2 years ago

Service - Leadership in Government - Issue 75

  • Text
  • Government
  • Leadership
  • Urban
  • Leaders
  • Pandemic
  • Transition
  • Digital
  • Infrastructure
  • African
  • Economic
  • Global
  • Cities

S energy Indications

S energy Indications show that climate and energy will be essential topics for governments, businesses and consumers alike. The emerging energy-sector stakeholders’ decisions provide positive signs for a long-term acceleration of the energy transition, revealing new ways of financing, producing and consuming energy. Six macro-trends in three areas characterise the impact. If consumers or regulators start making decisions about what they buy based on the overall carbon impact, entire value chains will be quickly impacted. FINANCE: Growing interest in low-carbon assets. A complex issue is that socio-economic pressures are changing the way markets prioritise their investments. Governments and industries alike are incorporating environmental commitments into their long-term plans for an economic recovery. The International Monetary Fund has urged governments to tie post-Covid stimulus packages to their climate goals, promoting emergency loans for green technology and scrapping fossil fuel subsidies. Consequently, investors are shifting away from traditional investments in favour of low-carbon assets. As investors seek long-term stability during the volatility, preliminary signs indicate that Covid-19 could be a galvanising force for energy transition infrastructure investments in the long term. Capitalintensive generation and infrastructure categories could capture a larger share of the investment wallet. PRODUCE: A power mix transformation makes strategic sense. As recovery plans reinforce long-term support for the energy transition, the magnifying lens hovers over commitments to reduce Scope 3 emissions, which cover all direct and indirect emissions from sources that a company does not own or control, such as transportation, use of sold products, and end-of-life product treatment. The lifetime carbon impact of products and services is now coming to light. If consumers or regulators start making decisions about what they buy based on the overall carbon impact, entire value chains will be quickly impacted. CONSUME: Consumer behaviour changes are driving product demand shifts and decarbonisation – the pace and nature of these changes vary by country and city. Covid-19 has triggered large-scale changes that should permanently impact urbanisation models. Over 85% of organisations encourage or mandate employees to work from home. Road traffic in major cities around the world has plummeted by more than 40%. As more work has gone virtual, digital collaboration tools have enjoyed a major popularity surge. For example, on 31 March 2020, Microsoft Teams set a daily record of 2.7-billion meeting minutes – 200% higher than the week before. Global companies are saying that these remote ways of working will be the new normal. Twitter CEO Jack Dorsey announced that its employees will work from home forever, and Barclays CEO Jes Staley expects Covid-19 to make big offices a thing of the past. Governments are adapting mobility regulations in some cities to become more efficient and reduce pollution. The UK has accelerated its trial launch of e-scooters to alleviate pressure on public travel modes without increasing carbon emissions. London mayor, Sadiq Khan, announced “one of the biggest car-free initiatives of any city in the world” in a pedestrianisation campaign of certain city roads. Paris’ mayor revised the city’s street map during the lockdown, dedicating paths on some roads for bicycles and closing traffic on major routes such as Rue de Rivoli (near the Louvre Museum). Consumer sentiment is often the most poorly understood driver of change, yet it has the potential to rapidly shift a market, product demand and/or its supply chains. The pandemic behavioural shifts reveal the power of consumers. Where energy transition trends have typically been catalysed by regulation and technology, consumers will likely become a major influence. This is not a new phenomenon: the “Blue Planet effect” ignited a global war on plastic, and the ensuing rapid-fire regulatory, operational and product changes required supply chains and logistics to rapidly pivot. With consumers leading this push, some markets have struggled to keep up, creating an impact on both top and bottom line. HOW SHOULD COMPANIES RESPOND? Never let a crisis go to waste. Currently, most businesses are focused on survival. When Covid-19 cases start dissipating, leaders must prepare for what comes next: to adapt to the new normal and become agile enough to respond to future trends – building business models, products and services fit for an energy transition future. Tailor a global strategy to local conditions. Transition enablers are well-known: switching from high- to low-emission generation, electrifying applications, developing multiple forms of storage and improving energy efficiency. This shift will not occur uniformly across the globe, as a multitude of local factors is in play. Technology is borderless; adoption is local. Strategy must take into account at least four dimensions: regulation, technology economics, technology constraints and consumers’ acceptance and demand. When reassessing and prioritising in the wake of Covid-19, local market conditions may have changed – creating both threats and opportunities that need to be re-examined. In making decisions, it is crucial to take an end-to-end view on the ___ __ The coronavirus has triggered large-scale changes that should permanently impact urbanisation models. 10 | Service magazine

energy S necessary investments, ecosystem partnering requirements and potential moves from other companies, to ensure sustainable business models and assets. Don’t miss the green recovery funding. Energy companies’ focus is gradually switching from addressing the immediate implications of Covid-19 to navigating the inevitable downturn that the pandemic has triggered. Government stimulus packages are being prepared, and financial support for the energy transition seems to be central to many government strategies. Leaders are poised to capitalise on the opportunity to accelerate a business model transition when government support materialises. The history of the energy transition is punctuated with rapid developments in technologies and infrastructure – stimulated by government subsidies. With the success of the energy transition, fundamental to so many companies, bold moves and rapid action will be needed to get on board the green recovery funds when they appear on the horizon. Drive an agenda with M&A opportunities and strategic partnerships. Cheap finance, publicly stated ambitions and broad awareness of the impact of the energy transition created a period of high activity across the market pre-Covid-19. The liquidity squeeze will increase scrutiny of investments, placing small and large businesses in a unique position to explore radical moves absent from the table before the crisis. A key feature of the energy transition is the convergence of multiple sectors onto the same customer PUBLIC-PRIVATE PARTNERSHIPS Public-private partnerships (PPPs) are mechanisms that use public policies, regulations or financing to leverage private-sector financing. The main characteristics of PPPs for financing EE projects include: • A contractual relationship (or less formal agreement) between a public entity and a private organisation; • The allocation of risks between the public and private partners consistent with their willingness and ability to mitigate risks, in order to encourage the private partner to mobilise financing; • The mobilisation of increased financing for EE; and • Payments to the private sector for delivering services to the public sector. An example of a PPP is where the private partner may operate and maintain energy systems or facilities, such as street lighting, under a service or lease agreement with a municipality, which serves as the public partner. Source: IEA, 2011 base. No one business has all the capabilities to win across the energy transition: a combination of service, consumer platform and geographical footprint undoubtedly holds the key. Reset supply chains for post-pandemic demand while leaping for decarbonisation. Covid-19 has forced a SUSTAINABLE INFRASTRUCTURE DEVELOPMENT In June 2020, Sustainable Infrastructure Development for South Africa (SIDSSA) was unveiled. The infrastructure project pipeline brings critical role-players in the investment space to collaborate in building back a better, robust socio-economic nation. “We are institutionalising the SIDS methodology as a new way of packaging and preparing projects for funding. This methodology will determine three pathways for project funding: commercial funding, blended financing and fiscal allocation. We look forward to an enduring relationship that will help propel our economic recovery effort and bring hope to the country.” President Cyril Ramaphosa “The public and private sectors share major points of intersection and significant commonalities that, together with the planned infrastructure projects, will help drive South Africa out of its current economic distress, now exacerbated by the Covid-19 pandemic. “We are aiming for a fundamental alteration of the economic relations of society towards a shared future in which everyone must participate. Inclusivity and transformation are key ingredients to the South Africa that we want to construct.” Dr Kgosientso Ramokgopa, Head of the Investment and Infrastructure, Office in the Presidency “Now, for the first time, South Africa’s public and private sectors have come together to advance a common infrastructure development agenda, namely the creation of a reliable, robust infrastructure project pipeline. Service magazine | 11

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