Is a lack of capability and skills holding back the transition to new business models in energy & utilities?
Blog: Capgemini CTO Blog
Energy-related greenhouse gas (GHG) emissions contribute over 73 percent of all emissions globally, with various sectors contributing to this directly or indirectly.
So, it comes as no surprise that moves are under way in the energy & utilities sector to transition to new business models that reduce reliance on fossil fuel with a pivot to clean energy and decarbonization. Indeed, in a recent report from the Capgemini Research Institute, 68 percent of the energy & utility organizations surveyed said that mitigating the impact of climate change was driving their shift towards new business models.
Interestingly, the ability to garner investment is also propelling this move as more investors look to put their capital into projects and companies with a strong sustainability record. During the Glasgow COP26 climate conference in November 2021, Larry Fink, the CEO of Blackrock, a multinational investment management corporation, said, “The key for our hydrocarbon companies, they need to rapidly move towards a more decarbonized business model. But at the same time, they are the number-one purveyor of energy, of gas and oil, in a society that still is totally dependent on that.”
Becoming a Next Economy organization
Several organizations in this sector are ahead of the game, having already implemented new-energy business models. What’s more, they report seeing an increase in revenues, profits and upsell opportunities as a result. At Capgemini Invent, we call the shift in mindset from simply making a profit to meeting the needs of people and planet a transition to becoming a ‘Next Economy’ organization. Our New Business Models offer helps clients launch what we term ‘regenerative ventures’ by co-creating the next generation of change-making organizations through new sustainable ventures.
However, while there is clearly interest in transitioning to new-energy models, those that have done so are still in the minority. For example, while 64 percent say they plan to implement energy-storage solutions in the future, only 19 percent are already doing so. There is also poor take-up of multiple new business models, although not in every case as the example of Orsted in Denmark illustrates. The company operates offshore and onshore wind farms, solar farms, energy storage facilities, and bioenergy plants, and is undergoing transformation from a fossil fuel-based company to a green energy company. Compare that with just 30 percent of companies saying they’re testing the market with multiple new business models. Is a lack of skills with a sustainability bias holding back wider adoption?
What do these new business models look like?
Before we answer this question, let’s consider what these new-energy models look like. Most companies and consumers would naturally assume we are talking about renewable energy sources end electric vehicle (EV) charging options. But they’re only part of the story, as illustrated here.
According to the CRI report, Energy-as-a-Service (EaaS) for commercial clients, energy platforms, and clean-energy generation are the models seeing particularly high demand.
Who’s getting it right?
From standalone companies to national approaches, the move to new-energy models is undoubtedly under way. We have already cited Orsted, so who else is forging ahead? In the CRI report, we discover that French energy major TotalEnergies plans to invest more than 20 percent of its net investments in renewables and electricity for the period 2022–2025. And in August 2021, Spanish multinational energy company Repsol completed the manufacture of the first batch of bio-aviation fuel (“biojet”) produced from waste. At a national level, Germany plans to end coal-fired power generation by 2038 and increase the share of power generation from renewable sources to 65% by 2030, up from 46% in 2020.
What’s holding back the transition?
However, just 18 percent of organizations in this sector have a comprehensive new-energy business strategy with well-defined goals and target timelines. So, with climate change at a critical moment, why aren’t more companies making the transition right now?
To answer our earlier question, it seems that one of the key blockers is a lack of capabilities and skillsets, with 70 percent saying they lack the capabilities to develop new-energy business models. Some 62% of organizations also report a lack in-house skillsets to develop, sell, and manage services.
While other barriers exist (lack of strategy, challenges with implementation, etc.) this article is focusing on the skills and capabilities challenge. For example, data and insights are essential in today’s digital business environment, but 56 percent of people surveyed said they lacked the data capabilities required to build new business models.
Capgemini Invent’s New Business Models offer reflects this challenge with one of the four focus areas being how to build a Next Economy team. In this respect, we’re talking about building the infrastructure for success and leadership in social and environmental sustainability by developing talent, tools, structures, and strategies.
How to bridge the capability and skills gap
So, let’s consider the talent aspect of this. Upskilling existing employees and bringing new expertise on board must be part of new-energy business model strategies. This is already happening in a few areas, such as hydrogen and carbon capture, usage & storage (CCUS), for which organizations are training talent internally in parallel with implementing revised hiring programs.
As Angel Fraile, head of sustainability planning and stakeholder engagement at Spanish utilities company Endesa, says: “One of the two major targets in our approach towards new business models is training of employees on digital skills. If we are going to digitalize our assets and our relations with customers, we need our employees to be well trained and upskilled on digital.”
But is this easier said than done? 67 percent of organizations surveyed stated that they were unable to reskill the workforce in line with the requirements for new models. Nonetheless, upskilling talent and creating product and service-related capabilities will be a vital pillar in the transition to new-energy business models going forward.
In addition to our own research, this is borne out by many other organizations. For example, the World Economic Forum notes that today’s young people will be tomorrow’s green engineers, helping to design and maintain solar panels, wind turbines, low emissions vehicles, and other green economy technology. Currently, however, almost half of young people feel they don’t have the right skills, according to the World Economic Forum’s Davos Labs Youth Recovery Plan 2021.
According to a Policy Brief from the International Labour Office, “Massive investments need to be made in reskilling and upskilling to achieve targets set by the 2015 Paris Agreement and UN Sustainable Development Goals (SDGs) beyond 2030. Elsewhere, a global career webinar hosted by RMIT Europe, the European hub of RMIT University, recorded that the future workforce would need an understanding of changing technologies, a passion for a global green energy future, and competencies in both technical and soft skills.
Recommendations for building such skills include developing in-house training programs on sustainable innovation and technology, exploring self-paced learning through digital-learning libraries, and re-educating traditional IT workforces in AI and data analytics because this can be more cost-effective than bringing in external talent.
Act now or fail fast
There is no time to wait. Global warming is not going to be kept within the 1.5-degree climate target without radical action. And businesses failing to respond to this urgency won’t survive. Some 71 percent of energy & utility industry executives in the CRI survey said companies in their sector that did not implement new-energy business models would be wiped out given the massive shift to decarbonization, digitization and decentralization.
Beyond the potential to increase profits and revenue with new-energy business models, organizations that focus on energy generation and exploration of non-renewable energy have already achieved a 4.6 percent reduction in scope-3 emissions thanks to new business models. They also expect a further reduction of 13 percent in the next three years.
The energy & utilities sector has a crucial role to play in tackling climate change. Don’t let a lack of skills and capabilities stand in the way of your move to the Next Economy.
Find out more
If you’re looking to accelerate your transition to new-energy models, New Business Models from Capgemini Invent will help you succeed and grow at the intersection of purpose and profit.
- Discover how we helped energy & utilities firm Red Eléctrica de España embrace the circular economy with a new tool that informs sustainability decision making here
- Read the Capgemini Research Institute report ‘Remodeling the future’ here
Find out more about New Business Models from Capgemini Invent here
Kara is an Executive Design Director and Sustainability lead at frog who is passionate about the dynamic opportunities for impact found at the intersection of people, planet, services and systems. With a graduate degree in design and over 15 years of experience, she has supported her clients to build better futures through design research, team and org activation, product and service design and new ventures.