Section 2:
Can energy companies stay competitive in a net-zero economy?
About six in ten energy companies in our research are concerned about their ability to remain competitive in a net-zero economy. But only 22 per cent say they are prepared for it.
Companies will increasingly have to balance their investments in the transition with financial, legal and operational risks. But that does not mean they should delay.
John Moon, Head of Morgan Stanley Energy Partners, says that investing in battery storage and microgrids is an alternative to the competitive environment for investing in utility-scale solar and wind power. There are also opportunities within fossil fuels—switching from coal and diesel to cleaner-burning natural gas and LNG, for example.
About six in ten energy companies in our research are concerned about their ability to remain competitive in a net-zero economy. But only 22 per cent say they are prepared for it.
Companies will increasingly have to balance their investments in the transition with financial, legal and operational risks. But that does not mean they should delay.
John Moon, Head of Morgan Stanley Energy Partners, says that investing in battery storage and microgrids is an alternative to the competitive environment for investing in utility-scale solar and wind power. There are also opportunities within fossil fuels—switching from coal and diesel to cleaner-burning natural gas and LNG, for example.
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Meet your energy transition team at White & Case
What do companies think are the biggest transition risks, and do they feel prepared for them?
What do companies think are the biggest transition risks, and do they feel prepared for them?
There are lots of things we can do to decarbonise without putting our shareholders’ financial welfare at risk, but it takes real creativity and differentiation
John Moon
Head of Morgan Stanley Energy Partners
There are lots of things we can do to decarbonise without putting our shareholders’ financial welfare at risk, but it takes real creativity and differentiation
John Moon
Head of Morgan Stanley Energy Partners
Technology fears require courage
But which technology or fuel source is the right one to decarbonise? Our respondents are keen to explore new solutions—both through their shift into renewables and in their efforts to reduce emissions with, for example, carbon capture, utilisation and storage—but they worry that they are being asked to take a gamble on unproven technologies.
“This is a critical point for the traditional energy markets to push the boundaries on what new technology risks they may accept,” says White & Case Partner Carina Radford.
Most investors and financiers understand that the first-mover advantage could be significant, and they may just have to take a leap into the less-proven to capture real opportunity as the pace of change is so fast
Carina Radford
Partner | White & Case
Most investors and financiers understand that the first-mover advantage could be significant, and they may just have to take a leap into the less-proven to capture real opportunity as the pace of change is so fast
Carina Radford
Partner | White & Case
How much of a challenge is accepting new technology risks for your organisation?
How much of a challenge is accepting new technology risks for your organisation?
Risks of expanding in a shrinking economy
Our respondents are also worried about the possibility of litigation in a rapidly changing regulatory environment. About half believe that litigation risk related to energy transition transactions will increase over the next two years.
Nearly half of executives expect litigation risk related to energy transition transactions to increase over the next two years
Nearly half of executives expect litigation risk related to energy transition transactions to increase over the next two years
Mark Clarke, Partner at White & Case, says that climate litigation is accelerating around the world, which increases the prospect of litigation and liability risk for a diversifying pool of potential claimants and defendants.
We are witnessing, he says, a rapid increase in the number of sophisticated, well-funded, non-governmental organisations and civil society players and activists seeking opportunities to use litigation as a way to enhance corporate accountability and drive regulatory change.
“While there has been limited explicit reference to energy transition in climate litigation and theories of harm,” says Clarke, “as energy companies and capital providers strive to meet their decarbonisation targets and commitments this is likely to become more prevalent.”
Strategic litigation, stakeholder activism and regulatory enforcement risks are all clear and present dangers for businesses
Mark Clarke
Partner | White & Case
Strategic litigation, stakeholder activism and regulatory enforcement risks are all clear and present dangers for businesses
Mark Clarke
Partner | White & Case
To stay competitive in the energy transition, energy companies will have to prepare for these risks. But how? Joint ventures and multi-stakeholder projects are examples of ways to mitigate risk and bring in new expertise and capital.
“Strategic players such as Siemens, Schneider or ABB, or traditional oil and gas companies like Chevron, are teaming up through commercial partnerships and joint ventures with financing sponsors such as Carlyle, Macquarie, Morgan Stanley and others, to bring together the best of their respective worlds,” says Germaine Gurr, Partner at White & Case.
