What will the Energy & Materials industry look like in 2025?
Shifting market demands, regulatory pressure and new technologies are transforming the Energy & Materials (E&M) industry, and companies are seeking new ways to create value and remain competitive. “Today’s global energy and materials industries are characterized by significant shifts, which are creating new opportunities,” according to the World Economic Forum. “New trends and technologies are changing the way energy is produced, delivered and consumed. In parallel, and under the current production-consumption model, world demand for raw materials could double by 2060.”
Here are some ways that today’s key trends will shape the industry over the next five years.
Extended enterprises support agile innovation
Major E&M players are growing through merger and acquisition activity, enabling them to add capabilities across the value chain and deliver on ever larger projects. But alongside its many benefits, this growth can increase complexity and slow down innovation.
In the next few years we’ll see these major players increasingly seeking to bring onboard the agile innovation capability of start-ups and small businesses, which can quickly develop new products, services and business models in response to changing market demands. The key factor in their success will be whether those large companies can streamline the integration of partners as part of their organizational ecosystem. By 2025 those that take an extended-enterprise approach – making it simple for partners to access and share information and work with teams across the organization – will emerge as the leaders in agile innovation.
Sustainability takes center stage
Sustainability will continue to drive change in the industry as governments, regulators, businesses and consumers commit to goals including the electrification of vehicles, use of renewable energy and a move away from fossil fuels. As this trend plays out, the effects across the E&M industry will be profound.
By 2025, leading oil and gas companies will have diversified to serve a spectrum of electrification markets – for example, producing electricity from resources like natural gas, building and operating their own solar or wind farms, or providing direct sales of electricity or energy management services.
A more flexible, decentralized power and utilities sector will emerge, consisting of smaller plants generating locally produced renewable energy. The combined effect of government subsidies, economies of scale and the falling costs of technologies such as onshore wind and solar photovoltaic generation will accelerate the growth of this sector in the next few years.
The circular economy will also gain a strong foothold as waste is harnessed to create energy instead of being sent to landfill. For example, by 2025 a new EcoPark in Edmonton, London, UK will be operational, using up to 700,000 tons of non-recyclable waste per year to supply both heat and power.
Added value counters commodity
In the age of experience, selling commodities is not enough. For E&M companies, diversification is the key to competitive differentiation, and this trend will play out across the industry.
The effect of electrification and the increasing shift to renewables will see E&M companies become more creative as they diversify further by developing new products and markets. Oil and gas companies, for instance, are already looking to joint ventures with other major players to increase the added value of their crude oil by making sure it’s used in chemical production.
Meanwhile major chemical companies are moving away from selling materials and formulation properties to become “specialty as a service” providers. Leveraging advanced technologies like 3D simulation, they will continue to replace physical experiments and enable faster, more agile innovation and rapid reactions to changes in market demand. By 2025, expect to see more chemical companies developing innovative business models, accelerating time-to-market and increasing added value as they enter a growing number of specialist markets.
Disciplines draw together
Talent and teamwork are the bedrock of innovation and profitability. By 2025, the most successful E&M companies will be those that use digital technologies to leverage expertise from across their ecosystem, bringing talent together to collaborate and share ideas across disciplines, departments and geographies in real time. Increased automation will reduce labor-intensive tasks and minimize risk, enabling people to focus on creativity and quality. Companies that don’t seriously consider how they can provide the right environment for innovation now, will fall behind as their competitors up the stakes.
Powered by knowledge
One thing all successful E&M firms will have in common in 2025 is an ability to leverage their most important asset – knowledge. Leading organizations will be those that can create an enterprise ecosystem from both a technical and an organizational standpoint, so they can structure their communication efficiently however complex the project. By making the right data available to the right people in the right context, and using tools like virtual and augmented reality to provide immersive, user-specific experiences, these companies will quickly adapt to internal and external changes while attracting new talent and rapidly developing the skills and expertise they need.