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Why new energy is 'the greatest business opportunity in history'

Logo - WorleyParsons (Advisian)

Environment Analyst hears from a panel of senior figures from Advisian, the advisory arm of WorleyParsons, to find out how the company has seized on the global energy transition and is repositioning to align with many of its clients - not only to ride but also to drive the new energy revolution.

In EA’s most recent Megatrends Insight Report one of the major themes explored was how the oil & gas industry is responding to global concern over climate change and the now indisputable societal shift towards low carbon energy. And as the O&G industry responds to the changes, so too must the associated support services and engineering consulting sector - or maybe its vice versa? We find out how this Australian-headquartered international consultancy is making new energy a strategic component of its business, with thanks to Advisian's:

  •        Global New Energy Technology Lead, Paul Ebert
  •        Global Environment Lead, Tasman Graham
  •        Power Advisory Practice Lead, Peter Israel

Energy transformation

Our use of energy, its generation and distribution, is currently undergoing the biggest transformation ever seen: the shift from hydrocarbon to low-carbon. It has the potential not only to provide us with new sources of energy that will alleviate the impacts of man-made climate change, but also to unpick and invalidate systems and processes that much of modern society is grounded on and that have held sway for many decades.

WorleyParsons is to most people – in the wider-engineering consulting and professional technical services industry at least – synonymous with oil & gas. And it’s true, hydrocarbons have been the firm’s staple since it was founded back in 1971 and that’s not expected to change in the medium-term.  

But this is a firm, vast as it is at 27,000 people worldwide, that adapts quickly to the changing times. Back in 2016, CEO Andrew Wood made it clear it would be targeting renewable energy projects, which he described as "the fastest growing part of our business"; the same year saw the firm set up its New Energy initiative, focusing its low-carbon resources and know-how into a holistic offering.

Earlier this year WorleyParsons outlined clear priorities for New Energy, including: expansion across its business lines (spearheaded by Advisian); growth in strategic new energy markets (solar thermal, hydrogen, hydro, offshore wind and hybrid systems, with an equally strong focus on storage, demand management, microgrids and importantly, transmission and distribution networks); and targeting key geographies (core Australian, North American, Middle East markets; emerging markets in Latin America and Sub-Saharan Africa; high growth markets in China/Southeast Asia).

What exactly is New Energy?

Ebert explains: "The use of the term ‘new energy’ has recently become more widespread as a way of defining the different types of alternate energy generation, distribution and storage technologies that are becoming available. A lot of companies say they have ‘new energy’ divisions, or that they are ‘new energy-focused’; I believe it is more of a catch-all phrase for what industry and businesses are responding to – which is an ‘energy transition’.

"We’re entering the third major global transition in terms of energy use. The first began about 150 years ago when coal started fuelling industrialisation. After that, another revolution emerged as oil became the fuel of transportation. While those first two transitions were great for humanity, they came with significant environmental costs. Now we have reached the third transition which is seeing an increase in energy efficiency while lowering emissions, or the low-carbon revolution. This transition will be just as transformative as the first two, and while largely driven by technology it will also impact the way energy is traded and used. An example of this is the rise of the ‘prosumer’ and sharing economies. Digitisation is also driving business model disruption. Combined this will all lead to significant change, but positive steps as well, as we tackle emissions and make our energy systems truly sustainable.

"As a business concept, New Energy sits within WorleyParsons’ Power and New Energy sector, but it’s broader than that - it's a concept that extends across our entire business. And it doesn’t just affect power generators; it impacts all parts of our society that generate, store, transmit or use energy. Our New Energy team are there to help industries, clients and consumers alike respond to the challenges and opportunities this energy transition creates."

On a more practical level, it encompasses WorleyParsons’ solar, wind, gas, hydro, biomass, geothermal, even nuclear, expertise. The concept really took on life with the publication of Advisian’s New Energy thought papers back in 2016, and whilst the narrative outlined does have an Australian leaning, the New Energy concept is unequivocally global in scope and ambition. And the company’s new energy projects to-date stretch from battery energy storage systems in Oregon, US, to Africa’s largest wind farm at Lake Turkana Wind, Kenya, and from the Shagaya Solar Energy Park in Kuwait to the Foz do Chapecó hydropower plant in Brazil.

Middle Eastern opportunities

But new energy, its up-take and implementation, varies considerably from region to region, depending on local policy settings and of course commercial opportunities. Nevertheless, it was of some surprise, counterintuitive even, when Ebert revealed that the Middle East - oil capital of the world and home to so many of the hydrocarbon giants that have helped WorleyParsons grow to what it is today - is now providing some of the biggest opportunities in New Energy.

There are good reasons for this, as Ebert explains: "The Middle East is where some of our biggest clients are located, many of which are fully aware that the world is changing in terms of energy. While it might take decades, they are trying to work out what their role might be in that new energy environment. Some are starting to invest heavily in new energy - and when they do something, they tend to do it on a big scale - and that fits very well with our expertise.

"Thinking globally, to get clean energy options from a relatively small part of the energy equation into big percentages is an enormous task. And nobody underestimates the sheer investment size and complexity of bringing variable renewable energy to market. That’s why there is such a strong role for a company like Advisian/WorleyParsons that not only understands the traditional use of energy but can facilitate the integration of the new into the old."

But if oil prices continue to rise, won’t their enthusiasm for some of these new(-fangled) energies be somewhat dampened, EA puts to the team? "Actually not at all," counters Israel. "My experience is that when oil prices are low, O&G companies lack discretionary cash to spend on new investments. As prices recover they can start to think about more strategic and long-term activities and how to invest in opportunities in the low-carbon space. What’s more, as oil prices rise it becomes even more compelling to source energy from alternative and emerging technologies which can be cheaper."

However, more broadly, at least in the interim, it’s not all black and white (black and green?); fossil fuel vs low-carbon. There are overlaps on numerous levels between the two, as Graham points out: "We’re seeing real activity with our resource and energy clients in how they think about the ‘end-of-life’ of their assets; some believe renewables present them a fantastic opportunity. For example, we have old mine sites here in Australia which offer large-scale solar and pumped storage opportunities. That’s a double dividend in reducing the contingent liability for the business with good restoration outcomes, and beneficial reuse of those sites rather than just leaving them sterile. We’re also seeing innovation around the transfer of offshore O&G platforms for wind and solar."

Ebert adds to this last point: "The sheer scale of some of the offshore wind turbines and ancillary plant is getting to a point where the undersea structures are not so different from those in O&G, and the wind industry is looking precisely to the O&G industry for expertise. Floating platforms are another example with clear overlaps."

"The trick is to marry the two – offshore O&G and renewable energy – perhaps interesting bed-fellows with very different cultures, methodologies and cost expectations; but both can learn from each other."

Meanwhile, there’s growing use of hybrid systems. Blending renewables into traditional systems enables O&G clients to offset their consumption of hydrocarbons for electrical power generation through the development of new renewable power projects. This also frees up O&G volumes for more profitable export options or use as petrochemicals feedstock.

And, to make things even more Alice-in-Wonderland-esque, Graham points to insight gained from earlier experience in wind farm development which is now feeding back into WorleyParsons’ work in unconventionals, such as coal seam gas (CSG) to liquefied natural gas (LNG) projects in Australia. As he says, there are many skills which are transferable across the different technologies.

So what’s Advisian’s role in all this?

Ebert comes straight to the point: "Whenever a client has an energy need, our role is to discuss with them the range of options from a kitbag of contemporary technologies, and their relative strengths and weaknesses for that client’s particular situation. In this we are agnostic on the types of technology, but obviously have one eye on the future to what will meet commercial, risk and social-license-to-operate imperatives."

"And in addition to the technical engineering element," Graham adds, "Advisian offers expertise from environmental, commercial, contractual, policy and regulatory perspectives too. In that sense, the formation of Advisian, with its cross-cutting advisory offering back in 2015, coincided perfectly with the advent of New Energy. We have the true front-end breadth to tackle what are very challenging and complex front-end studies and commercial evaluations."

In many respects Advisian secures the projects, lays the foundations and then opens the doors for WorleyParsons’ other business lines (Services for delivery, and Integrated Solutions for O&M) to take projects to operation and beyond. In terms of ‘clients’, it’s right across the board, from utilities and energy companies to governments of developing countries and large emitters (such as the steel industry). Shareholders concerned about emissions risks to their businesses are also increasingly driving the discussion, says Ebert.

But of one thing the Advisian team is sure: the future may be bright but it is also looking pretty darn confusing; this is not going to be any velvet revolution. "If you look to the future, it's going to be extremely difficult and disruptive to bring new energy technologies at scale to the industrial complexes throughout the world without destroying significant value," Ebert warns.

"This integration piece is critical. It's easy to bring in technologies at low penetration levels but as soon as the penetration starts impacting other markets - a classic example would be a traditional generation fleet - you can destroy significant social value and that represents a huge challenge. Think of aluminium smelters that use enormous amounts of electricity and yet we all benefit from the aluminium that they produce. This isn’t just about adding on a solar power plant, we’re talking process redesign with significant amounts of energy storage to provide stability. That’s going to take real cerebral horsepower."

‘The greatest business opportunity in the history of mankind’

In some respects, however, the jobs of people like Messrs Graham, Ebert and Israel are getting easier – at least in terms of (client) acceptance of low-carbon energy if not on a day-to-day basis!

Israel explains: "On a personal level, having been an advocate of low emission technologies and renewables for many years, I used to get asked why I was wasting my time thinking about low-carbon. These days this is less of an issue as more and more industries develop a desire to move to low-carbon energy options. At the same time, the economics and the opportunities around the investment in it are becoming more and more compelling."

Ebert echoes the ‘de-linking’ of new energy from environmental ideals as these technologies, particularly renewables, start to make commercial and business sense. "Right now in most places with sun, the cheapest way to make electricity is from a solar panel on your roof. Sure, it’s not quite that simple, but we’re now seeing some clean energy options often as the right commercial choice."

And Graham concurs: "If you look at this in relation to the Paris agreement, by 2040 we’ll still be increasing emissions - not making the required cuts. To put a price tag on just meeting the pledges, we’re looking at trillions, let alone implementing change that delivers the constrained outcome on temperatures. But what we are seeing is business responding. This is now recognised as potentially the greatest business opportunity in the history of mankind. Stakeholders are trying to develop commercially viable solutions independent of policy. We’re not there yet but the trajectory is good."

But we shouldn’t take anything for granted our contributors caution. Government support in the shape of policy and subsidies across the world has been instrumental in getting us thus far. Some will argue that government incentives are good, whilst others disagree. Regardless, we have now reached "a point of parity", Israel says, whereby government intervention is no longer needed for some of these technologies to stand on their own two feet. Many investors now want legislators to set the rules and stand aside to let the cold, hard economics of a project do the talking. Australia, Israel highlights, is one country where there has been considerable policy confusion in recent years towards fossil fuels vs low-carbon sources resulting in stalemate. What investors need now is regulatory clarity so that they can plan long-term investments, he concludes.

And this clarity could be coming for Australia, as Graham points. The Australian Government is advancing integrated energy and climate policy with its National Energy Guarantee, now in the final stage of design and due for implementation next year. Graham states that: "This policy seeks to strike the balance of energy affordability and responsibility, while not compromising the international competitiveness of our emissions-intensive trade-exposed industries, or the reliability of our energy system. The Guarantee places a requirement on electricity retailers to make sure the energy that they are purchasing meets dispatchability requirements in each region of the National Electricity Market and meet emissions reduction targets for the electricity sector."

Future innovations

So what’s ahead for the New Energy team at Advisian? Ebert predicts we’ll see a range of technology innovations over the next decade but three areas stand out: "We’re going to see innovation around the nexus of digitisation and energy; development of the hydrogen industry (and that’s exciting because it starts to decarbonise the gas industry); and significant changes in transport. While I don't think that electric vehicles are going to impact the oil industry as much as people think, we are going to see the rise of electric transport and the electrification of many industries."

Digitisation is one area that EA has covered considerably in recent months in relation to the consulting industry; but what are the ramifications for the energy sector? "Digitisation allows you to be innovative around the way that you handle, sell and use electricity," suggests Ebert.

"It's about being able to get information and data on the way it’s used so that you can then tail up both the generation and the production in a much more discrete system than what we have now. We’re going to see market evolution that allows for some very innovative energy products - much like the social platforms and Uber or Airbnb. We don’t really understand yet where things like P2P trading and blockchain technology are going to lead us, but no doubt they will start disrupting energy markets."

But that’s a discussion for another day.

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