Five reasons businesses need a future energy strategy

Future energy strategy

If we left 2018 with one thing, it was the knowledge that the future of energy remains uncertain. Not only are the technology pathways unclear, it’s also the case that the regulatory and political landscape is constantly changing. My blogs in 2018 focused on these divergent pathways and the high levels of uncertainty ahead of us. So why does it matter and what can we do to prepare for the road ahead?

Assets bought today last 20+ years (easily into the 2040s!)

Firstly, let’s be clear that decisions made today matter for a long time and assets we select now have significant operational life ahead of them. For example, I operate a boiler plant which is well over 20 years old now but still working well. The assets we purchase now may well have operational lives well beyond the point at which there is likely to be regulatory intervention to achieve carbon or local emissions objectives.

Although pathways are unclear there are ways to mitigate the risk of assets requiring replacement in the future. Some good examples, especially in heat, are ensuring lower NOx options exist, such as replacement burners or the ability to add a catalyst or some type of scrubbing. In terms of CO2, then the ability to switch fuels in the future is an important consideration on a larger plant.

Regulatory intervention is inevitable

To achieve the legally binding carbon targets by 2050 and local air quality targets (many by 2030) there is likely to be regulatory intervention to force through change. When you consider our challenge in point one, assets with a lifespan of 30+ years which are being installed now just aren’t going to be able to operate in a substantially lower carbon world.

Recent examples of regulatory intervention include the Medium Combustion Plant Directive which required operators to install much lower NOx plant and lower the NOx of existing plant in a phased way over the next decade.

The pace of technology change is increasing

The pace of change is fast, with new ideas popping up every week. Some will stick and some won’t, however it’s fair to say that with increasing digitalisation and fuel source shifts this speed is only likely to increase. It doesn’t seem that long ago that batteries were just for milk floats and golf buggies!

How you plan for future technology switches is important. Although assets may last a long time, regulatory and technology demands may force change.

Customer sentiment can change rapidly

Many companies are already stealing a march on others in terms of customer expectation. In my previous blog I discussed how customer expectations of companies are increasing. There are also plenty of examples of some recent step changes in companies moving towards decarbonisations such as Lego which has announced going zero carbon across its operations.

Changes in customer sentiment have impacted companies in many other areas – take single-use plastic for example, where customer sentiment was hugely impacted by the BBC’s Blue Planet series and has driven massive upheaval in consumer patterns and demands on business, especially in retail and service industries.

A question now for businesses operating in city centres or built-up areas: are you ready if customer sentiment suddenly shifts on carbon emissions or local air quality?

There are still some ‘no regrets’ decisions – so why not make them?

In my previous blog on energy futures I talked about the need to seek ‘no regrets’ decisions when investing in energy assets; for example, heat networks enabling easier future asset switches and choosing plant that can easily have NOx removal fitted in the future.

But don’t forget it is easy to get lost worrying about future trends and miss the obvious ‘no regrets’ options that could be chosen right now; energy efficient lighting, insulation, batteries and photovoltaics are just some of the smaller switches that can help future proof a business from coming changes in our energy world.

Written by John Armstrong

John Armstrong is a Chartered Engineer and Fellow of the Institute of Mechanical Engineers, with a degree in Mechanical Engineering and a global energy MBA. He worked at E.ON for 15 years until June 2020, including roles in engineering governance, asset risk and safety, and most recently as Head of Operations for E.ON’s decentralised city energy systems.