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Industry Overview: Energy Industry

The energy industry is the totality of all the industries involved in producing and selling energy, including fuel extraction, manufacturing, refining, and distribution. Modern society consumes large amounts of fuel, and the energy industry is a crucial part of the infrastructure and maintenance of society in almost all countries.

Energy demand is at a record high, but public opposition to fossil fuels gathers momentum daily. The so-called global energy transition is not helping matters either. For an industry struggling to satisfy fast-paced industrialization and a ballooning human population, issues seem to be at a cross-issue; the pressure mounts from the regulatory environment, civil society, and the emergence of new technologies; The energy industry is facing 3 dominant challenges.

CHALLENGE 1: Low Carbon Requirement

Everywhere you go, stakeholders in the industry are talking about the low-carbon agenda. The goal of limiting the global warming rate to below 2 degrees has finally caught up with the industry. With over 40% of the carbon dioxide emissions from the energy industry, many countries are at the forefront of promoting cleaner energy supplies, which creates some challenges. Innovating and adapting to these requirements is an expensive and tedious process. Since we are talking about severe risks to Mother Nature, there are no options. Business models within this industry must align themselves with limiting the global warming rate.

Fossil fuel’s future of fossil fuels plays a huge role in the current challenges in energy and the climate agenda. A notable change in recent years is the erosion of coal and oil’s insurmountable advantage in energy markets and policy circles, a phenomenon broadly known as lock-in. The generally declining allure of oil equities all points to a more difficult path forward for fossil energy.

The roots of fossil fuel’s recent challenges lie in environmental concerns and opposition to big projects from governments, but also from the growing competitiveness of alternatives like wind and solar power, which are often the cheapest sources of new electricity generation and significant sources of jobs. However, renewable energy like these faces its challenges.

CHALLENGE 2: Regulations

According to most energy experts, the biggest challenges for the energy sector are related to escalating government regulations. Energy is one of the most regulated resources currently. Rules have benefits, but adopting the recommendations and remaining profitable can be challenging for many in the industry. The most significant regulatory challenge industries are concerned about is integrating distributed energy resources and renewables.

Renewable energy will continue to face challenges. Additional policy support is required as the renewable energy industry grows. The deployment of renewables will continue to increase; however, the intermittency of renewables (like wind and solar power) and the policy challenges dealing with intermittency is the main issue.

Intermittency can be addressed by reducing the cost of electric storage batteries and by building interstate electric transmission lines to transport electricity from where the wind blows hardest to where power demand is most remarkable at any given moment. Both solutions would also help balance the unpredictability of solar power.

The more significant challenge is to design financially viable energy systems. The slowing demand for electricity has created issues regarding funding or investing in maintaining the electric grid. It has also created various incentives that made utilities slow down renewables’ deployment.

Industries with trouble reducing emissions will face increasing scrutiny from policymakers as the pressure to act on climate change grows. Legislators may invest significant funds in developing and deploying carbon capture and storage technologies to reduce industry emissions and minimize their environmental impact.

CHALLENGE 3: Energy and Affordability

Accessibility of energy to more people is one thing; sustaining affordability is a perpetual worry for stakeholders in the energy sector. Unfortunately, even developed economies are encountering this problem.

Energy sectors are inevitably experiencing substantial changes. One of the solutions to the challenges is to leverage advanced technology and relevant talent—such strategies present avenues for growth for the next decade or so. However, the impact of technology on the energy industry has mainly been momentous. Technological advancement has given rise to trends such as the Industrial Internet of Things (IIoT), advanced analytics for energy data, and optimal utilization of assets.

Updated on February 11, 2023

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