Australia’s energy ecosystem and the resistance to change

This is an extract from “Dare to dream! – Icarus rewritten!”, a speech by ARENA chairman Greg Bourne, delivered to the Australian National University on November 17, 2014. We will be running further extracts from the speech in the days to come.

Let’s take look at the energy world – a world from which I came, and let’s think about it as an energy ecosystem.

There are multiple scales; habitats, communities, populations, individuals that make up the energy ecosystem – in fact there are several interconnecting ecosystems at work. Connectivity and breadth are enormous. There are predators and prey; bottom feeders and nutrient recyclers; passive and aggressive actors; colonisers and extinction candidates and all of the above are highly interdependent. Truly a rich tapestry of a modern industrial ecosystem.

So why do I use the ecosystem metaphor? I do so firstly to illustrate the incredibly complex interplay of business, business actors, regulators, governments and our energy consuming society. Secondly in order bring in the concepts of resilience and incumbency.

In the climate change debate much is made of the importance of “resilience”; resilience in our economies, in our coastal cities, our agricultural areas, within communities themselves and within the individual. Many care about the resilience of species, habitats and ecoregions. In most of these debates the prime concern is with regard to conserving what is – what was; as sort of freeze frame please if you like. And yet we actually live in a world, which is a complex adaptive system where stasis is abhorred!

One of the most pertinent understandings of resilience is the capacity of a system to absorb disturbance and still retain its basic form and function. This definition intrinsically holds that other stable states are possible. Characteristics such as resistance, latitude and precariousness are ascribed.

Resilience is seen as a positive attribute if you prefer the state you are in, a negative one if you want change.

So let’s look at the flip side of this coin called resilience – perhaps we might call it incumbency!

This is not meant to be a pejorative – rather the observation that; the rich tapestry of a modern industrial ecosystem prefers to stay in the state it is – it actively resists change. It avoids precariousness like the plague.

If at the energy ecosystem level, change is resisted; with the invisible hand well at work; so too is change at the level of the incumbent firm.

Here perhaps we might find the biological term, immune response helpful. Many of us will have experienced the effect in the world of work.

It is incredibly difficult to morph a firm. To change an oil company into an energy company is difficult enough. To change an oil company into a renewable energy company – well nigh impossible! But let’s look at the human and market reasons as to why.

I’ve used the six words; promote, protect, partition, isolate, reject, eject to picture the sequence of what all to often happens.

Firstly the new idea is vigorously promoted – a brave new world with brave new individuals promising a product line, division, market etc. Next it is protected from the normal cut and thrust of internal bidding for capital. It is partitioned from much of the core bureaucratic processes. By now it is already beginning to feel isolated. This is just fine in good times but times change! The market wants greater returns, capital becomes tight, the originating CEO walks or is walked. The core is told to stick to the knitting – the margin is marginalised. The interloper is rejected and set up as a possible spin-off. Eventually it is ejected usually at a loss. – And so the cycle continues.

Some firms learn from the experience and carry the lessons in their DNA – most learn to avoid step-outs. Some learn how to do it better next time.

Change is difficult – very difficult!

As we try to tackle our emissions through enhancing energy efficiency and introducing renewable energy; for the energy ecosystem it is akin to actually courting a change of state. Fossil fuels at first predominate; renewable energy colonises and gains a foothold in the ecosystem – an alien species – an exotic – an interloper. The basin shallows, life become more precarious, two states exist side by side – which one will prevail? Time will tell.

Of course there are many paths to the future and many stable states – for a time. Which ones happen depends on decisions yet to be made and events yet to be experienced.

So back to change; why is it so difficult?

I like to think of the change process as having five steps. There’s the invention of the idea – the eureka moment. The road testing – does this really work – or was I in the wrong bath? Assuming the idea does compute – networking for adoption to me is the next step. New ideas are resisted – they are only adopted if sufficient actors adopt them as their own. Only then can a critical mass be built and finally full adoption; that is at a level the market determines.

At the very moment of invention is the maximum propensity to absolutely annoy everyone. Victor Hugo’s quote “one can resist the invasion of armies – one cannot resist the invasion of ideas”, I do believe is right – in the long run. But in the short run the resistance is fierce.

So once more back to the energy ecosystem, so how far have we come? Just over 2% of primary energy supply in 20 years, 5.3% of the world’s electricity generation excluding hydro. Accelerating – yes – near a threshold – not yet. Precariousness for fossil fuel companies – yes for some – no for most.

To accelerate the change is not easy but can be done, but it requires a sophisticated understanding of the players in the energy ecosystem. What currently is on trend to take about 100 years, could be done in 50 or perhaps even less.

This is an extract from “Dare to dream! – Icarus rewritten!”, a speech by ARENA chairman Greg Bourne, delivered to the Australian National University on November 17, 2014. We will be running further extracts from the speech in the days to come.