The history of the energy industry is marked by key years and events that have altered the industry’s trajectory.
1893 saw the AC vs DC War of the Currents swing decisively in favour of the former as the de facto transmission standard. The electric industry hasn’t been the same since.
1911, another momentous year, saw the forced dissolution of almighty Standard Oil into 34 smaller companies which led to the subsequent evolution of Exxon, Mobil, Chevron, Amoco, Marathon and others.
The 2008 financial crisis and the years immediately following saw historically cheap credit fueling the shale oil boom, which again changed the course of the industry.
2020 may turn out to be another trajectory-altering year for the energy industry. Energy 2020 – the unique set of circumstances this year – may change the industry’s priorities and the strategies and fortunes of energy enterprises.
An industry already in transition
The past few years have already seen remarkable change. Favorable renewable energy economics, more coordinated policy pushes, growing public awareness of energy choices and maturing carbon credit markets have accelerated decarbonization, decentralization and democratization of energy.
Those trends, driven initially by policy nudges and early-adopter customer preferences, are here to stay. Additionally, bold investments and rapid innovation in green mobility and behind-the-meter products have met with great consumer interest.
In reaction, oil and gas behemoths are operationalizing their strategies for diversification and energy transition de-risking with big ticket investments in renewables and electric consumer markets. Changes are widespread in electric transmission and distribution (T&D), too. For example, microgrids are quickly achieving technical and commercial viability while utility-scale solar-plus-storage is helping to manage solar intermittency and enabling new system balancing and dispatch options. New business models continue to emerge; demand aggregators provide flexible demand response capabilities while nimble and all-digital energy retail start-ups are catching the fancy of customers in sizeable numbers. All the while, network and system operators are having to continuously adapt and re-adapt to shape-shifting supply and demand topologies that are testing T&D control room capabilities.
The 2020 reset
Two new forces - the COVID-19 pandemic and collapsing oil prices – add new complexity and opportunity that even the most extensive corporate scenario-planning and war-gaming have not anticipated.
The oil price collapse, caused by a geopolitics-driven supply glut combined with a pandemic-triggered demand collapse, will have immediate, wrenching consequences. Bankruptcies, especially in shale oil, are already visible. The increasing unpredictability and unreliability of oil prices and revenue will also hasten oil companies' energy transition investments.
The near-term impact of the COVID-19 pandemic, beyond the widespread human cost, is already large. By the end of March 2020, electricity demand, a proxy measure of economic health, had fallen by 14% in New York City relative to February 2020 averages and by about 25% in Italy. Global demand for oil in April 2020 is expected to reach 1995 levels. Longer-term, the pandemic’s long shadow will impact government policy, business strategies, economic priorities, international affairs and individual mindsets and behaviors.
Questions energy companies must consider
The 2020 reset demands that every player in the energy chain – oil companies, power generators, energy retailers, T&D networks, renewable operators and beyond - reconsider how they will do business in the future.