Despite current economic challenges, energy and industrial leaders are expected to remain committed to their long-term plans to reduce fossil fuel reliance.
Eighty-nine percent of executives surveyed across energy and industrial sectors reported already having or developing a strategy to reduce reliance on fossil fuels.
While a temporary pause in spending on some priorities and technologies is expected, as companies await a recovery, they are unlikely to be canceled completely.
Momentum for action on decarbonization, reinforced by growing consumer and stakeholder pressures, will likely not be compromised by present circumstances.
Why this matters
In the wake of the COVID-19 pandemic, oil price collapse, and increasingly challenged economy, many have questioned if the pace of the global energy transition has been disrupted and whether energy and industrial companies will remain committed to their decarbonization goals. Deloitte’s “Navigating the energy transition from disruption to growth,” report examines progress to date in the energy transition, the decisions management teams in the energy and industrial sectors are facing, and how the current economic environment could affect the transition’s future trajectory. As part of this study, Deloitte surveyed 600 C-suite executives and other senior corporate leaders globally for their perspectives around low-carbon trends and strategies.
Energy transition remains a priority for energy and industrials
Despite the current economic challenges, the survey study findings suggest that energy and industrial leaders are expected to remain committed to an energy transition that they believe can help reduce costs, increase customer loyalty and make their companies more competitive.
- Eighty-nine percent of surveyed executives (92% oil and gas, 92% power and utilities, 87% chemical, 87% industrials) reported their companies either already had a plan or were developing a strategy to reduce reliance on fossil fuels.
- Across sectors surveyed, some of the top drivers of decarbonization included customer focus and digital technologies supporting energy efficiency (i.e., cost savings) and decarbonization.
- More than 50% of the executives reported that meeting decarbonization reduction targets are tied to board and/or executive compensation.
- Seventy-one percent of CEOs surveyed across industries said that the key benefit achieved from their plans for a lower-carbon future was to improve the environment.
- While environmental benefits will likely be deemphasized as companies regain their footing through the economic crisis, reducing costs and maintaining a competitive position are expected to remain important even in the downturn.
Decarbonization a strategic imperative for oil and gas
The energy transition is having a mixed impact on the oil and gas sector, as decarbonization is expected to slow long-term oil demand growth. Most company leaders in this sector however appear to recognize this reality and are rethinking where and how they do business in a decarbonizing world. Many are making the energy transition a strategic priority, as evidenced from the survey results detailing the scale of plans and commitments in place.
- Sixty-eight percent of surveyed CEOs indicated that the key component of their decarbonization strategy was a focus on low-carbon fuels, including natural gas.
- Oil and gas executives cited consumer support and regulatory mandates including policy incentives, as the top drivers for the energy transition.
- Almost half (49%) of oil and gas company respondents said they plan to switch to cleaner fuels or renewables in their facilities and field operations.
- Further down the value chain, 57% of chemical executives reported that their company has invested in renewables to reduce emissions and waste.
- More than half (56%) of oil and gas respondents indicated that plan metrics to reduce reliance on fossil fuels were tied to executive compensation.
- When asked if a low-carbon future would have a positive, neutral, or negative impact on the future of their organization, over 60% surveyed said it would have a positive impact.
Technologies play key role in business climate goals
Survey respondents overwhelmingly cited technology as a key enabler of progress in the energy transition. While a near-term pause in spending on new technologies is expected, they are unlikely to be canceled completely as these investments help increase operational efficiency, reduce carbon emissions, and benefit companies in the long run.
- Digital technologies that improve energy efficiency were ranked as the top priority for oil and gas (59%); and industrial products and construction (53%) executives surveyed.
- Carbon-capture-utilization-and-storage (CCUS) and other carbon-reducing technologies were identified as a key component to emission reduction by oil and gas (54%); and chemicals and specialty materials (54%) surveyed leaders.
- Nearly 70% of executives who reported that they have a sustainability strategy in place, cited digital technologies supporting sustainability and energy efficiency as the key driver.
- Top accelerators to achieving decarbonization goals among oil and gas surveyed executives included partnerships; mergers and acquisitions; and organic investments.
Policy Measures to Advance Jordan’s Transition to Renewables
A new report published today by the International Renewable Energy Agency (IRENA) has identified a series of policy measures that can help advance the energy transition towards renewable energy in Jordan.
The “Renewables Readiness Assessment: The Hashemite Kingdom of Jordan” – developed in co-operation with Jordan’s Ministry of Energy and Mineral Resources, suggests opportunities exist to deepen private sector engagement in national efforts to reach a 31 per cent share of renewables in total power by 2030.
“The recommendations of this report comply with the newly issued Energy strategy 2020-2030 and its action plan,” said H.E. Engineer Hala Zawati, Minister of Energy and Mineral Resources in Jordan. “We are fully aware that to achieve all these ambitious targets, a strong partnership between the public and private sectors is needed. We are also eager to work with international friends and partners to make renewable energy a main pillar of the Jordan energy sector.”
The report presents policy action areas to increase energy security and boost supply diversity through the accelerated uptake of renewables and includes ideas to boost end-use electrification and increase the availability of energy transition investments from domestic institutions.
Jordan’s share of electricity from renewables grew from almost zero in 2014 to around 20 per cent in 2020 thanks to enabling frameworks and policies that have supported the deployment of renewable energy technologies, including solar photovoltaic (PV) and onshore wind.
“Jordan boasts significant renewable energy resource potential that if realised will reduce consumer energy costs, improve national energy security, create jobs and stimulate sustainable growth – boosting post COVID-19 economic recovery efforts,” said IRENA Director-General Francesco La Camera. “This report highlights a series of policy and regulatory measures that will allow Jordan to build on its energy transition progress to date and align it with 2030 national decarbonisation goals.”
Capacity building in local financing institutions and project developers can drive their engagement in the energy transition, the report says, while helping the country to meet its needs in important areas such as the build-out of electric charging infrastructure for the transport system.
Challenges associated with integrating higher shares of renewables in Jordan can be addressed by building and upgrading transmission and distribution infrastructure, deploying storage, promoting demand-side management and incentivising electrification of heating, cooling and transportation.
Renewables Readiness Assessment: Jordan lists concrete recommendations around the following seven action areas:
- Provide the conditions for renewables to grow in the power sector
- Foster continued growth of renewable power generation
- Plan for the integration of higher shares of renewable power
- Incentivise the use of renewables for heating and cooling
- Support renewable options for transport and mobility
- Catalyse renewable energy investment
- Strengthen local industries and create jobs in renewables
World Bank Supports Angolan’s Electrification with $250 Million
The World Bank approved $250 million to improve the operational performance of the electricity sector utilities and increase electricity access in selected cities of Angola.
The Electricity Sector Improvement and Access Project will finance electrification investments in the provinces of Luanda, Benguela, Huila, and Huambo, delivering 196,500 new electricity connections that will benefit close to one million people and 93,857 public lights.
The project will focus on electricity access expansion and improvement of revenue collection, electricity service improvement, capacity improvement of the public electricity producer (PRODEL, Empresa Pública de Produção de Electricidade), and strengthening sustainable management of generation plants. The project also aims to increase the commercial performance of the national electricity distribution company (Empresa Nacional de Distribuição de Electricidade, ENDE) as well as provide financing to the national transport network Rede Nacional de Transporte, RNT) for targeted interventions to improve and optimize the dispatch of electricity supply and the overall management of the national transmission network. Furthermore, the Project will also finance immediate measures to raise the operational, commercial and technical capacity of the three national power utilities, leading to significant electricity service improvement.
“Investment in infrastructure, especially in energy, is key to economic development ”, said Jean-Christophe Carret, World Bank Country Director to Angola “Quality access to electricity services will have a spillover effect in many other sectors, including agribusiness, health, education, just to name a few.”
Angola’s power generation capacity, largely based on hydropower, has developed at a fast pace with the national installed generation capacity quadrupling in just one decade, but transport, distribution and cost recovery remain very challenging. Less than 40 percent of Angolans have access to electricity, with inadequate electricity services impacting poverty, productivity and regional disparities. Therefore, the project aims to deliver the most critical actions needed to help expand electricity access, improve the operational and commercial performance of utilities, and ultimately boost their creditworthiness. This, in turn, will contribute to reducing extreme poverty, improving the resilience of communities to impacts arising from COVID-19, and increasing shared prosperity.
The total project cost is $417 million, financed with a $250 million loan from the World Bank and a credit of $167 million from Agence Française de Développement.
IEA and SICA to collaborate on clean energy transitions in Central America
The International Energy Agency (IEA) and the Central American Integration System (SICA) have signed a Memorandum of Understanding (MoU) to promote clean energy transitions in Central America. Under the MoU, the two organisations will expand their cooperation on energy data and statistics, energy efficiency and climate resilience of electricity systems. These have all been identified as key areas for energy transitions and climate change mitigation in the region under SICA’s Central American 2030 Sustainable Energy Strategy.
“The IEA is pleased to team up with SICA to expand our work in Central America, a dynamic region that is home to over 55 million people and has excellent clean energy potential with distinctive transition opportunities and challenges,” said IEA Deputy Executive Director David Turk.
Under its Clean Energy Transitions Programme, the IEA has been expanding its collaboration in Latin America. This is taking place both bilaterally with key partner countries – including the two largest economies, Brazil and Mexico – and on a regional level through cooperation with leading regional organisations, including the Latin American Energy Organisation (OLADE) and the Inter-American Development Bank. The signing of the IEA-SICA Memorandum of Understanding is a new milestone for the IEA’s engagement with the region.
“Today’s signing ceremony marks an important step for SICA’s work on clean energy transitions – an important priority for our member countries, which can now benefit from the IEA’s leading analysis and expertise,” said Vinicio Cerezo, SICA Secretary General.
The Central American Integration System (Sistema de Integración Centroamericana, or SICA) is an economic and political organisation composed of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panamá and the Dominican Republic, that works to foster closer ties and integration across Central America and the Dominican Republic to promote peace, liberty, democracy and development in the region.
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