I woke up at 4.15 on Thursday morning. Not because I already had to, my alarm was set to 4.45, but because I was excited. Four of us Statkraft trainees were bound for Steinkjer in the county of Nord-Trøndelag to meet other trainees in the energy sector to discuss the challenges and opportunities ahead. Such meetings are held once or twice a year, and the purpose is for trainees in the energy sector to exchange ideas, learn about other companies in the industry and to develop a network. The participants in this so-called ‘Network Energy Trainees’ stem from various companies; some are trainees in local energy companies such as Agder Energi, Hafslund or at this gathering’s host NTE. Others work at bigger firms such as Statnett and a third group is in research and consulting (Sintef Energi, Multiconsult). Interestingly enough, many have the same academic background, the “Energy major” at NTNU in Trondheim. As a foreigner, I didn’t even know that there is an “Energy major” but supposedly it is a prestigious line of study.
It’s the Energy Business’ turn to modernize
Most presentations were held by leaders in NTE or the daughter company NTE Nett. The tone of the presentations was quite critical with regards to the development of the Energy industry: while other industries had changed fundamentally over the last 100 years, we had stayed the same. One speaker used the telephone industry as an example: 100 years ago, calls from one caller to another were connected in large switchboard rooms. Today, customers are not even paying for calls anymore, they pay for connectivity. Meanwhile, not much has changed in the energy business according to the speakers. They agreed: now is the time for the Energy sector to change.
Why this urgent call for change in our industry? For one, energy prices in Europe have fallen nearly as drastically as the oil price, but over a longer period of time. Nordic energy prices went from around 70 EUR/MWh in 2010 to around 30 EUR/MWh in 2016, while the oil price dropped from around 110 USD/bbl in June 2014 to around 50 USD/bbl in six months. One of the reasons for low energy prices in Europe is weak demand. Steadily rising until 2008, energy consumption dropped in 2008 due to the recession and hasn’t really recovered since (check out the European Enviroment Agency for more information).
Where does that leave energy companies? After decades of steady growth, energy producers need to shift focus from building more capacity to ensuring cost effective operations. That is a very different way of operating. The bottom line for energy producers is: if energy prices stay as low as they are, they will need to change their operating models, potentially their entire business model. For the grid companies, interesting days are ahead as well. Reinvestment decisions regarding the grid are taken about every 30 years. In Norway, the last decisions were taken in the 1990ies, so new decisions are due now (for more information on this topic see also the 2014 Reiten-Rapporten).
Customer focus – what does that actually mean in the energy context?
So what should the investment decisions and business models in our industry be built upon? The speakers agreed that an increased customer focus (keywords customer centricity, customer interaction) is the way forward. But what does customer focus actually mean in our context? Today, energy is a highly standardized product, delivered one way from the producer to the end consumer. Will customer interaction be based on the consumer’s wish to produce, store and sell their own energy? Or are most consumers happy with a convenient, reliable and cheap energy supply that they regulate via smart devices? Or maybe customers want something completely different? The answers to such questions will shape the operating- and business models of energy companies. My take-away from the gathering was that at the moment, there are still more questions than answers.
Back on the train from Steinkjer to Trondheim I thought: most likely change in the energy business will happen the same way other radical advancements did: once the solution is there, it will be obvious. Remember when Steve Jobs presented the first iPhone? It was obvious that this is what we needed. It’s going to be interesting to see who will be the Steve Jobs of the energy industry.