In October 2015, Equinor was awarded the ‘Energy Intelligence Award for Leadership in New Energy’ at the high-profile Oil & Money conference in London. I was sent off by my boss to pick up the gong and say a few words in acceptance. In truth, I was embarrassed this recognition was unduly premature: we had only recently established our New Energy Solutions business in the summer of that year, and while we had some proof-points on offshore wind power and carbon capture and storage (CCS), it was many miles away from Equinor’s presence in the renewables markets today.
I dutifully delivered my speech, outlining our strategy and ending on why Equinor and the oil & gas sector should take on a broader responsibility for the climate challenge. “That was different” was the bone-dry comment I received from a delegate as I sat down from the podium. This comment in all respects echoed mainstream thinking among many colleagues at the time. Back then, climate fluency within the oil & gas sector was ‘early reader’ level.
The shift in the narrative in just over five years has been immense, which prodded me to think what else has changed in the energy sector during this period.
So, in the spirit of sharing, my – highly unscientific – Top 10 personal observations from the energy transition:
1 | Social normalisation happens fast
Psychologists and sociologists often refer to normalisation as the social processes through which ideas and actions settle into feeling ‘normal’ and are soon taken for granted. At Oil & Money 2015, legendary ExxonMobil CEO Rex Tillerson gave a rallying ‘all of the above’ speech for more energy – including more coal, nuclear, gas, oil and ‘some’ renewables. Can you imagine any of the leading European energy supermajor CEOs giving a similar speech today? And who among international or national oil company chiefs will still be saying anything like this in a few years’ time?
2 | I completely underestimated the Paris Accord
Do we understand the significance of watershed moments, or do we pretend to rationalise their significance long after the fact? When initially reflecting on the December 2015 Paris climate agreement, I completely underestimated its future significance. The lack of clarity between “well below 2°C” versus “efforts” to limit to 1.5°C and these new-fangled ‘intended nationally determined contributions’ seemed to provide oceans of wiggle room for any real change.
Working in business, our toolbox consists of measurable KPIs, performance metrics and quarterly results at the behest of the market. The language of Paris didn’t feel like our world. I could probably blame my own lack of social normalisation, but the agreement is more than a legally binding treaty: it is a reference point for investors, the public, media, stakeholders and politicians to essentially ‘call out’ whether companies are climate proofing their strategies. To be on the wrong side of this will have major consequences.
3 | Net-zero changes everything – many just haven’t acknowledged it yet
As Paris set the framework as to where the world needs to be by 2050, individual countries, regions and states started to define clearer targets. In June 2019, the UK became the first major economy to pass a net-zero emissions law. Thereafter came a rush of legislation and pledges across Europe, Asia, progressive US states and most importantly China.
Many customer-facing businesses understood the importance of net-zero targets to their brands well before us in the energy sector. Just two years ago the thought of an oil & gas company taking responsibility to solve for their customer’s emissions, in technical parlance ‘Scope 3’ emissions, was anathema to the industry. Today that is front-and-centre for the major European oil & gas companies in their journey away from fossil fuels.
A line in the sand has been drawn in terms of the hydrocarbon business model, enabling what will be a long debate about how oil supermajors approach the energy transition.
4 | The importance of PowerPoints and shoe-leather – not always in that order
Policymaking in a pluralistic society does not occur in a vacuum. Setting context, defining visions, providing evidence is something many of us spend a lot of time on with policy makers and politicians. This is unashamedly called lobbying. The main point is that all interest groups should have equal access to present their points.
In the UK, the world’s largest and most dynamic offshore wind market, we should not take for granted our ‘most favoured energy tech’ status. In 2015, we were deeply unsure of the future of offshore wind, with nuclear capturing so much political attention. Compared to that time, we have an almost embarrassment of riches now: the Offshore Wind Sector Deal; a 40GW offshore wind target; 1GW of floating wind on the horizon, and a huge degree of public support.
To state our claim to politicians and policy makers, many of us tirelessly wore out a lot of shoe-leather traipsing up and down Whitehall and Westminster explaining how cost reductions would come through bigger volumes and predictable auction rounds.
I repeatedly used a PowerPoint explaining Equinor’s highly detailed roadmap to get the cost of offshore wind under £100/MWh ($140/MWh) by 2020 from around £150/MWh at the time. I honestly never foresaw we would smash that number by 60%.
5 Losing auctions is good for you
The offshore wind business model can be a brutal. I have several mental scars from lost auction battles ingrained in my memory. Sometimes you just can’t get to a number to justify an investment, other times we fail to see value where others do.
Sometimes it's cathartic to lose, but you need to lose right.
The point is, sometimes it's cathartic to lose, but you need to lose right. Losing right means you actively take the learning and focus on where you really need to win. This was a case in point for Equinor and SSE snatching a full pot for Dogger Bank in the UK’s 2019 offshore wind auction round.
I don’t think we would have dared to think this way unless we got a few bruises from previous auctions – and, it must be said, the essential backing of a visionary CEO.
6 | Zero harm is possible
As offshore wind developers, operators and partners, the most important part of our job is to ensure that all our employees get to sleep in their beds safe and sound every day they leave their shift. At Equinor’s oldest running offshore wind farm, Sheringham Shoal, we recently celebrated 1,000 days with a clean sheet on safety, a real testament to the team.
This does not come for free. Tackling complacency is essential, with constant training and learning from our supply chain partners. To become a truly global industry, on par with offshore oil & gas, offshore wind must ensure a proven safety record and operating model that all operators and developers consider wherever they produce electrons in the world.
7 | The answer you seek might be in an airport bestseller
I must admit I am not the best person to champion the latest management guru techniques. But, sometimes, this stuff works. In 2018 we were hitting the wall in my business unit. We lost some auctions, struggled to prioritise and chased too many opportunities. Inspiration and clarity were required.
By coincidence I managed to attend a speech by Morten Hansen, the Berkeley management professor, who writes about performance, bought his book ‘Great at Work’ – at Newark airport – and read it on the flight home to Oslo.
One point he nails home is “do less, obsess”. So, with my team, we did exactly this and devised ‘The Big Four’ for 2019. These were: 1) win Dogger Bank (UK offshore auction); win Empire Wind (NY offshore auction); reach final investment decision for Hywind Tampen (floating wind for oil & gas in Norway); and get commercial agreement for Northern Lights (major European CCS project in Norway).
If there was ever a question about prioritisation, the answer was always the same: Dogger, Empire, Tampen, Northern Lights. The Big Four – all of which ‘came true’ – was also a rallying cry for the team and highly measurable, iconic projects, which are gamechangers for Equinor’s energy transition.
8 | ‘It is in change that we find purpose’: Heraclitus
I’m no oracle – or ancient Greek philosopher – but after 23 years in the energy industry, I think I have a pretty decent feeling for gauging the temperature of the human side of the business. Most people working in energy are a proud bunch. We get up every morning to produce energy to keep the lights on in hospitals and schools, provide heat for all the industrial and consumer products we take for granted, and transport fuels and electrons to move us across the world.
At the same time, some of the products we produce are responsible for the bulk of greenhouse gases. For industry colleagues who get this, and want to do something about it, that motivation and passion is incredible to witness. Whether they are electrifying offshore platforms, cutting flaring, capturing carbon or maintaining wind turbines there is a definitive buzz knowing that what you do every day makes the world a little bit better. This passion and engagement amongst industry colleagues is infectious and often differentiates high performing teams.
9 | Swimming in the energy mainstream renewables must show more muscle
The renewables industry maintains the image as the scrappy and disruptive contender on the world’s energy stage. But, within certain markets it is definitively moving from the margins to the mainstream and eventually the incumbent. How does, for example, offshore wind become a good incumbent?
As the industry grows, we will see increased expectations, and inevitably more pushback, criticism and enemies. How do we ensure good environmental stewardship, shared value and a just transition? To start to tackle these questions, Equinor and Orsted spearheaded the Ocean Renewable Energy Action Coalition to share best practice. A growing issue, as renewables enters the mainstream, is the focus around the life-cycle impact of the industry from metals and mining to production and decommissioning.
Openly tackling these issues and dilemmas is imperative if our industry is to maintain vital public support.
10 | Three words: Scale, scale, scale
In 2018 we witnessed an important milestone in the renewables industry, when solar and wind installed capacity hit the 1TW mark. One trillion watts. It took two decades to get there. More noteworthy was the forecast for the next trillion watts of solar and wind, this time in just five years. Technology and innovation continue to drive renewables towards a seriously competitive alternative to fossil fuels, but major deployment is the real enabler.
As the bottom-fixed offshore wind sector was continuously smashing previous assumptions around the cost of energy, our floating offshore wind team was feeling a little like passengers on the platform watching the bullet train speed past. We needed to up the ante, with an ambitious target for the entire floating wind sector to aim towards.
In 2018, we launched the Equinor floating wind roadmap with a ‘top down’ cost of energy target of €40-60/MWh ($48-72/MWh) by 2030. It grabbed attention in the industry – enabling a clearer focus around scale and industrialisation. As the big oil & gas companies piling into offshore wind fully understand, major scale counts.
Future shock – alea iacta est (the die is cast)
While my ‘Top 10’ is a personal reflection on the past, looking forward there is a major, growing discontinuity between a world of climate pledges and the Paris Agreement. To get anywhere near the IEA’s Sustainable Development Scenario implies unprecedented cuts in CO2 emissions. This is not business as usual.
Yet, global energy-related emissions in December 2020 were higher than the same month in 2019, despite the harshest economic downturn in a generation. Barring any major and immediate policy changes, global emissions will likely increase.
What will be the tipping point here? We’ll see a plethora of new, low carbon initiatives from the industrial sector and a corresponding need to take carbon sinks seriously – especially for CCS. Renewables will continue its steady march. Climate and financial activists will shout louder and courts will increasingly become a new frontier for climate battles. In the 2020s short-term actions will need to better reflect long-term pledges.
For the energy industry, alea iacta est, the die is cast. The energy transition will be deeply disruptive, messy and financially bloody for some. There will also be incredible winners. But there is no going back.
· Stephen Bull is currently SVP for New Energy Solutions in Equinor, chair of RenewableUK and, starting this summer, EVP for Aker Solutions’ Renewables business. A fuller version of this article is available here