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Peak Carbon is the New Peak Oil

image credit: Peak Carbon - © Derrick Bowen 2020
Derrick Bowen's picture
Principal Consultant, Pariveda

Pariveda's Derrick Bowen has more than 11 years of consulting experience leading user-centered software development, CRM, BI, and strategy projects in industries including energy (traditional and...

  • Member since 2021
  • 24 items added with 5,927 views
  • Apr 23, 2021

Every industry is evolving in this uncertain climate; companies across all industries will need to become nimbler to survive and thrive. The Energy Transition has both near-term and longer-term implications, and businesses should invest in agility via talent, product, and modern data to build the necessary capabilities for the climb ahead.

As we engage with companies within Oil & Gas, Retail Electricity, New Energy, and Cleantech, it is striking that there is much more consensus about the future of energy within the industry than you would expect based on TV or social media. For instance, are you aware that ExxonMobilChevronShellbp, and ConocoPhillips all support the Paris climate accords? The industry has shifted due to an understanding that the model of the future is now better explained by Peak Carbon than by Peak Oil.

For many years, Peak Oil was seen as the energy hurdle of the future. In the Peak Oil future mindset, the amount of hydrocarbon in the ground is limited and we are using it up quickly. Cheap energy fuels the motor of the modern economy, and so an ever-diminishing supply will wreak havoc on human well-being. Hence the need for “renewable” energy. This concept has lead governments and businesses to hunt for new discoveries of cheap hydrocarbons, for new ways to extract the hydrocarbons we know about efficiently, and for new materials that we can burn to generate energy.

Recently, clearer evidence of the impacts of heavy hydrocarbon consumption has brought about political, scientific, and environmental pressures to reduce our carbon dependency. In the Peak Carbon future scenario, unless we transition to “alternative,” “new,” or “clean” sources of energy that don’t release CO2 and methane into the atmosphere, we will face ever greater societal and economic threats. See or the Intergovernmental Panel on Climate Change for the most up-to-date science on this subject.

This mindset represents a fundamental shift in the business model for forward-thinking companies in the energy industry. These companies include all of the Oil and Gas Supermajors, Midmarket Oil and Gas services companies, Retail Energy Providers, traditional Utilities, and New Energy rising stars. We are also discussing the impacts and opportunities created by the Energy Transition with other industry leaders, such as Telecom, Construction, and the Automotive sector.

While there is broad recognition that the Energy Transition has already started, each company’s expectation of the pace of the transition varies. This directly impacts the strategies they are choosing to take for the short and long term. There are also various viable paths for disrupted companies and new entrants to explore as we set off on this unprecedented global economic trek.

There are some key themes across industries that come from the need to be nimble for the uncertain future.

  • Talent Capability to acquire, retain, and develop talent that is motivated and engaged through autonomy, mastery, and purpose, but also to identify and cultivate the Solutions Architects that can navigate white space and design high value, highly adaptive solutions
  • Product Capability to effectively ideate, design, develop, continuously evolve, and service-innovative products that delight customers and respond to the changing needs of the energy grid, and 
  • Modern Data Capability to provide people with the knowledge, insights, and understanding they need to adapt to forces both internal and external to the organization

Talent Capability

The energy transition will require shifting people into roles where their past experience only partially applies. For instance, Oil and Gas companies routinely execute large, complex capital projects with a decades-long return on investment timelines. These skills are clearly relevant and sorely needed to carry out the massive infrastructure investments predicted by a Peak Carbon mindset. Organizations will need future-thinking enterprise architects to help them build resilience; reimagining all of their interacting systems and processes and to recognize and re-apply core strengths into new domain areas. Additionally, companies will be better served in most cases to retain and retrain their existing workforce for many of the roles needed in the reimagined organization, as relevant expertise will be rare or in areas that do not even exist yet.

Product Capability

At the ground level, the energy transition will involve many companies retiring their existing products and services and replacing them with alternatives that still fulfill the underlying Job To Be Done but in a carbon-neutral manner. Companies will need to try a lot of different product ideas and strategies, and likely most of them will fail. Building an organizational capability to keep innovating so as to overcome inertia will be essential for success.

Modern Data Capability

As mentioned earlier, the pace of the energy transition is unknown and will be important for organizations to monitor closely. Combining internal and external information to uncover meaningful, trusted insights in a relevant timeframe could mean the difference between success and undue difficulty. Experimentation with predictive intelligence models may also prove valuable. A combination of tying analytics to business value, carefully architecting the data platform, and applying fit-for-purpose automated governance will help transitioning organizations achieve insight-driven results.

There is broad recognition that the Energy Transition has already started, and industry leaders have fundamentally shifted away from the “Peak Oil” mindset of last decade. Many viable paths exist in the future. Which path companies choose, and which capabilities they choose to grow is largely connected to their expectation of the pace of the Energy Transition. Will there be major technological and financial obstacles that keep the pace slower, or are we at a tipping point of reinforcing systems building towards a steeply sloping S curve?

Matt Chester's picture
Matt Chester on Apr 23, 2021

At the ground level, the energy transition will involve many companies retiring their existing products and services and replacing them with alternatives that still fulfill the underlying Job To Be Done but in a carbon-neutral manner. 

We're seeing lots of the big oil companies seeking to diversify their fuel types now, perhaps in recognition of that. But are there any companies in the supply chain that are unable to do that sort of shift in their products/services? 

Derrick Bowen's picture
Derrick Bowen on Apr 26, 2021

It's been interesting to talk to companies and see what they are trying to do here. They range from drilling companies who are looking to introduce low-carbon rig platforms, to oilfield services companies that provide temporary housing and network connectivity looking to expand their target customers. We still expect there to be significant demand for plastics and other petroleum based chemicals, especially if these can be produced in a way that has neutral or negative carbon emissions, and if we can find solutions for waste stream issues. Smaller companies with less diversity in their existing portfolios will be the most challenged, and we expect to see significant consolidation as the market contracts.

Jim Stack's picture
Jim Stack on Apr 27, 2021

The words low carbon always scare me. They many times are trying to make Nuclear look clean and green in the utility area. They also tell about Flex Fuel and PZEV  in cars which does nothing. Then there are also the Hydrogen folks who have been telling how great it is for 20 years with very low results. 

Peak Oil is a real limit on Oil. We already hit that and also Peak NG but since they allow Fracking and still subsidies big Oil we don't see it. Yet we still don't have any carbon tax so no cost or limits to carbon.

   I'd like to see some real rules and fines for polluting with carbon. Stopping subsidies for Oil, Coal ,NG and Nuclear. slow but sure and get thet shift started. 

Derrick Bowen's picture
Derrick Bowen on Apr 27, 2021

Agreed, a market-based mechanism to encourage reductions in GHG emissions would help to boost the energy transition to move faster on the most sustainable generation sources that are the least costly.

Bob Meinetz's picture
Bob Meinetz on Apr 27, 2021

Jim, you're not alone. The phrase "nuclear energy" inspires irrational fear in many people, likely related to perceived associations with nuclear weapons.

Acceptance of zero-emission nuclear energy will require necessary changes in public opinion. The illusory truth effect of hearing the dangers of nuclear energy exaggerated again and again has wrought incalculable damage to the environment, an effect that can only be countered with education and familiarity with nuclear technologies.

Mark Silverstone's picture
Mark Silverstone on Apr 30, 2021

This mindset represents a fundamental shift in the business model for forward-thinking companies in the energy industry. These companies include all of the Oil and Gas Supermajors, Midmarket Oil and Gas services companies, Retail Energy Providers, traditional Utilities, and New Energy rising stars.

You are correct here Derrick.  The oil majors are trying to steer their respective ships toward sustainability.  The problem is that they don´t yet exactly know in what direction to turn. They are trying to hedge their bets and to avoid giant stranded assets.  I think there is a realization that future profits won´t be what they used to be.  And I think there has been some panic in some circles because the transition has been looking more imminent than they might have thought up to now.

But there is a great deal of engineering expertise, products and data capabilities in these companies, as you suggest, that are looking for new uses.  And they are finding some. However, investors clearly haven´t yet seen what they are looking for with these companies. 

About 20 years ago Schlumberger tried hard to find a path that concentrated their expertise in something other than in oil and gas exploration and production, as they thought that "peak oil" was closer than it turned out to be. The effort was an expensive bust.  Wall Street hammered them.  Eventually, they returned to their oilfield "roots" and helped lead the industry into "Big Data".   I fully expect that they and other primarily oil and gas related companies will make further attempts to leverage that expertise in other directions, now that "peak carbon" looks closer,  and to be more patient this time. And some will be very successful.

Derrick Bowen's picture
Derrick Bowen on Apr 30, 2021

Thanks Mark! Yes, I find it really interesting to see how different companies are responding to the new and added pressures. There is certainly room for multiple strategies, I find it interesting to look for the underlying perceptions and motivators of the different players that is leading them down different paths (example, Shell vs. ExxonMobil).

Derrick Bowen's picture
Thank Derrick for the Post!
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