Editor's note: This Beyond the Horizon column first appeared in the January-February 2024 issue of Offshore magazine. Click here to view the full issue.
By Jeffrey Whittle and Lisa Rushton, Womble Bond Dickinson
In recent years, energy majors have outlined strategic plans to diversify their businesses to include decarbonization technologies and renewable resources. Now we are seeing some of these companies moderate their previous net zero commitments. This is not true for all; in March of last year TotalEnergies reaffirmed a commitment to its transformation strategy. But a month earlier, BP revised its previous commitment to a 35% to 40% reduction in carbon emissions by 2030 to a 20% to 30% cut. Shell announced job cuts in its Low Carbon Solutions business to “strengthen its delivery on our core low-carbon business areas such as transport and industry,” and CEO Wael Sawan recently stated that the company is “trying to provide energy security [which is] critical today and continues to be very much foundational on oil and gas production.” ExxonMobil said in May that Net Zero by 2050 is highly unlikely. More recently, Saudi Aramco’s CEO suggested that more investment in oil and gas is required just to meet the demand scenario outlined in the International Energy Agency (IEA)’s Net Zero by 2050 roadmap.
In November 2023, Womble Bond Dickinson conducted its third Energy Transition Outlook Survey Report. Respondents included companies and investors with interests in renewable energy (76%), oil and gas (64%), utilities (39%), mining (33%), EVs (30%) and nuclear (18%). Participants were located in North America (23%), the U.K. and European Union (37%), Asia Pacific (11%), the Middle East (6%), and Latin America (22%). The survey incorporated 456 responses from CEOs, chief financial officers, chief operating officers, legal counsel, and business, operations, and project managers.
The survey found that companies operating in the renewable energy space remain committed to Net Zero. Setbacks and challenges are expected, given the volatility of the industry and the complexity and enormity of the energy transition. But it is concerning that major renewable technologies are failing to clear cost hurdles in both the U.S. and Europe—due in part to escalating capital costs and inflation at levels not seen in decades. Wind and solar energy deployment risks reaching a bottleneck due to grid interconnectivity issues. Permitting is a challenge across the board. Multiyear delays are hampering the delivery of key grid equipment such as transformers. Meanwhile, in the face of insufficient supply and public opposition to mining practices, there is a rush to meet future demand for metals such as copper, nickel and lithium, as well as for the rare earths required for electric vehicles (EVs) and offshore wind turbines. Our research shows that industry leaders are maintaining or increasing their commitment to energy transition strategies. But this commitment is accompanied by a sobering understanding of economic realities and growing concerns about global conflict. Recent events in Israel and Gaza, and the ongoing war between Ukraine and Russia further emphasize geopolitical instability. The need to ensure energy security is real, and global consumption is increasing. Based on a range of estimates of population growth and living standards, the U.S. Energy Information Administration (EIA) forecasts an increase in primary energy demand of between 16% to 57% by 2050.
The survey results indicate that despite economic, political and regulatory challenges, energy industry executives and investors continue to pursue more sustainable power sources while facing persistent hurdles tied to cost, grid and infrastructure issues.
We asked energy industry executives and investors to rank, beyond their own businesses, what they believe to be the most relevant energy transition investment areas today. Key areas of opportunity, according to our respondents, include decarbonization-focused solutions such as biofuels and biomass (more broadly characterized as energy from waste); energy efficiency improvements; carbon capture technologies; utility-scale energy storage; and EVs. After biofuels and biomass (energy from waste), both constituencies clearly view energy efficiency—which has been described as the low-hanging fruit of the energy transition—as a priority. It tied with carbon capture as the secondranked opportunity, selected by one-third (33%) of all respondents. Energy storage ranked fourth among all respondents (27%), and was fourth among executives (29%) and fifth for investors (24%), tied with green hydrogen.
Executives are generally more bullish on energy from waste inclusive of biomass and biofuels. It is worth noting here that 64% of our respondents participate in some way in the oil and gas subsector, which could be a driver of that result. Executives and investors both show interest in carbon capture infrastructure and technology. Nearly 70% of executives and investors expect commercial-scale carbon capture, transport and sequestration will be a reality by 2040.
Overall, it appears that business leaders continue to increase their commitment to the energy transition. However, with that intention to move forward also comes a clear-eyed perspective that the global energy transition is fraught with risks and will require a greater-thananticipated level of capital investment. Moving the energy industry forward will require sustained will, ingenuity and multifaceted solutions to seemingly infinite complex challenges.
