Since we started talking at the RSA about the Power to Create, I have been asked to apply the idea to a variety of subjects. The most recent is the energy sector….
Generally I enjoy giving talks to outside audiences (although to protect the interests of the RSA I, as do other colleagues, have to charge for my time). Preparing gives me an opportunity for a quick dive into a sector or organisation, I often meet people on my outings who subsequently become partners or Fellows of the RSA and, like any performer, I enjoy feeling I have engaged an audience. But some gigs are tougher than others.
Yesterday I was in Amsterdam speaking at European Utility Week’s massive annual conference. I was billed as offering an outsider’s view of the sector. The organisers were kind to me and the conference programme was broad and interesting but, judging by the silence on the conference Twitter thread after I had spoken, I fear the largely besuited corporate folk in the audience found me about as relevant as the small brass band that played delegates into the main hall.
Still, waste not, want not, I thought my readers might find my analysis of greater interest.
In a transparent attempt to curry favour I started by saying that energy is arguably the single most important sector of the economy; important to national and regional security, to global sustainability, to economic growth, to quality of life and household finances. It is often said that energy policy faces a trilemma, or even ‘quadlemma’ in which it can meet some of its objectives (say affordability and medium term security of supply) but only at the cost of the others (say sustainability and long term national interest). So, I suggested, instead of choosing one objective over the others, could a focus on being a creative sector help to improve the trade-off points between them?
There are five ways in which the energy sector could become a creative force.
It could build on innovations like NEST and British Gas’ Hive to enable energy users to be much more active in managing their energy use. Notwithstanding the failure of the Green Deal, these forms of customer empowerment should extend to ways of making investing energy efficiency pay off quickly.
Also, the sector should be a champion, facilitator and financial backer of community based schemes to generate and save energy. Despite the great enthusiasm of the community energy sector and a genuinely supportive (albeit modestly-funded) Government strategy, we still lag way behind Germany and Scandinavia in the overall contribution that community based schemes make to energy supply.
Moving from customers to organisations, energy companies, especially the big utilities, should seek to exemplify the best practice of creative organisations including being mission driven, devolved in structure and encouraging innovation at all levels. It is noteworthy that one the firms featured in Frederick Laloux’s Reinventing Organisations was a major American energy company AES (although, sadly, the company eventually retreated from the radically devolved form it had adopted).
Combining these points, energy firms need to be open to the possibility of transforming their whole business model if it is the only way of aligning organisational and public interest. Even if Jeremy Rifkin is only half right there will come a time when the marginal cost of energy will have dropped dramatically. At that point it will be the firms that have moved from being commodity providers to platforms for a plethora of other providers (families, communities, co-operatives, municipal companies) that will survive and prosper. The experience of who has won and who has lost from free on-line content is instructive here.
Finally, the sector needs to make a creative contribution to public debate. In any energy gathering there is much justified complaint about the vagaries of public policy particularly in relation to the business case for investment in renewables (to know more read Alan Whitehead’s excellent blog) but to my inexpert eye the key dilemma is whether industry or government (which means you and me) carry risk. In a highly regulated sector, industry needs price predictability to make long term investment decisions but, if the government does provide price guarantees, it can end up shelling out billions in rent seeking profits when market conditions change. The best solution to this is greater transparency, consistency and trust among and between the key players.
As many commentators have argued, while trust doesn’t remove trade-offs or conflicts of interests it can make them much less expensive and dangerous. But if the industry is to contribute to a higher trust (thus more creative) environment for debate and policy making it has to behave in an open, authentic and responsible way. If anyone thinks those words apply already to the sector’s big players they should read the relevant sections of James Meek's book ‘Private island’.
Sensing that I was failing fully to convince my audience I ended with a final suggestion.
While the Amsterdam delegates were clearly expert in their fields I wondered whether there was enough passion in the gathering. I have on various occasions spoken to energy innovators, whether entrepreneurs trying to develop new energy saving devices or community activists trying to get a local energy scheme off the ground. Many of them are RSA Fellows (we have even given some small financial backing to some of their ideas) and they tend to be hugely enthusiastic. Perhaps at next year’s conference the organisers should give out some free tickets to these pioneers; they certainly wouldn’t have any doubt that energy can and must be a creative sector.