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October 25, 2016
What's the future of energy? Three scenarios suggest what could lie ahead.
By: Muqsit Ashraf

The first half of this decade has been a volatile one for our industry. We have gone from digging out of the great recession, to relatively heady days, to one of the worst downturns, if not the worst, the industry has seen. In tandem, several significant macro trends have continued to unfold across the globe: lower population and global labor force growth, a shift in economic and geopolitical power toward Asia, a range of disruptive new technologies, and greater appreciation for the planet’s environmental boundaries. Combined, these underlying drivers will reshape the economics of energy in the next half of the decade and beyond—an uncertain journey the World Energy Council (WEC) calls “The Grand Transition.”

Accenture Strategy has attempted to eliminate some of the uncertainty these trends and drivers are creating and add some clarity to what lies ahead as the Grand Transition gains momentum. We played an instrumental role in helping the WEC develop three scenarios that shed light on the new opportunities, as well as the challenges and risks, that energy companies could face in the next 40 years:

  • Modern Jazz scenario – The Modern Jazz scenario is characterized by a diverse set of resilient and lower-carbon energy systems; a highly complex and competitive market landscape that drives efficiency, innovation and open access to information; and the rapid deployment of new technologies.

  • Unfinished Symphony scenario – In the Unfinished Symphony scenario, the world has shifted to a resilient, integrated, global low-carbon energy system. Global unified action is taken on security, environmental and economic issues, and global institutional and national governments support enabling technologies.

  • Hard Rock scenario – This scenario is indicative of a fractured world, with a diverse set of economic, energy and sustainability outcomes, where nationalist interests potentially prevent countries from collaborating effectively on a global level, and with limited attention to addressing climate change. In this scenario, technologies are mandated based on availability of local resources.

These three scenarios, developed through a series of interviews and workshops with industry leaders and experts around the world, present distinctly different yet plausible energy futures. A few key threads that emerged from the work are the following:

  • With demand peaking, the risk of “stranded resources” will increase

  • New technologies and changing demand patterns will disrupt the primary energy mix and lead to slower demand growth to 2060

  • Doubling of electricity demand will drive significant investment in clean energy and infrastructure

  • Penetration of alternative transport fuels will spur significant diversification, but hydrocarbons will meet the majority of fuel demand

  • Despite the momentum created by technology innovation and resource shifts, staying within the carbon budget will remain a challenge

Energy executives can use these scenarios as valuable frameworks when making critical strategic decisions today to reshape their companies to thrive in the coming decades. Regardless of scenario, leading companies will be those that adapt quickly and think creatively about where they play and how they win. The former will require companies to consider rebalancing their energy portfolio; the latter, a forward-looking view of using business and digital technologies to transform how they deliver work and organize and manage performance. The fact is, the Grand Transition has already begun. Companies, and the broader set of industry stakeholders, can ill afford to be left lagging in adapting, innovating and transforming.

You can read more about these three scenarios for the Grand Transition, and what they might mean for the industry, in the executive summary, World Energy Scenarios 2016: The Grand Transition.

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