John Kitchingman, Managing Director EuroNorth at Dassault Systèmes, leads the development of the EuroNorth team's business strategy and collaborates and innovates across a wide range of industries including automotive, aerospace, defence, life sciences & many more. Prior to his role at Dassault Systemes, John was the VP of the Automotive and Aerospace sector at IBM, leading their global sales department.
The COVID-19 pandemic has had a huge impact on the energy sector. Following a drop in consumption and demand for the better part of 2020, the industry has found itself tackling a major issue since the start of 2021: reducing its reliance on fossil fuels to meet the government’s targets for net zero by 2050. For global players in the industry, this is more than committing to increase the volume of clean and green energy products they offer. It's about rethinking their entire business plans to support every aspect of consumers’ lives – from the modes of transport they use to the way they heat and cool their homes, and even the products they buy.
To add to the challenge, the UK is the president of COP26, which will focus on the energy transition and clean vehicles as key priorities. This puts British energy companies in the spotlight more than ever before.
Between mounting consumer pressure, changing government regulations and rising global temperatures, the energy sector cannot afford to wait any longer to put sustainability top of its strategic agenda. And with it comes considerations around the right tools, skills and partnerships the industry needs to operate efficiently.
The energy sector is struggling
With a growing global population and more people using electricity and fuel, energy companies should in principle have a bigger pool of customers to service than ever before – and therefore be in a position to increase their revenue. This is very far from the truth. In a recent Dassault Systemes survey, we found that a majority of consumers (70%) demand sustainable alternatives to traditional energy products. This demand has now become so critical two in three energy business leaders admit that failure to do so will drive customers to competitors.
Consumer pressure is only the tip of the iceberg: energy leaders also need to comply with government mandates for net zero emissions. While these targets were already ambitious pre-COVID, they have become extremely challenging to navigate for the industry: our research found that 75% of energy companies have had difficulty predicting and planning for government decisions, and 70% have struggled to attract and retain environmentally focused talent.
As a result, a majority of businesses had to focus on resilience during the pandemic, instead of being able to tackle their sustainability challenges: 76% of businesses having to postpone the implementation of their sustainability goals, while 64% struggled to innovate. For a third of companies, this challenge was due to a lack of agile processes or digital transformation tools to be able to pivot during the pandemic. This is a critical number of leaders not having the right tools in place to support the government on its net zero strategy.
However, Covid-19 has provided businesses with a great opportunity to rethink sustainability. Almost 8 in 10 energy leaders (79%) now see sustainable product innovation as a strategic priority; 6 in 10 also acknowledge that becoming net zero is a priority for their organisation (64%). So, if Covid-19 has allowed leaders to recognise the importance of the net zero strategy, why are companies still taking a lukewarm approach to their energy mix, and how can they be supported to reduce their reliance on fossil fuels? The challenge is complexity. The answer: virtual twin technology.
Shifting to virtual twin technology
With 70% of business leaders believing that virtual twin technology will be crucial to achieving net zero goals, it is a no brainer that the sector considers this technology for innovation. Virtual technology is seen by many energy businesses as key to helping the sector transition to a sustainable future.
A virtual or digital twin is essentially creating a fully functional digital replica of an asset, including its physical structure, its behaviour and associated processes. With a virtual model, you can analyse and optimise different scenarios using real time or experimental data. For example, you can create a virtual twin of an energy site to track its waste and carbon emissions, allowing for more effective management of the site.
Virtual twins are already used in the conception of solutions to harness the power of renewables, such as wind turbines, solutions to turn water into energy, to produce mobile electrical chargers and in the manufacture of solar panels. Highly versatile, the virtual twin approach is also used to improve the safety of operations in extraction sites, from drilling into caves to extracting fossil fuel, routing nuclear power and managing waste; and even mapping out models of physical sites before construction. These are all steps in the right direction for an industry which has yet to adopt agile ways of working across all its operations.
Why is this shift important?
Energy companies simply cannot afford to lose out on substantial business value simply because they do not have the tools or technologies to deal with a greener post-pandemic world. For energy companies to weather the storm, the Covid-19 pandemic has highlighted the first one is the importance of digitalisation for business adaptability.
This shift towards digitalisation is necessary with increasing regulations and a more time and consumer pressure environment to move to sustainable resources. Digital innovation is one of the few means that will enable energy companies to contend with these profound and unpredictable changes, and we cannot ignore that Covid-19 has created a window to drive transformative change.
Beyond improving ways of working and allowing businesses to design more sustainable products, it also provides a new way to upskill workers and attract more environmentally minded talent to the sector. In effect, mass adoption of virtual twins creates a virtuous cycle whereby companies can attract talent who can help them devise and implement efficient carbon reduction strategies – a current challenge for 7 in 10 business leaders. Using platforms that can support the company’s entire operations simplifies information sharing, ensuring that best practice is shared across the workforce to enable staff to tackle future carbon reduction projects to meet evolving consumer demand or government mandates.
As the industries the sector services move to clean and green energy sources to deliver on their own government mandates for net zero, energy companies must act now to guarantee their future success, global economic growth and keep global temperatures from rising further.
The future of the energy sector
The energy sector will face many challenges as we look towards a post-pandemic future, with environmental concerns, increasing public scrutiny and new government mandates disrupting traditional business models. It is paramount for the industry to start implementing the right strategy to reduce its carbon footprint. To generate the best results, new strategies should come hand-in-hand with delivering the type of products customers’ need and upskill current staff to be ready to take on new roles, all the while meeting governments’ stringent mandates for net zero emissions.
To do so, the industry not only needs the right strategy, business and operating models, but also the right technology to underpin and support these initiatives. Virtual twins are one answer to this. By driving sustainability and the circular economy at speed and scale, they help companies reduce their costs, resource use and carbon footprint whilst supporting innovation and customer-centric business models.