Notes from the sharp edge

10 personal reflections on the energy transition

For anyone working in the energy industry during the past five years, the pace of change must feel phenomenal. I have worked in energy for 23 years and cannot point to a time where I have witnessed such a fundamental transition in our industry. And yet, we’re just getting started.   

Admittedly, I am currently in a more reflective state of mind, as I enter a new career challenge. After many wonderful years in Equinor, I will be taking on an extremely exciting opportunity in Aker Solutions as the Executive Vice President the Renewables business area. Now, apart from all the existential thoughts that churn through your mind at 3 o’clock in the morning when you are considering a significant career change, it does prod you to reminisce and take stock.

Amongst oil and gas companies, Equinor was an early innovator and leader in the energy transition, establishing its ‘New Energy Solutions’ business area in 2015. I was fortunate enough to not just help establish our new energy business, I was the Senior Vice President covering offshore wind, carbon capture & storage (CCS), low carbon solutions and operations.

When we kicked off Equinor’s New Energy Solutions business area in August 2015, we were a hotchpotch of various business clusters, pulled together with a mandate to build a renewables business and provide low carbon solutions for oil and gas. To draw out a narrative, I started writing a weekly update to share with my team and all the people we were so heavily reliant on internally. It was a chance to update on progress, celebrate milestones, give a ‘shout out’ to our people and often a meandering reflection on the speed and extent of the energy transition.

This was a cathartic exercise for me and became obsessively a part of how I wrapped up my Fridays after a busy week. I wrote 257 of these weekly updates over the space of five and a half years. I know that may sound a little ‘spammy’ but looking back, especially as I head into a new job, these observations provide a rich and personal view on the energy transition from someone lucky enough to be at the sharp edge of this business.

So, in the spirit of sharing, I have compiled a highly unscientific ‘Top 10 personal observations from the energy transition.’

#1: Social normalisation happens fast

Psychologists and sociologists often refer to normalisation as the social processes through which ideas and actions become seen as ‘normal’ and taken for granted. Back in 2015, climate fluency within the oil and gas sector was a world away from today. Personally, it was like learning a new language. It wasn’t so much the climate science, that was clear, but the context of the energy industry as a major part of the climate problem and the externality risks of a business model based on carbon.

In terms of social normalisation, here is a personal story. In October 2015, Equinor was awarded the ‘Energy Intelligence Award for Leadership in New Energy’ at the curiously titled ‘Oil & Money Conference’. I was sent off by my boss to pick up the gong and give a speech, embarrassed that this was somewhat premature. We had just established our new energy business and were building a stronger presence in offshore wind and CCS, but many miles away from Equinor’s renewables presence today. Anyway, I dutifully delivered my speech, explaining our new energy strategy and ending on why Equinor is taking on a broader responsibility for the climate challenge. “That was different” was the dry reply I received from a delegate as I sat down from the podium.

For a hard-core oil and gas audience in 2015, this probably was a foreign language. Legendary ExxonMobil CEO, Rex Tillerson, spoke not long after. Tillerson’s speech mentioned GHG emissions, energy poverty and carbon taxes but also a rallying ‘all of the above’ for more energy, including more coal, nuclear, gas, oil and some renewables. To give a food analogy, Rex dished up a fat, juicy steak, whilst I presented an experimental vegetarian amuse bouche. Tillerson’s speech is light years away from BP CEO Bernard Looney and his ‘Reimagining Energy’ presentation in August 2020. But, in 2015, Tillerson’s view represented the majority mindset of the industry. Compare this to the CEOs of the European oil and gas ‘supermajors’ today, many fully embracing net-zero strategies. In all respects, a line in the sand has been drawn in terms of the hydrocarbon business model, enabling what will be a long debate about how supermajors approach the energy transition.

#2: I embarrassingly completely underestimated the Paris climate agreement

Do we understand the significance of watershed moments, or do we pretend to rationalise their significance long after the fact? When I initially reflected on the December 2015 Paris Agreement, I thought of savvy French diplomacy, exhausted civil servants and a smiling, triumphant Christiana Figueres. In all respects, a rallying cry for planet and people. Yet, I completely underestimated its future significance. The lack of clarity between “well below 2C” vs. “efforts” to limit to 1.5C, or peaking GHG emissions “as soon as possible” and these new-fangled ‘Nationally Determined Contributions” seemed to provide oceans of wiggle room for any real change.

Working in business, our toolbox consists of measurable KPIs and actions, transparent performance metrics and quarterly results at the behest of the market. The language of Paris didn’t feel like our world. I could blame my lack of social normalisation, but this is where business must be better to understand the nuance of politics. The Paris Agreement is more than a legally binding treaty, a global warming target and a pathway to measure and recommend increasingly ambitious targets. It is also a reference point for investors, the public, media, stakeholders and politicians to call out whether companies are climate proofing their strategies.

If the world is to come anywhere near to meeting its climate-change goals, the oil and gas industry will have to play a big part. The industry’s operations account for 9 percent of all human-made greenhouse-gas emissions (called Scope 1 & 2 emissions). In addition, it produces the fuels that create another 33 percent of global emissions (Scope 3 emissions). As a response to Paris, some oil & gas companies intensified their focus on reducing their own business-related emissions, namely the carbon intensity of their portfolio. For environmental NGO’s, focusing solely on the 9% was the climate equivalent of rearranging the deckchairs on the Titanic. A big underestimation (at least for me) in the Paris deal was tucked away in Article 4 referring to the balance between emissions and sinks in the second half of the century. This essentially set the scene for a net-zero world.

#3: Net-zero is going to change everything (most of us just haven’t acknowledged it yet)

As Paris set the framework as to where the world needs to be by 2050, individual countries, regions and states started to define clearer targets. In June 2019, the UK became the first major economy to pass a net-zero emissions law. Thereafter came a rush of legislation and pledges across Europe, Asia, progressive US states and most importantly China. Serious organisations like the Climate Change Committee, CICERO, the Grantham Institute, IRENA and the IEA have clearly been spelling out scientific-based warnings and solutions for the energy transition for some time. Many customer-facing businesses understood the importance of net-zero targets to their brands well before us in the energy sector.

In September 2019, I sat on a panel during NY Climate Week flanked by senior leaders from Carlsberg and Levi’s. Both companies clearly linked customer preferences and brand loyalty to their climate targets and saw it natural to take a holistic view of emissions all through the value chain. I could not match their narrative. Just two years ago the thought of an oil and gas company seeking responsibility to solve for Scope 3 emissions was anathema to the industry. Today, that is front and centre for the major European oil and gas companies in their journey to be broad energy companies. Net-zero is not business as usual. It will fundamentally disrupt a plethora of energy-reliant sectors from cement, tech, metals, agriculture, chemicals to transportation. Not everything can be electrified, not everything will be renewable, and fossil fuels will not fully disappear. But the carbon impact of our everyday actions and our consumer choices will create immense threats and opportunities across all industries. We are just at the tip of the iceberg today. 

#4: The importance of PowerPoints, shoe leather and renewable tourism

Policymaking in a pluralistic society does not occur in a vacuum. Setting context, defining visions, providing evidence is something many of us spend a lot of time on with policy makers and politicians. This is unashamedly called lobbying. The main point is that all interest groups should have equal access to present their points, whether consumers, trade unions, NGOs, industry associations or scientific specialists.

In the UK, the world’s largest and most dynamic offshore wind market, we should not take for granted the status the industry has today. In 2015 we were deeply unsure of the future status of offshore wind, as nuclear was capturing much of the attention. Compared to that time, we have an almost embarrassment of riches: The Offshore Wind Sector Deal; a 40 GW offshore wind target; 1 GW of floating wind; regular Contract for Difference auctions; and infrastructure investments in ports. 

To elicit politicians and policy makers to listen, many of us wore out a lot of shoe leather traipsing up and down Whitehall and Westminster explaining how cost reductions would come through bigger volumes and predictable auction rounds. We often pointed to Denmark and its ability to create a national industry. Cost was key for the UK Treasury at the time. In essence, how could we compete with nuclear? I repeatedly used a PowerPoint explaining Equinor’s highly detailed roadmap to get the cost of offshore wind under ￡100/MWh by 2020 from ~￡150/Mwh at the time. I honestly never realised that we would smash that number by 60%. Kudos especially to the industry association RenewableUK which has impressively put offshore and onshore wind at the heart of the UK’s energy transition.

PowerPoints are one thing, but physical projects with high-viz jackets and hard hats are the real deal. Hence, the importance of renewable tourism. At Hywind Scotland, the world’s first floating offshore wind farm, we have hosted dozens of politicians, bankers, policy makers and partners, all with the same comment and gasp “do those turbines really float?” The point is that projects like this break new ground and encapsulate the coming together of political vision and industrial scale well beyond the net present value business case at the time. 

#5: Losing auctions is good for you

The offshore wind business model can be quite a brutal arena. I have several mental scars from lost auction battles ingrained in my memory. Sometimes you just can’t get to a number to justify an investment, other times we fail to see value where others do. The point is, sometimes its cathartic to lose, but you need to lose right. Anyone that has worked in business development knows the value of a proper ‘look back.’ We reverse engineer bids, we flex the valuation metrics, but most of all, we have firmer touchpoints with the supply chain as to where technology, costs and synergies are going. What is the trajectory of the cost of energy? How has the curve moved? Why?

Losing right means you take all this and focus on where you really need to win. This was a case in point for Equinor and SSE snatching a full pot for the three Dogger Bank projects in the UK’s 2019 offshore wind auction round. The project’s Achilles heel was always seen as the long distance to shore, meaning longer export cables and energy losses. But what if you turn it on its head and see the distance as an advantage, a chance to rethink transmission technology? What if you really exploit the sheer procurement scale of such a project with 3.6 GW on the table? I don’t think we would have dared to think this way unless we got a few bruises from previous auctions (and admittedly the essential backing of a visionary CEO).

#6: Zero harm is possible

 As offshore wind developers, operators and partners, the most important part of our job is to ensure that all our employees get to sleep in their beds safe and sound every day they leave their shift. If you can ensure a safe working environment, everything else is so much easier. At Equinor’s oldest running offshore wind farm, Sheringham Shoal, we recently celebrated 1000 days with a clean sheet on safety, a real testament to the team. This does not come for free. Tackling complacency is essential, with constant training and learning from our supply chain partners and active involvement in G+ (the global offshore wind safety organisation). To become a truly global industry, on par with offshore oil and gas, offshore wind must ensure a proven safety record and operating model that all operators and developers consider wherever they produce electrons in the world. You also get to produce home made t-shirts to celebrate!

#7 Sometimes an airport bestseller has the answer

I must admit I am not the best person to champion the latest management guru techniques. I generally feel that once they made their point (somewhere in chapter 2), do we really need to absorb another 10 chapters for them to continue to repeat it? But, sometimes, this stuff seriously works. In 2018 we were admittedly hitting the wall in my business unit. We had lost some auctions, we struggled to prioritise, chased too many opportunities and went somewhat round in circles in our low carbon solutions business model. Inspiration and clarity were required.

By coincidence I heard a speech by Morten Hansen, the Berkeley management professor, who writes actively about performance. His pitch for performing even better is by doing less – “what’s not to love?” I thought, thinking about my ridiculously full calendar. After a renewable’s road trip in the US, I bought his book ‘Great at Work’ - admittedly at Newark airport - and read it all the way back home to Oslo. One element he nails home is “do less, obsess.” So, with my team, we did exactly this and devised ‘The Big Four’ for 2019. These were: 1) winning Dogger Bank (in the UK offshore wind auction round); winning Empire Wind (offshore wind tender in NY); final investment decision for Hywind Tampen (floating offshore wind for oil & gas in Norway); commercial agreement for Northern Lights (major European CCS value chain in Norway). If there was ever a question about prioritisation, the answer was always the same: Dogger, Empire, Tampen, Northern Lights. It was also a rallying cry for the team and highly measurable, iconic projects, which are gamechangers for Equinor’s energy transition. So, I should give a big thanks to Morten Hansen for the inspiration, but it’s our team that made this all happen.

#8: Passion and engagement in the energy transition

I have worked across a relatively broad spectrum of the energy business, including projects in Russia, Angola, Brazil, Canada, the US, UAE, Germany, Norway and the UK. I also know many industry colleagues working in nuclear, hydro, oil and gas, most types of renewables, trading, energy consulting and services. I am no oracle, but I think I have a pretty decent feeling for testing the temperature of the human side of the energy business. When asked, most people in our industry are, overall, a proud bunch. We get up every morning to produce energy to keep the lights on in hospitals and schools, provide heat for all the industrial and consumer products we take for granted, and transport fuels and electrons to move us across the world.

At the same time, fossil fuels are responsible for the bulk of greenhouse gases and deeply threatening a delicate global balance. With the global economy hardwired towards fossil fuels, the energy transition clearly requires greater intensity. For industry colleagues who really get this, the motivation and passion around what they do is incredible. Whether they are offshore wind technicians, solar panel installers, electrifying offshore platforms, cutting flaring, capturing carbon, or implementing energy efficiency there is a buzz about knowing that what you do every day makes the world a little bit better. The motivation and passion from many of my colleagues is infectious (as seen in the photo from some of our Equinor Dogger Bank team members - Bj?rn Ivar Bergemo, Halfdan Brustad, me and Ingrid Fossgard-Moser). When people are conscious of this and the broader impact of energy on the climate it triggers conversations about so much more – how you travel, what you eat, what you buy, where you put your pension money. This passion and engagement amongst industry colleagues gives me genuine hope that we can deliver on a net-zero world.

#9: Welcome to the mainstream

Despite the phenomenal growth of renewables, it still retains an image as the scrappy and disruptive contender on the world’s energy stage. But, within certain markets and specific strategic sectors, it is definitively moving from the margins to the mainstream and eventually the incumbent. Global renewable investments are forecast to increase another 8% to USD 255 billion in 2021. Offshore wind investments are forecast to supersede oil & gas capital expenditure in Europe for the first time ever. In the next five years, global wind and solar installed capacity will likely surpass gas and coal-fired capacity.

How does, for example, offshore wind become a good incumbent? As our industry grows, we will see increased expectations, and inevitably more pushback, criticism and enemies. This was one of the themes my industry colleague Benj Sykes from ?rsted and I ruminated over. As the industry becomes truly global, how do we ensure good stewardship and transparent policy mechanisms? The response became the Ocean Renewable Energy Action Coalition (OREAC), spearheaded by ?rsted and Equinor with another 11 industry supporters. In June 2020 we launched a vision for 1,400 GW of offshore wind by 2050. The ‘Power of Our Ocean’ report includes a comprehensive policy toolkit, local content concepts and examples of best practice across the offshore wind industry. The Global Wind Energy Council is taking OREAC further, along with the World Bank Group’s programme to fast-track the expansion of offshore wind in developing countries. Forget all that funding for coal plants, offshore wind will be a major energy infrastructure development opportunity across Africa and Asia.

#10: Scale matters

In 2018 we witnessed an important milestone in the renewables industry, when solar and wind installed capacity hit the 1 Terawatt mark (a trillion watts). It took two decades to get there. More noteworthy was the forecast for the next trillion watts of solar and wind, this time in just five years. Technology and innovation continue to drive renewables towards a seriously competitive alternative to fossil fuels, but major deployment is the real enabler.

As the bottom-fixed offshore wind sector was continuously smashing previous assumptions around the cost of energy, our floating offshore wind team was feeling a little like passengers on the platform clutching our luggage as the bullet train sped past. We needed an ambitious target for the entire floating wind sector to aim towards. In 2018, Sebastian Bringsv?rd who headed up our floating offshore wind team, launched the Equinor Floating Offshore Wind Roadmap. Not quite the same hype as a new iPhone, but our ‘top down’ target with a cost of energy of EUR 40-60/MWh by 2030 grabbed attention in the industry. Even on a smaller scale, Equinor’s Hywind Tampen floating offshore wind project (88 MW) will deliver a cost of energy 40% lower than Hywind Scotland (30 MW). Major scale counts in renewables, as the big oil and gas companies piling into offshore wind fully understand. 

Alea iacta est - The die is cast

Whilst my ‘Top 10’ is a personal reflection on the past, looking forward there is a major, growing discontinuity between a world of climate pledges and the Paris Agreement. To get anywhere near the IEA’s Sustainable Development Scenario implies cutting CO2 emissions from the energy sector and industrial processes from 36 bn tonnes in 2019 to under 10 bn tonnes by 2050. This is not business as usual.

Yet, global energy-related emissions in December 2020 were higher than the same month in 2019, despite the harshest economic downturn in a generation. Barring any major and immediate policy changes, global emissions will likely increase. What will be the tipping point here? We’ll see a plethora of new, low carbon initiatives from the industrial sector and a corresponding need to take carbon sinks seriously (especially for CCS). Renewables will continue its steady march. Climate and financial activists will shout louder and courts will increasingly become a new frontier for climate battles. In the 2020’s short-term actions will need to better reflect long-term pledges.

For the energy industry, the die is cast. The energy transition will be deeply disruptive, messy and financially bloody for some. There will also be incredible winners. But there is no going back. In that sense, I can’t think of a better time to work in our industry.