Energy powers everything we do. Where and how we create it—and how we store and distribute it—is constantly evolving. One of the most likely evolutions is electrification, which promises to have a huge impact on our climate and planet.
The case for electrification is simple. Our current climate crisis, highlighted by the latest Intergovernmental Panel on Climate Change data, has reached a tipping point. Reports suggest that electrification of the U.S. economy by 2050 could reduce greenhouse gas emissions 70%. Electricity is more efficient for individual and commercial customers, and can eliminate harmful indoor pollutants that cause cardiovascular and respiratory issues. With over 40% of electricity today being generated from renewable, non-fossil fuel sources, electrification seems the most feasible path to a zero-carbon economy.
If electrification can provide cleaner, safer, more efficient, sustainable energy and generate millions of jobs in the process, why are we not there yet? Historically, there are three often-discussed challenges. There is the economic challenge: the market and market mechanisms don’t yet exist or aren’t yet optimized. A second challenge is that it’s just too complicated to retrofit old assets and buildings—some of which can’t manage the loads required for electrification. The third challenge is that technology, whether battery capacity and/or lithium components, just isn’t ready. At their core, all three challenge are technical in nature.
Less frequently discussed are the leadership and cultural challenges, which create a “carbon lock-in.” To evolve, power industry leaders need to shift the minds, behaviors, and incentives of large groups of people—individuals, teams, utilities, municipalities, sectors—to make meaningful progress toward an urgent goal. The following are four critical steps.
Create a Compelling Vision with Multi-Stakeholder Buy-in. Electrification can be a deeply polarizing issue. Decarbonization, for some, means exciting opportunities to innovate and add value to society. For others, it can mean lost jobs and a lost way of life. It can invoke fear, anxiety, uncertainty resulting in reduced productivity, and even active resistance.
To overcome this, leaders must get aligned, even excited about the strategic business opportunities of electrification. And they must be ready to bring the excitement to life for all stakeholders: investors, current employees, future employees, customers, vendors, and communities. Each of these groups must appreciate their role in the future vision, how they can accelerate its success, and, importantly, the value of taking action now.
Promote Innovation Everywhere. Decarbonization requires wins across all areas, and leaders will have to tackle this head-on by creating cultures that prize and reward the innovation process. For example, one client we work with celebrates every $1 in operating expense savings because it unlocks $8 for capital expenditures. This engages workers to drive the improvements and ideas that will ultimately build their energy future.
There’s an enormous amount of knowledge and untapped potential in today’s workforces. Leaders can take an example from innovative technology companies to engage it. Google’s famous “20 Percent Project” gave developers and team members 20% of their work time to explore ideas. The power sector could build on this concept, encouraging the creation of both calendar space and physical space for learning and experimentation, with new materials and software for hands-on exploration.
Create Agility Through Networks.Even with urgent, accelerated action, electrification won’t happen overnight. In the meantime, teams need expertise across both carbon and decarbonized technologies to bridge from the old to the new. That means ensuring ongoing capability building, recruitment, innovation, and advancement opportunities for those maintaining the critical fossil fuel systems—while at the same time developing and onboarding the capabilities and capacities for an electric economy.
Time and again in our work, we’ve seen the benefits of internal networks in driving cross-functional ideation, action, and results. We worked with one client that saw a cross-functional team of 10 individuals identify, design, and pilot a new direct-to-customer business offering in just 90 days. The new offering was projected to deliver $40 million in revenue within five years. By stepping outside of their traditional siloed ways of working, this team accomplished in 90 days what would normally have taken the company years to achieve.
Create Multi-Stakeholder Collaboration.A hybrid power economy will require deep collaboration and knowledge sharing across organizations, and even sectors. Policymakers and market leaders working together can best shape and accelerate electrification. We’ve all seen the impressive results of such private and public sector collaboration during the pandemic.
Finding ways for workers with different areas of energy expertise to come together, share knowledge, imagine new possibilities, and mitigate risks and barriers will be critical. This means developing networks and collaboration within and across companies. Think Google versus Internet Explorer. Google envisioned the power of open minds, and open systems—the willingness to collaborate with other companies and developers while maintaining their core competency, excellent search functionality. The closed system of Internet Explorer, tied as it was to Microsoft systems, ended up petering out.
Electrification is gaining urgency. The leaders and organizations that focus on culture, innovation, collaboration, and buy-in, in addition to technical issues, will accelerate the industry’s transition to a zero-carbon economy. In the process, they and their teams will step forward as the leaders of our electrified future.
—Nick Petschek is a director and Martha Deery is a principal, both with Kotter, a change management and strategy execution firm.