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The energy industry divide during COVID-19

As many of us reflect on past experiences with crises, I’m reminded of my time with GE’s renewable energy business

As many of us reflect on past experiences with crises, I’m reminded of my time with GE’s renewable energy business. 

In the wake of the 2008 financial crisis, US-installed wind power capacity more than doubled over the next four years, from 25 to 60 gigawatts. The 14 gigawatts installed in 2012 remain a single-year record. Government stimulus policies played a critical role, but so did the ability of the industry to adapt and prepare for a record-setting recovery.

It is no coincidence that GE’s wind business also adopted field service management software in 2012. Business growth had quickly exposed our service challenges: tracking the installed base as-maintained in the field, managing crews, and enabling field technicians to maintain a proliferation of wind turbines across the country. As installations levelled off after 2012, the aftermarket became even more critical to the business: thanks in part to our improved digital capabilities, our service revenues doubled between 2012 and 2015.

Outlooks on Digital Service Initiatives Divide the Industry  

The COVID-19 crisis—and government responses—will likely differ from the financial crisis in important ways, including their impact on the energy industry. Renewable energy may receive less government stimulus support this time, yet its much greater maturity and investor support today could help it sustain reasonable, albeit lower, growth despite manufacturing disruptions. The oil sector, meanwhile, is experiencing a historic drop in oil demand that is rippling across the industry. Analyst firm Rystad Energy projects a contraction of 1 million jobs—over 20%—in oilfield services this year. Producers and service companies have already announced spending and workforce cutbacks to stave off major losses or potential bankruptcies.

It is reasonable to question the relevance of digital initiatives amid such uncertainty, and we expect to see a divergence in the industry. Some—call them the “paralyzed” group—may push their digital initiatives out indefinitely, citing a need to focus on cash flow and surviving a market downturn. To those companies, I would ask two questions:

  1. Could a digital service initiative actually help you in addressing your new priorities of cash, revenue recognition, and cost-out? 

  2. Could a digital service initiative better prepare you to take advantage of the eventual recovery?

A second group of companies—call them the “catalyzed” group—may push forward with, or even prioritize, their digital service initiatives. They would answer “yes” to both questions. These are companies that see a potential competitive advantage in staying ahead of the curve. They recognize that some investments that make sense in a non-crisis setting may make even more sense during a crisis.

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Staying Competitive Requires a Dynamic Solution

Already, we are seeing energy companies pay more attention to certain capabilities of, and outcomes from, field service. Dynamic safety checklists, for example, become even more important in ensuring workers address emerging distancing or equipment requirements.

Remote expert collaboration, meanwhile, can accelerate problem-solving while supporting the business case for a reduced onsite presence—whether that is temporary or longer-lasting. Some power and utility asset operators report that they are enforcing shift management to keep field workers in smaller groups. Others have shown greater interest in remote operations, utilizing asset analytics and mobile collaboration, to minimize site visits by field personnel. 

Solutions may also be reevaluated for their ability to drive metrics and outcomes different than those for which they were originally considered. For example, an oilfield service company that not long ago was looking for a solution to manage dramatic business growth may now be more focused on accelerating invoicing, cash flow, and revenue capture in order to survive the market downturn. Or a turbine manufacturer might now seek to prioritize “customer intimacy” and contractor utilization as market and workforce conditions change.

Ultimately, companies that will continue to successfully service the energy sector will rely on solutions that are flexible and adaptable to the industry dynamics, cycles, and evolving business models of the profound long-term transition that their industry is undergoing. The COVID-19 crisis does not change this fundamental reality, but it may accelerate the divergence between companies that see digital service investments as a luxury and those that understand it to be an existential requirement and core to their competitive advantage.

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