Even as the energy sector has begun transformation, President Biden’s goal of a 100 percent carbon-free power segment by 2035 presents a bold challenge. Today, roughly just 20 percent of electricity generation comes from renewable energy sources.(1) Yet, the shift from carbon towards renewables presents significant opportunities for companies who embrace transformation in the coming decades and contribute to the President’s broader goal of a net-zero U.S. economy by 2050.
First and foremost, recognize the current energy sector as partners on the road to a lower carbon future. Energy companies must step up to embrace their role as leaders. For too long, the debate has pitted climate activists and energy companies against one another. Energy companies are equipped with the engineering, scientific, and technology expertise vital to leading us to a cleaner, more sustainable future.
Secondly, we need to be realistic about what the road to carbon-free power and a net-zero economy entails. Technology and economic barriers to the uptake of renewables are beginning to dissipate. However, consumers likely will continue to expect reliable and affordable energy. The major outage in Texas provides a reminder of how important energy reliability is on the journey to net-zero and that multiple sources of energy will be required. In addition, energy companies will continue to balance shareholder expectations between financial returns and the company’s environmental and social commitments.
Finally, we must adequately plan for the energy transition’s impact on American jobs. The oil and gas sector alone employs over 12 million in the U.S. The energy transition will create job opportunities requiring new skills and other jobs utilizing existing skillsets. We must be mindful about attracting new talent while utilizing and reskilling existing talent.
Opportunities for energy companies
The shift to carbon-free power may be confronted with challenges, but it also offers opportunities. KPMG recommends that energy companies take three steps to thrive in the coming decades:
- Match opportunities with strengths: KPMG sees the greatest opportunities ahead in renewables (solar- and wind-based power), hydrogen, biofuels, commercial transportation, and carbon capture, utilization and storage. Companies should explore which avenues best align with their assets and experience and pivot to an energy services mindset.
- Establish financial resilience: Go beyond short-term actions, ensure the organization is as efficient as possible, properly managing financial risk, and has the resources and access to capital to take advantage of opportunities as they arise.
- Leverage natural advantages: Tap into the vast pool of knowledge, skills, and industry expertise gained over the years to play a key role in leading our society to a lower carbon future.