Simon Virley, Partner and UK Head of Energy and Natural Resources, provides his thoughts on what the new reality will be for Energy and Utilities.
As the COVID-19 pandemic has unfolded, my conversations with energy and utilities companies have largely focused on how to maintain operations, support employees, manage liquidity and access government support schemes.
As the lockdown restrictions start to ease, my conversations have moved on to what the industry can expect next. There’s a huge amount of uncertainty about what will happen as more of the economy reopens. Economic recovery and the impact on energy demand is high on the agenda. As is the approach to managing risk, especially climate risk – and I’ll talk about that in another blog. But the pandemic is likely to have a long and lasting impact on how energy and utilities companies operate.
Over the past few weeks, our team at KPMG has been putting a lot of thought into what the new reality will look like for the sector. Here are some of our ideas.
We all recognise the importance of data to our businesses – in understanding our customers, in identifying process improvements. If anything, COVID-19 has accentuated that. What it’s also done is highlighted the need for greater data sharing between the government and the private sector. Take the food sector, where more sharing of data between the government and the food retailers has enabled support to be given to those who are most in need.
The pandemic has brought a renewed focus on the social element of the environmental, social and governance (ESG) agenda. It has also positioned energy squarely as an essential for life; not just a commodity to be traded. This could lead to a great focus on developing local or community sources of energy, as opposed to relying on global supply chains. Given the extensive financial support provided by the Government, there will also need to be new ‘social contract’ on how businesses in the sector need to contribute to wider social and environmental policy objectives.
The lockdown has forced energy and utilities companies to rethink how they operate, and to put in place new working practices and infrastructure at speed. We’ve talked with companies about how they can keep operations going while complying with social distancing – and that’s likely to be an ongoing need. We’ve also helped them implement solutions that enable key functions to operate effectively from home. Solutions like virtual call centres are likely to continue into the new reality, and see businesses reduce their expensive office space. And that will make digitisation and connectivity key themes of the new reality.
It’s not just in our sector where work and travel patterns have changed. The result has been a decline in power demand of over 10 percent compared to what we’d normally expect at this time of year. Some of these changes will be permanent, leading to new patterns of energy demand. That’s clearly a challenge, but it also provides the impetus to redouble efforts to move to a ‘smarter’ energy system, with more active balancing of demand and supply at a local level.
To help ensure businesses can adapt to the new reality and challenges coming their way, they’re going to need to attract and retain the best talent. That’s nothing new. But they’ll need to do it in a changed world where there is an even greater appreciation of companies’ ESG credentials and their impact on communities.
Even before COVID-19, we were seeing a larger focus on employees’ wellness and mental wellbeing. The pandemic is seeing this move even higher up the agenda. With locations, ways of working and individual’s priorities all changing, companies will need to re-evaluate their employee value propositions.
The new reality for energy and utilities will almost certainly mean significant changes to every aspect of business life. That will include how we manage risk – I’ll talk about that in my next blog.
You can also read our article “COVID-19: A new reality for Energy & Utilities” for our full take on the themes that will shape the industry’s future.
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