What is the energy climate shock?

The energy sector is on the front line of the battle against the climate crisis, and the switch to a net-zero global economy is almost wholly dependent on a swift transition to zero- and low-carbon energy. Over three-quarters of energy sector leaders (76 percent) believe their industry is under more pressure than any other to decarbonise. What’s more, they believe the sector will have to go further: 71 percent believe a global net zero will require the energy sector to achieve ‘net-negative’ emissions.

Without a low-carbon energy sector, other sectors cannot hope to decarbonise. As companies look to reduce their emissions, they’re using their buying power to force energy companies to decarbonise their supply. Seven in ten energy leaders say their organisation is feeling more pressure than ever from customers looking to reduce their Scope 2 emissions.

When it comes to net-zero strategy, energy organisations and large energy consumers are taking the lead. Our SHOCKED study found that nine in ten energy sector leaders (91 percent) say their organisation has a net-zero strategy in place — and four percent have already achieved net zero. Meanwhile, just 40 percent of Fortune 500 companies across all sectors state they have a net-zero target.

However, our study suggests that the current crisis, and the resulting focus on energy security, may be pushing net zero down the priority list for the global energy C-suite. Just over seven in 10 leaders (71 percent) believe a renewed focus on security within energy company boardrooms is happening at the expense of decarbonisation strategy planning.

There is a noticeable split in the sector. Almost half of the energy leaders in our study (47 percent) say the global energy crisis has decelerated their organisation’s net-zero plans — by an average of six years — and 39 percent indicate that their organisation has decelerated its investment in achieving net-zero in the past 12 months.

On the other hand, 42 percent say that the energy crisis has accelerated their organisation’s net-zero plans — by an average of five years. And almost half (47 percent) say their organisation has moderately or significantly increased its investment in achieving net zero in the last 12 months*. This divergence in net-zero plans risks slowing down progress across the board. To build a more resilient system, all parts of the energy system must move in the same direction at the same pace.

*As of time of publication in 2023

Though the current crisis may have put the brakes on net-zero strategies for many companies, our research reveals that the resulting volatility in natural gas prices is driving the diversification of energy assets. Seven in ten energy sector leaders say that the volatility of natural gas prices over the past 12 months has accelerated their adoption of renewable energy generation assets — rising to over three-quarters of the leaders in high-growth businesses (77 percent). Forty-four percent of energy sector leaders say this volatility has decelerated their adoption of coal assets.

Renewable energy will be the central component in the energy sector’s response to the climate crisis. Almost all leaders in our study (99 percent) have a strategy in place to increase their renewable energy mix. And for the most part, investment in renewables has continued or accelerated despite the crisis: 17 percent of leaders say the global energy crisis has had no impact on their organisation’s investment in renewables, and two-thirds say it has accelerated investment. This is compared to just 16 percent who say their organisation has decreased investment in the past 12 months.

The current crisis is spurring innovation in the race to net-zero. On average, the leaders we surveyed reported that their organisations have allocated two dollars in every five of their research and development spend to decarbonisation and transition technology over the past year. While wind and solar will be the key sources of energy as supply transitions to renewables, many companies are starting to deploy nascent clean energy technologies.

Three-fifths of leaders (60 percent) say their company is deploying carbon capture and storage — a critical technology for most current net-zero scenarios. Over half of companies (54 percent) are deploying large-scale energy storage solutions, which will be key to overcoming any intermittency issues that arise as a result of the switch to renewables. This will also enable the sector to support the economy while decarbonising.

A significant proportion of companies are starting to harness the potential of different renewable generation assets, such as biofuels and low-carbon hydrogen. Three-fifths of energy leaders (60 percent) say the global energy crisis has accelerated their organisation’s investment in hydrogen over the past 12 months.