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

1. Ten Key Energy System Burson-Marsteller
Global Energy Practice
Dynamics – And the
Implications for Global Energy August 2012
Company Communications
In this article we explore ten important
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dynamics of the global energy system, as it is
Technology and innovation
currently evolving, and the implications for
communications and positioning for global
imperative
energy companies.
The dynamics are: Energy technology breakthroughs and
innovations are more imperative now than at
1. More challenging energy any stage in human history in order to maintain
and improve living standards, secure our energy
2. Globalization of energy
future and avoid a potential energy crisis. The
3. 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 the
4. Increasing role of gas
energy challenge that we know is coming. This
5. Integration is both to produce more energy, more cleanly
6. Efficiency equation and more cost effectively – as well as to
consume and use it far more efficiently.
7. Doubts about the alternatives
8. Growing focus on energy access The available technologies provide no grounds
for complacency – indeed, some would argue
9. Green and carbon agenda they are still basically inadequate to meet the
10. Energy jobs interlinking challenges of energy, economic and
environmental security in the future. We need
Parts 1-2 can be found at the following link: radical breakthroughs as well as continuous
http://issuu.com/bursonmarsteller. innovation of existing technologies. We
absolutely need the pace to pick up in a number
In 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 and
imperative. energy intensity. We need to be thinking
constantly about ways to use less energy – as
Note: This is the third part of a 10-part series on well as about ways to produce more.
key energy system dynamics and the implications
for global energy company communications.
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2. 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 the
most elemental level – life is energy and energy Think of the great transformational periods in
is life in many ways. No energy, no life. Like all human development – from the agricultural
species of plants and animals on our planet, revolution to the industrial revolution to the
humans are energy converters. We need digital revolution – and of the life-changing
energy to live. The fuel we convert into energy energy dynamics involved. Ask yourself where
to live is biomass, otherwise known as food. would we be without them?
Yet we humans have taken energy conversion
to another level completely by applying our The good news is that with an increasingly
brain power to create a series of energy connected global community – energy
innovations that have enabled us to harness innovations can spread faster and wider across
and 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 Drivers
filling our stomachs). This enables us to live To understand the energy innovation dynamic
very different lives to other species, not to properly, we need to realize that energy players
mention 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 most
limitations and, ultimately, to develop other industries. This makes long-term
civilizations and complex modern societies, planning and thinking imperative.
including in some of the most inhospitable and
challenging environments on the planet. This As energy expert Daniel Yergin has noted, the
has resulted in standards and modes of life and pace and nature of technology innovation,
living that would have been unimaginable for regeneration, application and disruption
our primitive ancestors huddled around the associated with information technology and
campfire. consumer electronics – the sectors most
associated with innovation in the public
Think about every step of your day and where consciousness – are, for example, quite
energy comes into it. Energy for your breakfast, different in many ways to how innovation and
for the hot water for your shower, energy for technology works in the energy system.
producing, cooking and storing food, for cars to
get to work or school, for lights, heating and Building a new coal power plant, hydroelectric
cooling for the buildings you inhabit (e.g., dam or offshore oil platform – all of which can
offices, hospitals and schools), power for the last for many decades – involves a different way
machines and devices you use to work, educate of thinking and a different attitude to risk and
and entertain yourself – the list can go on and innovation. With the amount of money and
on for someone living in an advanced modern scale involved in building energy infrastructure
society (but not for someone still experiencing there is less scope for placing lots of bets and
energy poverty). seeing which ones come off. In some ways,
there is also less scope for smaller industry
It is fascinating to contemplate the extent to players (e.g., start-up companies) to come along
which energy innovations have provided the with a new idea or technology that can
foundation for human civilization, progress and completely revolutionize the industry.
development through the ages. Think of
breakthroughs made possible with innovations In some cases – such as where the energy can
in wind power, hydro power, horse power, be developed and produced cheaply with
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3. existing technologies, and the company’s Government-driven Innovation and
position is secure based on long-term contracts Research
and high barriers to market entry – the Innovation and technology are vital to securing
incentive to invest in new technologies is weak. the energy future and limiting the
environmental impacts of energy production
Innovation drivers, on the other hand, are often and consumption. They are also fundamental
created by policies that require companies to to national competitiveness. Given constraints
meet tougher standards, to face more companies face in investing in energy
competition or when the main growth innovation, there are increasing calls for
opportunities exist only in new and more governments to play a larger role in driving the
challenging areas. Indeed, energy players will development of technologies that can secure the
typically move to invest in R&D and innovate energy future while enhancing the
when the price is right – whether because of competitiveness of their countries. Proponents
higher revenues or lower costs (as long as there of a larger role for government include those in
is a profit in it), or because they need to have an industry that understand the critical role
edge to compete. government played in developing new
technologies that provided the basis for entire
While the situation varies considerably across industries (e.g., the Internet and nuclear
the energy system and economy, there are many energy) in the past.
energy sub-sectors where technology and
expertise are the key source of differentiation According to the American Energy Innovation
and competitive advantage for energy Council, a group formed by CEOs of some of the
companies. It may be the core value world’s largest companies, arguments for
proposition potential partners or customers are government to play a leading role in energy
looking for in choosing one company over innovation include:
another. So large investments in energy
technology and science are made because they • Energy is not valued in and of itself, but
are 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 options
As an example of this dynamic, investments by in the same way that it would for other types
international oil and gas companies (including of products and services.
service companies) in new technologies for
unconventional oil and gas picked up • Many energy technologies are capital-
significantly once the global opportunities to intensive and long-lived, with the result that
develop conventional oil and gas fields became many require significant up-front cash with a
much more scarce (in part because national slow return. In turn, the energy sector as a
governments increasingly reserved these whole is subject to a high degree of inertia, a
opportunities for state-owned national oil tendency to avoid risk and domination by
companies). Prices also rose to a point where incumbent firms.
there was a profit in it, and competition
increased. • Energy markets are not perfectly competitive,
due to regulatory uncertainty, market
In certain situations, the incentive to invest is fragmentation and distortions introduced by
not strong enough because no one company past policies – all of which generally slow the
would be able to adequately monetize the adoption of innovative technology.
technology. In others, the scale of investments
required is too great for any company to bear. China’s Innovation Investment
These are among the arguments used to urge China is a prime example of a country that has
governments to play a larger role in fostering decided to plan and invest in developing
early-stage energy research and technological technologies and industries to enhance overall
development. national competitiveness and meet the energy
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4. challenge. Of the seven strategic emerging technologies to energy challenges, there is also
industries in China’s 12th Five-year Plan (2011- much more intelligence within the system. New
2015) – all have energy dimensions and some energies like solar and wind can be deployed
are pretty much all about energy. much more quickly. Options for energy
consumers and for where and how energy can
The 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 risk
Note: The Five-year Plan is the guiding framework communications pioneers have noted, risk
used by the Chinese government to help achieve its perceptions and responses can often be way out
development objectives. It defines the government’s
of sync with the real hazard posed by a
overall 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 real
Diversification and Change hazards – because they benefit directly, because
Energy innovation is having a major impact in they feel like they can personally control their
transforming the energy system on many levels exposure to the risks, or because the risks are so
and in many ways. There is more and more familiar and well understood as to be taken for
diversification with new technologies and new granted, or because the companies involved are
sources of energy. With the continuously being regulated and held accountable by
increasing application of information government.
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5. Conversely, people react in a stronger way to Cleaner Fossil Fuel Technologies
risks that are poorly understood and not well We don’t just need technologies that can help
known; 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 address
the 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 in
and unusual; where the experts are debating this area include carbon capture and storage
intensively among themselves; or where there is (CCS), underground coal gasification and those
limited 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 worse
if there is no consensus among governments In the coming decades, countries like China and
and experts about how to regulate and India – two key global growth engines and
supervise the application of the technology in home to around one-third of the world’s people
question – 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 from
Meanwhile, NGOs and internet-empowered 80 percent to 66 percent for China and from 68
individuals have proven very adept at building percent to 51 percent for India. But with rising
opposition to specific technologies and overall energy demand, this does not
practices. 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 around
what moves them to act. This can involve 40 percent of the world’s coal, coal-fired power
emphasizing scientific uncertainties or selective generation will increase by 600 GW to surpass
emphasis on specific research (rather than the the current capacity of the U.S., the EU and
weight of scientific evidence or the consensus of Japan combined. Meanwhile, gas – another
expert reviews by relevant scientific fossil fuel, albeit less carbon intense – will be
authorities), 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 for
heartless corporations” and “defenders of the transportation. So the hydrocarbon era still has
people and environment”, utilizing graphic and a way to go, and we urgently need technologies
symbolic imagery, accusations of opacity, deceit that can mitigate related environmental
and arrogance, and so on. They have also been impacts.
effective in harnessing new digital and social
media technologies that are reshaping and, in Innovative Practices and Partnerships
some ways, leveling the global communications It is also important to remember that
playing field. innovation applies to organizations and
partnerships, to management, policies and
Such 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 our
potentially dangerous developments or energy system. This applies to governments and
technologies. Meanwhile, they can be regulators, to companies across the energy
champions of new or alternative technologies value chain, as well as to a host of other
and of efforts to expand energy access. So it is stakeholders such as NGOs, research
important to distinguish between those that are organizations and think tanks. Innovative
committed to a reasonable and equitable partnerships and policies are imperative for
outcome and those that aren’t. Indeed, the transforming our energy system.
former could become advocates as opposed to
opponents if they can be convinced of the Such innovation might, for example, focus on
benefits and that certain risks are worth taking. approaches that address the energy technology
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6. divide between developed and developing possible. Global energy companies can learn by
countries – recognizing that less-developed looking at examples of how technology
countries may need to tackle problems companies have communicated innovation
differently because they can’t afford to deploy through integrated communications platforms
the most advanced technologies and systems. and narratives.
Technology Dissemination Meanwhile, we should also not lose sight of the
It is important to remember that the fact that technologies – and our demand for and
dissemination of technology and expertise utilization of them – create new energy
globally is impacted by competitive dynamics demand. Think of all the energy required to run
and 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 by
property). Many technologies that exist are not the predicted 1.7 billion passenger cars on the
being widely applied in developing countries, planet in 2035. That is double the cars we have
for example, because they are considered too today! So we need technologies that last longer
expensive and there is limited capacity to and are much more energy efficient and
develop them independently. Arguments about recyclable – with a lower energy footprint over
quality, total cost of energy produced and their lifecycle. Energy innovation is needed
externalities (e.g., health and environmental across the industrial value chain and
impacts) in relation to different energy throughout the global economy and society. We
technologies are used to justify what may seem need to do much more with less energy for
to be more expensive technologies – but may in many more people if we are going to meet the
fact be more cost-effective from a holistic energy challenge of the future.
perspective. Some developing countries
meanwhile are seeking to reduce their reliance
on “foreign” or “imported” technologies for Lagging Reputation
economic reasons – and so that they can help The 2012 Global Corporate Reputation Index
foster the development of local energy (released by Burson-Marsteller, Landor
industries and economies. Global companies Associates, Penn Schoen Berland, and
are also responding to these dynamics – BrandAsset Consulting) found that the
including by developing technologies tailored technology industry has a very strong reputation
for developing countries (which in most cases overall (the strongest of all industries covered
means more affordable, with less bells and by the research), primarily due to the halo it
whistles, among other value propositions) and gets from performance strengths around
by 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 industry
Innovation Halo struggles the most of all the industries covered
It 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 extensive
most of the world – as evidenced by the high review of over 40,000 consumer interviews
standing 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 own
innovation and technology stories to build
business and reputation – for example in
countries which seek the knowledge and
technology spillover benefits from allowing
foreign players with technology advantages to
participate in developing local energy resources
– as well as the more tangible benefits from
securing more energy than would otherwise be
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7. Is this fair given the job energy companies do in fracturing) and to convince stakeholders that
securing our energy, the fact that some of them they have the expertise and technologies
are among the most innovative and forward- necessary to protect human health and the
looking companies on the planet and invest like environment in risky situations. This requires
few others in “corporate citizenship” efforts that they have the ability to communicate
around the world? What about when we smartly about science, related policies and risk
consider the massive energy demand and assessments. (One un-replicated scientific
attendant environmental impacts generated by study does not equal the international scientific
technologies produced and marketed by the consensus, the weight of scientific evidence or
technology sector? the view of independent panels of experts that
have reviewed the various branches of science
in a particular area!)
Communications Implications
One thing this research makes clear is that
They need to identify and know the most
energy companies need to better communicate
credible authorities on specific topics, whether
the innovation and technology story and a
organizations or individuals, recognizing that it
vision for the future. Meanwhile, they need to
is usually much more credible to reference the
also communicate a strong sense of purpose
position of such experts and authorities than to
and 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 funding
discussed, educating people about the energy
more research by independent scientists to
system will support such efforts by making it
reduce uncertainties (with controls in place to
easier for people to understand how vital and
ensure reality and perception of objectivity).
important the role of energy companies is, and
how massive and complex the challenges are
Meanwhile, they cannot afford to over-
that energy companies are meeting through
emphasize technology and scientific arguments
technology and innovation.
when a case might be better made in terms of
the benefits to people and communities. Often
To compete and succeed, global energy
both sets of arguments need to be made
companies need to be able to communicate the
simultaneously – but some stakeholders may
advantages and value propositions they offer
be far less interested in a technology
from a technological perspective (so that they
discussion. It is also important to avoid being
can be understood by the part of the global
arrogant or failing to communicate because of
population 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 towards
to develop and apply technology through R&D
energy companies and play into the hands of
and collaborative partnerships are well
opponents.
communicated.
Openness, dialogue, transparency and
A focus on technology can help to demystify
mobilizing third-party experts and coalitions are
and legitimize companies that are sometimes
important ways to build confidence about, and
more 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 with
Communicating a vision for an energy future
the technologies and the wider benefits they
where technology solves key challenges can
bring, including energy access and economic
help to make clearer why energy companies are
development.
so vital and need to be able to get on with the
job.
Energy companies also need to help people Douglas Dew, Chair, Burson-Marsteller Global
understand and demystify what can be Energy Practice
controversial technologies (like hydraulic – with Ryan Fenwick, Senior Associate
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8. About Burson-Marsteller
Burson-Marsteller (www.burson-marsteller.com), established in 1953, is a leading global public relations and
communications firm. It provides clients with strategic thinking and program execution across a full range of
public relations, public affairs, reputation and crisis management, advertising and web-related strategies. The
firm’s seamless worldwide network consists of 74 offices and 81 affiliate offices, together operating in 108
countries 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 Practice
Burson-Marsteller’s Global Energy Practice is an unrivalled global network of communications professionals
focused on the energy industry and energy issues. Drawing on our worldwide Practice network of more than
100 communications and public affairs professionals with expertise and experience in the energy sector, the
Global 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 prepared
Website: www.burson-marsteller.com
Twitter: @BMGlobalEnergy
Contacts:
Asia-Pacific North America
Douglas 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 America
Europe 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)
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