associations, I often asked if power companies could have foreseen this rapid increase in renewables. Perhaps the most interesting I got was from an employee of Greenpeace who replied: “To be honest, I don’t think so. Not surprisingly of course, we had published very optimistic scenarios for renewable energy. This in contrast to most energy companies but also organizations like the IEA. But I have to admit even we were surprised by the fast development of renewable energy and we didn’t expect our scenarios to come true.”
RWE and Engie for example are trying to innovate, but they are also protecting their conventional assets
If Greenpeace didn’t see it coming it is no surprise energy companies didn’t either. But the fact remained that from 2010 the rapid increase of renewables was visible for all to see, not only in Germany but also in countries like Denmark and several southern European countries. This directly affected conventional power plants, the core business of power companies, plummeting them into a deep crisis.
In a relatively short time span, between 2011 and now, they went through the first three of four classic phases companies usually go through during a transition: ignoring, resisting and accepting. The last stage, transformation, is what many of them are in now. Let me give some concrete examples.
During one of my first interviews with a strategic advisor at a power company he referred to solar energy as a hype. For the foreseeable future he couldn’t imagine a world with large shares of renewables, even at a time when a massive buildup of wind and solar capacity was underway in Germany. This first phase of ignoring ended at the end of 2012 when gas-fired plants were increasingly affected and the companies began to realise that the changes were of a structural nature.
Then the resistance started in full swing with, for example, the formation of the informal Magritte group, consisting of a dozen large energy companies with major stakes in conventional power production. CEO’s of these companies toured European capitals warning government leaders that (national) renewable subsidy schemes were destroying the market and that major black-outs were no longer a distant or unlikely scenario.
Since 2015 most companies have been in the phase of acceptance or are working towards this phase. This is when the company accepts that it has to adapt in order to stay in the game. Eon made the most drastic decision by splitting up the company in a conventional part (called Uniper) and a part that focuses on renewables. It’s becoming clear that all companies are now turning to innovation and the development of new business models.
Companies are yet unable to deal with the much lower return on investment of 5 or 6% of new business models compared to 10 to 15% or even higher in the old days
Most companies have only just started with the transformation phase. Company cultures have to change from bureaucratic and risk averse to agile, innovative and able to adapt to a rapidly changing environment. Whether they will be able to survive is still too early to say. Most are struggling with innovation and the development of new business models, in particular those companies with major stakes in conventional power plants. RWE and Engie for example are trying to innovate, but they are also protecting their conventional assets.
From interviews I had with employees I know that old habits and cultural barriers within the company strongly inhibit change and that companies are yet unable to deal with the (much) lower return on investment of 5 or 6% of new business models compared to 10 to 15% or even higher in the old days.
Energy professionals have their say
My research continues in this fascinating phase of transformation in which companies are trying to get on top of the game again. Each company will choose its own way on how to deal with the transition led by their strategy and vision of the future and the role they see for themselves. New business models will be developed, old business models will be either protected or ditched, and policies that support or hamper their strategy will be lobbied over.
I will look at many different aspects of the transition, trying to paint a picture of an energy sector in transition. I will do this through stories told to me by energy professionals who work for companies but also those who deal with them, such as policymakers, start-ups, researchers, NGO’s, etc. In this way I will fill this Power Talk blog with stories from within, to gain insight into power companies’ strategies in transition. I hope you will enjoy my blog and send me your feedback! Or better still, share you stories with me.
Want to share your story with Hendrik?
The rules of the game
Would you like to participate in Hendrik’s project on a strictly anonymous basis? Then please send an email to email@example.com or call him at +31-6-41091639. Remember that if you share a story, you are in control. You get to check the draft of the interview. The final version of the article will not be published before you give permission to do so. Follow Hendrik’s endeavors also via twitter: @PowerTalkBlog
Earlier blog posts
- Big energy companies take control of Dutch wind energy association NWEA
- “Nuon has no vision of the future of the energy system”