Ten Energy System Dynamics and the Implications for Communications   part 3 - Burson-Marsteller
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Ten Energy System Dynamics and the Implications for Communications part 3 - Burson-Marsteller

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Burson-Marsteller's China Chaired Global Energy Practice's third installment in the series Ten Energy System Dynamics - And the Implications for Global Energy Company Communications

Burson-Marsteller's China Chaired Global Energy Practice's third installment in the series Ten Energy System Dynamics - And the Implications for Global Energy Company Communications

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    Ten Energy System Dynamics and the Implications for Communications   part 3 - Burson-Marsteller Ten Energy System Dynamics and the Implications for Communications part 3 - Burson-Marsteller Document Transcript

    • Ten Key Energy System Burson-Marsteller Global Energy PracticeDynamics – And theImplications for Global Energy August 2012Company CommunicationsIn this article we explore ten important 3dynamics of the global energy system, as it is Technology and innovationcurrently evolving, and the implications forcommunications and positioning for global imperativeenergy companies.The dynamics are: Energy technology breakthroughs and innovations are more imperative now than at1. More challenging energy any stage in human history in order to maintain and improve living standards, secure our energy2. Globalization of energy future and avoid a potential energy crisis. The3. Technology and innovation technologies already being used today are as imperative advanced as in any field of human endeavor. Yet we need much more to be able to meet the4. Increasing role of gas energy challenge that we know is coming. This5. Integration is both to produce more energy, more cleanly6. Efficiency equation and more cost effectively – as well as to consume and use it far more efficiently.7. Doubts about the alternatives8. Growing focus on energy access The available technologies provide no grounds for complacency – indeed, some would argue9. Green and carbon agenda they are still basically inadequate to meet the10. Energy jobs interlinking challenges of energy, economic and environmental security in the future. We needParts 1-2 can be found at the following link: radical breakthroughs as well as continuoushttp://issuu.com/bursonmarsteller. innovation of existing technologies. We absolutely need the pace to pick up in a numberIn this installment we address the third key of areas if we are going to meet certain targets,dynamic: Technology and innovation such as the reduction of carbon emissions andimperative. energy intensity. We need to be thinking constantly about ways to use less energy – asNote: This is the third part of a 10-part series on well as about ways to produce more.key energy system dynamics and the implicationsfor global energy company communications. 1
    • Life is Energy steam power, gas power, coal power, oil, solar,It is easy to lose sight of how much we rely nuclear, and so on.on energy. Yet when we reduce things to themost elemental level – life is energy and energy Think of the great transformational periods inis life in many ways. No energy, no life. Like all human development – from the agriculturalspecies of plants and animals on our planet, revolution to the industrial revolution to thehumans are energy converters. We need digital revolution – and of the life-changingenergy to live. The fuel we convert into energy energy dynamics involved. Ask yourself whereto live is biomass, otherwise known as food. would we be without them?Yet we humans have taken energy conversionto another level completely by applying our The good news is that with an increasinglybrain power to create a series of energy connected global community – energyinnovations that have enabled us to harness innovations can spread faster and wider acrossand convert many other forms of energy the planet than at any stage in human history.besides biomass (and to harness biomass, too,in different ways that do not simply involve Energy Innovation Driversfilling our stomachs). This enables us to live To understand the energy innovation dynamicvery different lives to other species, not to properly, we need to realize that energy playersmention our hunter and gatherer forbearers. – particularly the traditional ones – are used to longer innovation cycles and time horizons –Energy innovation and conversion has been the and to working on much larger scale projects,basis for humans to transcend our physical requiring much larger investments than in mostlimitations and, ultimately, to develop other industries. This makes long-termcivilizations and complex modern societies, planning and thinking imperative.including in some of the most inhospitable andchallenging environments on the planet. This As energy expert Daniel Yergin has noted, thehas resulted in standards and modes of life and pace and nature of technology innovation,living that would have been unimaginable for regeneration, application and disruptionour primitive ancestors huddled around the associated with information technology andcampfire. consumer electronics – the sectors most associated with innovation in the publicThink about every step of your day and where consciousness – are, for example, quiteenergy comes into it. Energy for your breakfast, different in many ways to how innovation andfor the hot water for your shower, energy for technology works in the energy system.producing, cooking and storing food, for cars toget to work or school, for lights, heating and Building a new coal power plant, hydroelectriccooling for the buildings you inhabit (e.g., dam or offshore oil platform – all of which canoffices, hospitals and schools), power for the last for many decades – involves a different waymachines and devices you use to work, educate of thinking and a different attitude to risk andand entertain yourself – the list can go on and innovation. With the amount of money andon for someone living in an advanced modern scale involved in building energy infrastructuresociety (but not for someone still experiencing there is less scope for placing lots of bets andenergy poverty). seeing which ones come off. In some ways, there is also less scope for smaller industryIt is fascinating to contemplate the extent to players (e.g., start-up companies) to come alongwhich energy innovations have provided the with a new idea or technology that canfoundation for human civilization, progress and completely revolutionize the industry.development through the ages. Think ofbreakthroughs made possible with innovations In some cases – such as where the energy canin wind power, hydro power, horse power, be developed and produced cheaply with 2
    • existing technologies, and the company’s Government-driven Innovation andposition is secure based on long-term contracts Researchand high barriers to market entry – the Innovation and technology are vital to securingincentive to invest in new technologies is weak. the energy future and limiting the environmental impacts of energy productionInnovation drivers, on the other hand, are often and consumption. They are also fundamentalcreated by policies that require companies to to national competitiveness. Given constraintsmeet tougher standards, to face more companies face in investing in energycompetition or when the main growth innovation, there are increasing calls foropportunities exist only in new and more governments to play a larger role in driving thechallenging areas. Indeed, energy players will development of technologies that can secure thetypically move to invest in R&D and innovate energy future while enhancing thewhen the price is right – whether because of competitiveness of their countries. Proponentshigher revenues or lower costs (as long as there of a larger role for government include those inis a profit in it), or because they need to have an industry that understand the critical roleedge to compete. government played in developing new technologies that provided the basis for entireWhile the situation varies considerably across industries (e.g., the Internet and nuclearthe energy system and economy, there are many energy) in the past.energy sub-sectors where technology andexpertise are the key source of differentiation According to the American Energy Innovationand competitive advantage for energy Council, a group formed by CEOs of some of thecompanies. It may be the core value world’s largest companies, arguments forproposition potential partners or customers are government to play a leading role in energylooking for in choosing one company over innovation include:another. So large investments in energytechnology and science are made because they • Energy is not valued in and of itself, butare imperative for sustainable business success rather for the goods and services it provides.(and survival). This means that product differentiation does not drive innovation in energy supply optionsAs an example of this dynamic, investments by in the same way that it would for other typesinternational oil and gas companies (including of products and services.service companies) in new technologies forunconventional oil and gas picked up • Many energy technologies are capital-significantly once the global opportunities to intensive and long-lived, with the result thatdevelop conventional oil and gas fields became many require significant up-front cash with amuch more scarce (in part because national slow return. In turn, the energy sector as agovernments increasingly reserved these whole is subject to a high degree of inertia, aopportunities for state-owned national oil tendency to avoid risk and domination bycompanies). Prices also rose to a point where incumbent firms.there was a profit in it, and competitionincreased. • Energy markets are not perfectly competitive, due to regulatory uncertainty, marketIn certain situations, the incentive to invest is fragmentation and distortions introduced bynot strong enough because no one company past policies – all of which generally slow thewould be able to adequately monetize the adoption of innovative technology.technology. In others, the scale of investmentsrequired is too great for any company to bear. China’s Innovation InvestmentThese are among the arguments used to urge China is a prime example of a country that hasgovernments to play a larger role in fostering decided to plan and invest in developingearly-stage energy research and technological technologies and industries to enhance overalldevelopment. national competitiveness and meet the energy 3
    • challenge. Of the seven strategic emerging technologies to energy challenges, there is alsoindustries in China’s 12th Five-year Plan (2011- much more intelligence within the system. New2015) – all have energy dimensions and some energies like solar and wind can be deployedare pretty much all about energy. much more quickly. Options for energy consumers and for where and how energy canThe seven strategic emerging industries are: be produced are also increasing thanks to continuous technology innovations (with a• Energy-saving and environmental protection: trend towards increasing decentralization and Advanced and eco-friendly products, cyclic distribution of energy production closer to utilization, industrial equipment and services where energy is used, for example). And there is still very significant potential for• Next-generation information technology (IT): transformative techniques and approaches to Advanced communications network, cloud develop and be applied quickly in the fossil computing, three network convergence, high- energy sectors. The combination of 4D-seismic performance integrated circuits, high-end imaging, horizontal drilling and super fracking software, Internet security and artificial (hydraulic fracturing) to develop shale gas, for intelligence example, has led to what some refer to as the “golden age of gas” – with major implications• Biotechnology: Bio-medicine, bio-agriculture, for energy security and geopolitics (as will be bio-energy, biomanufacturing, drugs/vaccines discussed in the next installment on the increasing role of gas).• High-end equipment manufacturing: Carbon fiber, battery industries, high-speed railway, Controversial Technologies and Practices aerospace, marine engineering and high-end New technologies, techniques and practices, smart equipment however, can sometimes involve greater or new types of risks (e.g., those involved in ultra-• New energy: Nuclear, solar, wind, biomass, deepwater oil and gas exploration and geothermal and ocean energy production), generate significant controversies and present a new set of communications• New materials: High-performance composite challenges. The deployment of such materials, nanomaterials, rare earth, alloys, technologies may in fact be held up by concerns membranes and high-end semiconductors about how risky they are and doubts about the wider benefits. Indeed, in communicating• New-energy vehicles: Plug-in hybrid vehicles about both old and new technologies, energy and pure electric vehicles, fuel cells, hydrogen companies need to be adept at risk cars and solar cars communications. This requires an understanding of how people respond to and perceive risk. As Peter Sandman and other riskNote: The Five-year Plan is the guiding framework communications pioneers have noted, riskused by the Chinese government to help achieve its perceptions and responses can often be way outdevelopment objectives. It defines the government’s of sync with the real hazard posed by aoverall objectives, as well as specific goals related to technology.economic planning and promotion of key sectors,industries and regions. In many cases, people are prepared to accept certain technologies that may pose very realDiversification and Change hazards – because they benefit directly, becauseEnergy innovation is having a major impact in they feel like they can personally control theirtransforming the energy system on many levels exposure to the risks, or because the risks are soand in many ways. There is more and more familiar and well understood as to be taken fordiversification with new technologies and new granted, or because the companies involved aresources of energy. With the continuously being regulated and held accountable byincreasing application of information government. 4
    • Conversely, people react in a stronger way to Cleaner Fossil Fuel Technologiesrisks that are poorly understood and not well We don’t just need technologies that can helpknown; where they feel like they have limited produce more energy or use it more efficiently –control personally over their exposure; where we also need technologies that can help addressthe main beneficiary seems to be a big company the impacts of our dependence on fossil fuels in(and not them); where the technology is new more direct ways. Promising technologies inand unusual; where the experts are debating this area include carbon capture and storageintensively among themselves; or where there is (CCS), underground coal gasification and thoselimited accountability, transparency and that significantly improve the efficiency of coal-openness on the part of those applying the fired power plants.technologies. The situation can be much worseif there is no consensus among governments In the coming decades, countries like China andand experts about how to regulate and India – two key global growth engines andsupervise the application of the technology in home to around one-third of the world’s peoplequestion – especially if there is not enough – will still need coal for a majority of electricity.scientific evidence to draw a firm conclusion. For the period 2008-2035, reliance on coal for electricity generation is predicted to fall fromMeanwhile, NGOs and internet-empowered 80 percent to 66 percent for China and from 68individuals have proven very adept at building percent to 51 percent for India. But with risingopposition to specific technologies and overall energy demand, this does notpractices. This is in part because they necessarily mean that less coal will be used.understand how people perceive such risks and Indeed, in China, which currently uses aroundwhat moves them to act. This can involve 40 percent of the world’s coal, coal-fired poweremphasizing scientific uncertainties or selective generation will increase by 600 GW to surpassemphasis on specific research (rather than the the current capacity of the U.S., the EU andweight of scientific evidence or the consensus of Japan combined. Meanwhile, gas – anotherexpert reviews by relevant scientific fossil fuel, albeit less carbon intense – will beauthorities), painting things in terms of a increasingly utilized during this timeframe. Oil“David vs. Goliath” struggle between “big will also still be the main fuel we use forheartless corporations” and “defenders of the transportation. So the hydrocarbon era still haspeople and environment”, utilizing graphic and a way to go, and we urgently need technologiessymbolic imagery, accusations of opacity, deceit that can mitigate related environmentaland arrogance, and so on. They have also been impacts.effective in harnessing new digital and socialmedia technologies that are reshaping and, in Innovative Practices and Partnershipssome ways, leveling the global communications It is also important to remember thatplaying field. innovation applies to organizations and partnerships, to management, policies andSuch groups play a vital role in society and are, practices. Such innovation, it can be argued,of course, in many cases justified to oppose has just as much potential to help transform ourpotentially dangerous developments or energy system. This applies to governments andtechnologies. Meanwhile, they can be regulators, to companies across the energychampions of new or alternative technologies value chain, as well as to a host of otherand of efforts to expand energy access. So it is stakeholders such as NGOs, researchimportant to distinguish between those that are organizations and think tanks. Innovativecommitted to a reasonable and equitable partnerships and policies are imperative foroutcome and those that aren’t. Indeed, the transforming our energy system.former could become advocates as opposed toopponents if they can be convinced of the Such innovation might, for example, focus onbenefits and that certain risks are worth taking. approaches that address the energy technology 5
    • divide between developed and developing possible. Global energy companies can learn bycountries – recognizing that less-developed looking at examples of how technologycountries may need to tackle problems companies have communicated innovationdifferently because they can’t afford to deploy through integrated communications platformsthe most advanced technologies and systems. and narratives.Technology Dissemination Meanwhile, we should also not lose sight of theIt is important to remember that the fact that technologies – and our demand for anddissemination of technology and expertise utilization of them – create new energyglobally is impacted by competitive dynamics demand. Think of all the energy required to runand the self-interest of those that developed and the Internet and the devices connected to it.possess them (and related intellectual Think of all the energy that will be consumed byproperty). Many technologies that exist are not the predicted 1.7 billion passenger cars on thebeing widely applied in developing countries, planet in 2035. That is double the cars we havefor example, because they are considered too today! So we need technologies that last longerexpensive and there is limited capacity to and are much more energy efficient anddevelop them independently. Arguments about recyclable – with a lower energy footprint overquality, total cost of energy produced and their lifecycle. Energy innovation is neededexternalities (e.g., health and environmental across the industrial value chain andimpacts) in relation to different energy throughout the global economy and society. Wetechnologies are used to justify what may seem need to do much more with less energy forto be more expensive technologies – but may in many more people if we are going to meet thefact be more cost-effective from a holistic energy challenge of the future.perspective. Some developing countriesmeanwhile are seeking to reduce their relianceon “foreign” or “imported” technologies for Lagging Reputationeconomic reasons – and so that they can help The 2012 Global Corporate Reputation Indexfoster the development of local energy (released by Burson-Marsteller, Landorindustries and economies. Global companies Associates, Penn Schoen Berland, andare also responding to these dynamics – BrandAsset Consulting) found that theincluding by developing technologies tailored technology industry has a very strong reputationfor developing countries (which in most cases overall (the strongest of all industries coveredmeans more affordable, with less bells and by the research), primarily due to the halo itwhistles, among other value propositions) and gets from performance strengths aroundby highlighting various contributions they are “innovative” and “visionary” attributes –making to local development. regardless of its citizenship efforts. Meanwhile, as this chart indicates, the oil and gas industryInnovation Halo struggles the most of all the industries coveredIt is also worth noting that innovation and by the research, particularly on citizenship.technology enjoy a very significant halo effect in These findings are based on an extensivemost of the world – as evidenced by the high review of over 40,000 consumer interviewsstanding of technology companies in relation to across six countries (Brazil, China, Germany,other industry sectors. Energy players would do Japan, Russia and the United States).well to focus more on telling their owninnovation and technology stories to buildbusiness and reputation – for example incountries which seek the knowledge andtechnology spillover benefits from allowingforeign players with technology advantages toparticipate in developing local energy resources– as well as the more tangible benefits fromsecuring more energy than would otherwise be 6
    • Is this fair given the job energy companies do in fracturing) and to convince stakeholders thatsecuring our energy, the fact that some of them they have the expertise and technologiesare among the most innovative and forward- necessary to protect human health and thelooking companies on the planet and invest like environment in risky situations. This requiresfew others in “corporate citizenship” efforts that they have the ability to communicatearound the world? What about when we smartly about science, related policies and riskconsider the massive energy demand and assessments. (One un-replicated scientificattendant environmental impacts generated by study does not equal the international scientifictechnologies produced and marketed by the consensus, the weight of scientific evidence ortechnology sector? the view of independent panels of experts that have reviewed the various branches of science in a particular area!)Communications ImplicationsOne thing this research makes clear is that They need to identify and know the mostenergy companies need to better communicate credible authorities on specific topics, whetherthe innovation and technology story and a organizations or individuals, recognizing that itvision for the future. Meanwhile, they need to is usually much more credible to reference thealso communicate a strong sense of purpose position of such experts and authorities than toand show people the impact they have as say, “Trust me, I know what I am talking about.”global corporate citizens. As we have already Sometimes, they need to contribute to fundingdiscussed, educating people about the energy more research by independent scientists tosystem will support such efforts by making it reduce uncertainties (with controls in place toeasier for people to understand how vital and ensure reality and perception of objectivity).important the role of energy companies is, andhow massive and complex the challenges are Meanwhile, they cannot afford to over-that energy companies are meeting through emphasize technology and scientific argumentstechnology and innovation. when a case might be better made in terms of the benefits to people and communities. OftenTo compete and succeed, global energy both sets of arguments need to be madecompanies need to be able to communicate the simultaneously – but some stakeholders mayadvantages and value propositions they offer be far less interested in a technologyfrom a technological perspective (so that they discussion. It is also important to avoid beingcan be understood by the part of the global arrogant or failing to communicate because ofpopulation that are neither engineers nor an assumption that one is technically correct.scientists). They should also ensure that efforts Indeed, this can inflame public anger towardsto develop and apply technology through R&D energy companies and play into the hands ofand collaborative partnerships are well opponents.communicated. Openness, dialogue, transparency andA focus on technology can help to demystify mobilizing third-party experts and coalitions areand legitimize companies that are sometimes important ways to build confidence about, andmore known for the power they wield or the acceptance of, new technologies and solutions.damage attributed to them by their opponents. So is basic education to familiarize people withCommunicating a vision for an energy future the technologies and the wider benefits theywhere technology solves key challenges can bring, including energy access and economichelp to make clearer why energy companies are development.so vital and need to be able to get on with thejob.Energy companies also need to help people Douglas Dew, Chair, Burson-Marsteller Globalunderstand and demystify what can be Energy Practicecontroversial technologies (like hydraulic – with Ryan Fenwick, Senior Associate 7
    • About Burson-MarstellerBurson-Marsteller (www.burson-marsteller.com), established in 1953, is a leading global public relations andcommunications firm. It provides clients with strategic thinking and program execution across a full range ofpublic relations, public affairs, reputation and crisis management, advertising and web-related strategies. Thefirm’s seamless worldwide network consists of 74 offices and 81 affiliate offices, together operating in 108countries across six continents. Burson-Marsteller is a part of Young & Rubicam Brands, a subsidiary of WPP(NASDAQ: WPPGY), one of the world’s leading communications services networks.About Burson-Marsteller’s Global Energy PracticeBurson-Marsteller’s Global Energy Practice is an unrivalled global network of communications professionalsfocused on the energy industry and energy issues. Drawing on our worldwide Practice network of more than100 communications and public affairs professionals with expertise and experience in the energy sector, theGlobal Energy Practice helps clients:• Build compelling narratives that articulate value propositions and positions of energy sector players• Develop and implement communications programs that impact energy sector stakeholders• Map and identify energy sector stakeholders• Develop common-cause partnerships• Foster markets for new products and services• Protect and extend licenses to operate• Win public acceptance of needed energy infrastructure development• Manage critical relationships with decision / policy makers• Anticipate what’s coming next – and be preparedWebsite: www.burson-marsteller.comTwitter: @BMGlobalEnergyContacts:Asia-Pacific North AmericaDouglas Dew (douglas.dew@bm.com) Jim Cunningham (jim.cunningham@bm.com)Danny Phan (danny.phan@bm.com) John Kyte (john.kyte@bm.com) Laura Sheehan (laura.sheehan@bm.com)Middle East Beth Diamond (bdiamond@national.ca)Stephen Worsley (s.worsley@asdaa.com) Latin AmericaEurope Ramiro Prudencio (ramiro.prudencio@bm.com)Diederik Peereboom (diederik.peereboom@bm.com)Roland Bilang (roland.bilang@bm.com) Africa Hemant Lala (hemant.l@arcaybm.com) 8