Three Reasons The Energy Transition Is A Bumpy Ride
The energy world is changing fast. Investments in renewable energy are outpacing investments in traditional energy. But both traditional power providers and startups are struggling to find viable business models for an industry in transition.
Among the first to feel the sweeping changes in the energy sector were utilities in developed countries that have a high share of renewables in the electricity mix. But now, more industries that rely on traditional energy sources are feeling the heat.
Shifting Toward Sustainable Energy
The overall business environment is shifting toward a clean energy future. In April 2016, 177 countries signed the ambitious Paris Climate Agreement. In response, companies are beginning to improve their sustainability footprint and are adjusting product portfolios and corporate strategies.
Despite the enthusiasm and well-meaning political support, it still seems difficult for businesses to thrive in this global energy transition. So far, the transition has undermined traditional energy markets without yet having created functioning new markets. Both risk-taking, disrupting pioneers as well as the asset-heavy, path-dependent incumbents are often at a loss.
Where Do We Go From Here?
Existing, large energy companies will find it difficult to succeed in the new energy future. They would have to risk a lot (but what is their alternative?). Yet their shareholders often seek stable, low-risk returns.
Read more from Dr. Tobias Engelmeier, entrepreneur and sustainability consultant. He runs www.tfeconsulting.com, and founded www.bridgetoindia.com and www.indiagoessolar.com. He also cofounded www.gridhub.com, originally published in the May issue on the Worldwatch Institute blog: http://blogs.worldwatch.org/energy-transition-bumpy-ride/