Technological innovation, shifting economics, evolving regulations, and geopolitical dynamics are accelerating change across the energy sector. While perspectives differ on how quickly and deeply these transitions will unfold, the effort to reconcile energy security, cost competitiveness, and long-term decarbonization goals is creating uncertainty about the industry’s future.
From a macro perspective the energy industry continues to grow, attracting new companies and talent. But if we look deeper the changes in market segments are rapid and significant. We’ve seen solar boom from almost zero, Japan being the fourth largest country for capacity deployed followed by a slowdown with the transition from FIT to a market based system, and finally shifting back into growth mode, with a stronger focus on a distributed asset model.
The promise of 30-45 GW of offshore wind by 2040 attracted dozens of domestic and international players, but this segment is facing major headwinds with increasing costs, cancelled projects and market exits. Energy storage is now booming and attracting billions in new investment, yet there is a limit to how much storage capacity Japan will need to balance the grid, stretch out the power curve and provide critical backup.
In a constantly changing, and increasingly competitive market, having the right strategy and ability to execute is critical. With an abundance of capital entering the market, technologies the same or similar from project to project, talent becomes the key to get ahead. The line between success and failure often is defined by leadership, rather than dollars and technology.
Shifting mindsets for a shifting market
Leaders across the energy sector, from emerging new-energy startups to established oil and gas companies, must address these unprecedented and evolving challenges. This includes balancing traditional and innovative business models, risk profiles, and corporate cultures.
In the past, developers could rely on subsidies, project revenue was relatively simple to forecast and therefore lever with debt. Today however, challenges from curtailment, customer demands, shifting regulatory requirements and technological advancements make project development, delivery and financing more complex. Successfully deployed strategies in the past are not a guarantee of success in the future. Teams need to be built out with new capabilities that were not necessary just a few years ago.
Success in today’s transforming energy sector will require different qualities than in the past. Leaders will face new expectations on strategy, execution and how they hire and build their teams. Below are three of the top qualities that companies look for when hiring for leadership talent.
Ability to design, build and retain a winning team
A team’s makeup in a typical independent power producer today is different from just a few years ago. Naturally the core members who cover land acquisition, project development, engineering and project financing remain. But now there is a greater emphasis placed on strategic procurement, data analytics, market research and offtake origination and negotiation.
As the business, and thus the makeup of the team is more complex, the leader of the past, who only knows core development and execution of projects, is left behind. As one client told me recently: ‘I need someone who can run a company, not just a development platform’.
What is required to achieve this?
- Broad understanding of all the moving pieces of a modern, market-based energy developer and supplier. This includes offtake strategy, regulatory affairs, risk management, supply chain development and others.
- Ability to craft and communicate a vision. Developers, engineers and data scientists tend to think in different ways and value different things. Communicating a clear, compelling vision and purpose to unite all the moving pieces becomes critical.
- Empower over dictation. The leader is not necessarily expected to be an expert in every aspect of the business. The leader hires experts who know more, and gives them the tools, support and freedom to execute is the leader who attracts and retains the best talent.
- Foster an environment of collaboration and sharing. As new functions come into the business, their purpose, value and needs must be shared with the existing team. Integrating the new talent into teams, and having existing resources become well versed in what the new functions do, is necessary to have a smooth operation and avoid silos.
Leaders who can identify top talent across all key functions and bring them to a new organization command a lot more value than those who join a new firm solo.
Commercial innovation to create shared value
To succeed in the evolving energy landscape, leaders may need to move beyond a win/lose mindset that was prevalent in the earlier, fixed revenue business model reliant on subsidies. Today, greater progress can come from adopting a win/win “growth mindset” that emphasizes pursuing new sources of value — collaborating with suppliers, customers, and stakeholders to deploy innovative co-creation plans and solutions, develop new products and services, and ultimately build markets that do not yet exist.
This can be seen for example in revenue sharing offtake models that have become prevalent in advanced energy markets such as the UK or Australia, where the developer and offtaker will share the risk, but also the profits of trading energy from renewable and storage assets.
New fuels such as hydrogen are another example where co-creation and commercial innovation is necessary. Without shared vision, investment and accountability across upstream, midstream and downstream segments, projects will stagnate and ultimately fail to be delivered.
Leaders who are able to learn from other markets and apply lessons to Japan are gaining value. Management professionals in Japanese firms who have been seconded to joint ventures in advanced overseas markets for example are in high demand.
As there is often not yet a clear blueprint for these co-created business models where developer, offtaker, financiers and supply chain players need to collaborate with each other, creativity and innovation in commercial negotiations has become a core value driver for leadership talent.
Put simply, the one who gets hired is the one who listens, thereby understanding the needs of all stakeholders and structure agreements that share risk, providing benefit to each player. In contrast, those who push their own agenda, chase the short-term gain and take a zero-sum approach to negotiations are often passed over.
Ability to execute
At the end of the day, a wonderful strategy and quality team will not save the leader if business results fail to follow. Delivering on targets, winning projects, generating profit is still king.
Results are quantifiable and clear. How many projects in a competitive bid were won, how many MW was built, how much offtake was signed or how many projects were sold and at what margin can be measured and compared.
Recent results are more valuable than historic results — 50 MW delivered now in an innovative offtake strategy with distributed assets, for example, is worth more than 500 MW of big FIT projects years ago. As the market has become more competitive and complex, past success is not seen to automatically translate into future results.
Companies are run by investors, whether a private equity investor, venture capital player or shareholders of a publicly traded company. Investors want to see the track record, both historical and recent, to be comfortable with the decision that hiring a certain leader will ultimately lead to maximization of profits.
Real results, and the ability to clearly articulate how those results came about, and why we can expect them to translate into future success is critical in leadership hiring decision making.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.