Traditionally, innovation in the energy sector has been seen as a threat to the oil and gas industry due to the rapid growth of the renewable energy sector and its supporting policies. However, some of these large multi-national corporations have now reversed their views on renewable energies and have started to embrace the opportunities these technologies offer by engaging in a different style of innovation.
The WBCSD firmly believes that innovation is one of the core components to sustainability in business however it defines innovation in a very broad sense. Due to the turbulent and changing environment that energy businesses operate in nowadays, top management have had to be very flexible to adapt to new regulations and consumer behaviour. This has led to the innovation of business models to meet the requirements of these changes in the energy industry. One such firm to do so was Germany’s largest utilities company, E.on, after the reconstruction of the Energiewende policy in 2011. Faced with a rapidly declining share price (>75% devaluation between 2008 – 2016) and a more than 33% decline in revenues from fossil fuels and nuclear power since 2010, CEO Johannes Teyssen, took the radical decision to separate E.on’s fossil fuel energy production into a new company – Uniper, while E.on focusses all of its time and investment on renewable energy sources.
However that’s not the only way that E.on innovated its business model. E.on is tackling this changing industry on two levels – micro and macro, both of which are achieved by adopting another concept that is venerated by the WBCSD – collaboration. In an interview with the Economist, Johannes Teyssen stated “we no longer need to be in control”, when referring to how E.on is adapting its operations to meet the shift in consumer behaviour towards micro energy production solutions. Teyssen has acknowledged the increasingly decentralised nature of energy supply not only in Germany but elsewhere around Europe due to the growing popularity of community-based renewable energy programmes. As a result Teyssen sees the future of his company as not controlling the energy supply like they have done historically but rather in managing the decentralised network of energy production and consumption systems through building partnerships with local governments, cooperatives and businesses.
On a macro scale, E.on has also been partnering up with some massive names in the energy sector to grow in the green energy market. Currently E.on is collaborating with Statoil – the Norwegian oil and gas giant, to construct a 385 megawatt windfarm, Arkona, off the coast of Germany. Each company owns a 50% stake in the €1.2 billion project which will be managed and operated by E.on while Statoil uses its extensive knowledge and expertise in offshore energy operations to create higher value in the project.
These examples illustrate a number of crucial elements to sustainable development in the energy sector. Firstly, that government policy is an effective means for encouraging substantial change in business and society. Secondly, that innovation of all kinds lies at the heart of businesses successfully reacting to the demanding changes required by sustainable development. And finally, how that innovation can be supported by collaborating with a variety of different stakeholders, no matter how large or small in order to achieve a shared sustainable vision.
Tom Vaughan
LUMS at WBCSD 