The double impact of the global virus outbreak and its cascading economic effects accompanied by plummeting oil prices and production declines pose serious challenges for the entire energy value chain. Companies had to adapt quickly to the rapidly escalating situation and restructure their operations along with their business portfolio.
The pandemic tested the resilience of critical infrastructures in the energy sector in the past months, while energy companies had to guarantee supply security for end-users. However, development is inherent in crisis situations and companies who already prepare for a post-coronavirus rebound can even profit from the lessons learnt during this period.
In a panel discussion organised by the Hungarian Association of Executives on the transformation of the energy sector, István Kapitány, Global Executive Vice President of Shell highlighted the restructuring effect of the crisis, as it rules out inefficient operations and will most probably lead to increased business concentration in the upstream and downstream sector as well. He named three important factors that will have a transformative effect on the industry: energy transition, the future of mobility and digitalisation.
Attila Kiss, Chairman and CEO of E.ON Hungaria pointed out that although the pandemic raises a number of unique challenges it won’t change the long-term trends of the market which already started well before the crisis. Digitalisation, as well as secure and comfortable solutions, proved to be essential components of these trends and E.ON wants to align its operations with these strategic directions, concentrating on intelligent power distribution networks and customer solutions.
Quick adaptation and innovation could effectively contribute to crisis resilience, according to Attila Chikán, CEO of the Hungarian energy service provider and trading company, ALTEO Group. He also expects increased concentration of the industry, however this time it is not self-evident that big companies will survive while small ones will fall victim to the crisis. Flexible companies that can carry out timely readjustments in their business strategies could be the winners of the current situation regardless of their size.
The speakers all agreed that the current situation cannot slow down the green transition of the sector or overrule the commitments of companies to achieve climate targets. According to István Kapitány, the crisis can even give a push to the deployment of clean technologies but this won’t happen overnight. It requires a sectoral approach as well as shifting consumer and business choices. Shell strives to act as a beacon for others by aligning its operations to the challenges of climate change demonstrated also in the company’s recently published report exploring pathways to reach climate-neutrality in the EU by 2050.
Shell is determined to achieve net-zero emissions from the manufacture of all their products by 2050 which includes the emissions created by the company’s operations and its energy consumption (known as Scope 1 and 2 emissions). Shell also aspires to sell more products with a lower carbon intensity, such as renewable power, biofuels and hydrogen. Mr Kapitány mentioned the development of Shell’s e-vehicle charging infrastructure and the growing share of biofuels among the company’s flagship projects that will contribute significantly to the decarbonisation of the industry adding, that Shell will work together with its customers to further reduce Scope 3 emissions with projects like Nature Based Solutions.
E.ON is also committed to maintaining a consistent focus on running its business responsibly and sustainably. To underscore this commitment the company is aligning its sustainability strategy to the Sustainable Development Goals (SDGs) of the UN, specifically in three core areas; affordable and clean energy (SDG 7), sustainable cities and communities (SDG 11) and climate action (SDG 13). Attila Kiss pointed out that E.ON aspires to be the enabler of change by providing environmentally conscious solutions to its costumers highlighting the company’s engagement in the field of e-mobility and renewable technologies as solar power.
Attila Chikán emphasised that investment in clean technologies are long-term commitments and the pandemic could only have a temporary, short-term effect on the trend of growing investment potentials in renewables as their costs are rapidly declining, making them a true competitor of fossil energy sources. In addition, as the world confronted the pandemic and governments imposed lockdowns people experienced decreased air and noise pollution all around the world. This is also just a temporary side effect of the pandemic, but according to the CEO of ALTEO this could even accelerate our efforts to achieve the same results in a sustainable manner and we need to seriously consider how renewables deployment can contribute to this objective.
Looking ahead, the energy industry is likely to face continued challenges due to dampened demand, therefore industry leaders highlighted the importance of quick response mechanisms that also means the constant revision and adaptation of business strategies to changing circumstances. The energy sector may still be looking at a prolonged recovery, however important lessons learnt during this difficult period can help to exploit new business opportunities and build a more sustainable future for the industry.