The Just Energy Transition Ecosystem
Abundant efforts are underway to ensure and accelerate a transition to clean energy that is also just. This involves advancing environmental, social and economic justice in the process of the transition, sharing the benefits across society and minimising the risks. This is known as a Just Energy Transition (JET).
This article sets out the initial discussion points from the first phase of ReGenerate’s JET programme, in the spirit of furthering thought and debate, to accompany our Just Energy Transition Ecosystem Map and Directory
Add a couple of summary paragraphs here. Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium, totam rem aperiam, eaque ipsa quae ab illo inventore veritatis et quasi architecto beatae vitae dicta sunt explicabo.
Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit, sed quia non numquam eius modi tempora incidunt ut labore et dolore magnam aliquam quaerat voluptatem.
Ut enim ad minima veniam, quis nostrum exercitationem ullam corporis suscipit laboriosam, nisi ut aliquid ex ea commodi consequatur? Ut enim ad minima veniam, quis nostrum exercitationem ullam corporis suscipit laboriosam, nisi ut aliquid ex ea commodi consequatur?
SETTING THE SCENE
The Just Energy Transition is a common aim, yet difficult to deliver
Many of the largest energy companies have committed to transition to clean energy and away from fossil fuels. Some have also committed to doing so “justly”, by ensuring that workforces, communities and consumers are not left worse off or left behind, and perhaps even benefit, as a result of the shift to clean energy. This is easier said than done.
Central themes for this just transition are helpfully set out in The Council for Inclusive Capitalism’s Framework for Company Action on a Just Energy Transition. The pillars of the framework are:
UNIVERSAL NET-ZERO ENERGY
How to support universal access to energy and a net zero emissions world. For example, sufficient and affordable supply, and integration of consumer habits and products with a net-zero grid that leaves no-one behind. This relates directly to the consumer demand point above.
WORKFORCE EVOLUTION
How to ensure that the journey for the companies’ workers is just. For example, pacing and supporting the transition of oil and gas workers to green energy jobs with dignity, and regulation of new industries, job types and skills.
COMMUNITY RESILIENCE
How to ensure that the journey for communities affected directly and indirectly by the company’s transition is just. For example, through close collaboration with communities and local government when exiting geographies or building new infrastructure.
COLLABORATION & TRANSPARENCY
How to bring everyone on the journey and support the just transition of other organisations, whether locally, nationally or internationally. Report on progress and share knowledge and best practices across the ecosystem.
The need to accelerate the transition to clean energy has come into sharper focus amidst pressing environmental and energy security goals, and the need to think creatively about how fuel bills are reduced long term.
Yet, in practice, companies seeking to play their part in accelerating JET can seemingly face a difficult trade-off: to either slow down whilst social factors are addressed; or ignore these factors in the name of speed, potentially leaving workers, communities and consumers worse off in their wake. Neither are desirable.
The government and investors are also facing tough questions on what conditions to create for the transition, in particular how the cost of transition should be shared between companies, taxpayers, consumers, investors and pension holders, amongst others.
The potential social costs of transition are high.Risks include individuals and communities tipping into poverty if skills are no longer needed, key employers exiting a local economy, orthose who can least afford rising fuel bills seeing them rise yet higher.
Yet mitigation of these risks presents huge economic and social opportunities, including training a world-class clean energy workforce, injecting fresh investment into struggling communities, and innovating profitable solutions to fuel poverty.
The sheer scale and complexity of the challenge has been met with a booming ecosystem of investment, initiatives, organisations and research, dedicated to championing and delivering a Just Energy Transition.
Though the initial goal of our work on JET was simply to make these efforts more visible and easier to navigate, in the process we came across further insights that felt important to share. The themes in this article arose from the following activities:
Our review of over 250 organisations involved in energy transition, which can be viewed on our Just Energy Transition Ecosystem Map and Directory
A roundtable discussion with leading figures in the energy sector in Summer 2022
Desk review of major frameworks, articles and initiatives relating to Just Energy Transition. See our JET Library Here.
INSIGHTS
Noticeable patterns across the JET Ecosystem Map
These insights are presented as a point of view, based on our observations as we compiled the map. Each has far-reaching implications, and we are tabling them in the spirit of prompting further discussion, research and validation.
Our particular interest is in how companies can be better mobilised in a purpose-driven way to ensure a Just Energy Transition.
Imbalance in efforts across the four pillars of a Just Energy Transition
Efforts and narratives are weighted most heavily towards the Council for Inclusive Capitalism’s “Collaboration & Transparency” pillar (nearly two thirds of organisations), followed by the “Universal Net-Zero Energy” and “Workforce Evolution” pillars (around half of organisations touch on at least one of these). Only a quarter of organisations were obviously championing Community Resilience.
Though only a hypothesis at this point, an explanation may be that Universal Net Zero Energy and Workforce Evolution are more directly relevant to energy company profit models, whilst community resilience (for example following an exit from a location) is more about taking responsibility. Universal Net Zero Energy presents a world of new product and service opportunities, whilst tough decisions on how to restructure, retrain and hire workforces to fit clean energy business models is one of the greatest challenges faced by transitioning firms.
Opportunities to be explored further:
More proactively encourage a balance across all four pillars of the framework, in line with a truly multi-stakeholder approach - with a particular role for funders and sponsors to encourage this balance.
More specifically encourage stronger focus on Community Resilience.
The “Air Game” and the “Ground Game” across “Supply” and “Demand”
Efforts on Just Energy Transition can be crudely plotted onto the below simple framework:
The framework explained
To over-simplify, energy transition activities can be grouped as “supply side” and “demand side”. Supply side is energy generation, encompassing activity from drilling for fossil fuels to running wind farms. Demand side is the level of demand for energy, and how people access it. A transition to clean energy requires both: a supply of clean energy that meets the level of demand and is accessible to those who demand it. Infrastructure is a crucial enabler of both.
Efforts across both supply and demand sides encompass two broad areas of activity: the “Air Game” (strategy and advocacy) and the “Ground Game” (taking practical steps).
The ‘Air Game’ of powerful voices who are publicly calling for seismic shifts are crucial to JET efforts, and go well beyond activism to include business, academia, investors, consultants and industry bodies.
The “Ground Game” of transitioning to cleaner supply is also well covered both by efforts to transition fossil fuel companies, and an abundance of ventures focused on supplying clean energy.
The gap and opportunity we observed
Our analysis found that there was a significant gap in efforts on the ‘Demand-side ground game’. In practice, this gap translates to gaps in practical Net Zero solutions which are visible and accessible to the public. For example, if heat pumps are a major part of the transition, making it affordable and easy to install one.
Opportunities to be explored further:
The role of government in sharing a vision and roadmap for the future of energy consumption that companies can trust enough to invest behind
The role of innovators in making solutions scalable and affordable for consumers
The role of financial services in removing financial barriers to consumer energy transition
Consumer Trust
The difference in tone between the bulk of literature on JET and public opinion is stark. The More In Common public opinion research showed that the public’s questions are largely practical: How much is a heat pump? How many times will I need to charge my car on a long journey?
As the public seek answers, trust in politicians, media and the “business elite” is low, whilst trust in the engineers they deal with, such as gas engineers and car mechanics, is high.
The approach to transition is also important. The public are tired of being asked to constantly change behaviour, preferring a “gradual transition that gets things right”. Read the full More In Common report here.
Opportunities to be explored further:
Who should help the public engage with the Just Energy Transition?
The role of existing, trusted engineer networks to provide advice and access to consumers on how to transition
Greater emphasis on the role of the finance sector than of government.
Initiatives that specifically focused on the Finance sector’s role in JET were noticeably more prolific than those seeking to inform, challenge and support the role of government.
We found this imbalance interesting because together, the finance sector and government are two of the most powerful systemic enablers of companies playing their part in JET.
In particular, though many of the initiatives cite the government as a key and engaged stakeholder, it appears that less is being done to understand the role the government could and should play in the “just” dimension of energy transition, and to simplify and strengthen bridges for constructive dialogue.
Opportunities to be explored further:
Greater visibility of where and how in government the ‘just’ element of energy transition is being considered could be a quick win to foster collaboration with the efforts represented on the map.
Regardless of views on the role of state, crucial questions need to be consciously faced including who pays for transition, and whether profit and “doing the right thing” are believed to be compatible rather than a trade-off.
Political parties as an important actor
While we have not included political parties in the ecosystem map, it is worth mentioning that they play a crucial role in ensuring a just transition, and that some have publicly shared thinking on the “just” element.
We believe it is crucial that JET is explored across political parties. The existential need for transition to clean energy is relatively well accepted across political divides. Poor consideration of social consequences not only creates problems that only an expensive government safety net can solve, but also misses the industrial and growth strategy opportunity of a generation: to accelerate the creation of net zero products and marketplaces that is already underway, and help current and future workforces, and their communities, benefit from the ‘green boom’.
Literature: a flurry of publications surrounding COP 26
A huge focus on JET has yielded many useful publications, which we have compiled in our Just Energy Transition Library. It covers a seven year period and ranges from frameworks and guidance to practical toolkits.
Noticeable was that just over a quarter of our library entries were published in the six months surrounding COP26 (July 2021 to February 2022). This reinforces both the power of such an event to inspire investment in furthering thought and making it accessible.
It also raises the question of follow up. How many excellent articles got lost in the ‘noise’ of so many being published around the same time? Have recommendations been taken forward? Does fresh data present an opportunity for a refreshed view? Are frameworks being used?
The need for collaboration
As we collated the summary mission statements of over 200 organisations championing JET in some way, it was striking how often organisations with no apparent affiliation had similar mission statements. It seems likely that there is duplication of effort and resource, which we hope this directory will help address.
This level of alignment is both heartening as an excellent starting point for collaboration, and something to watch as a possible sign of duplication.
Opportunities to be explored further:
The importance of actively seeking common ground, and opportunities to support and collaborate as a first step, before starting further new initiatives.
Larger initiatives could help resource, partner with and give prominence to smaller initiatives that speak to ‘gaps’ in efforts, such as consumer and community transition.
The presence of super-nodes
Some organisations and initiatives were clearly at the epicentre of thought leadership and connection, and came up repeatedly in conversation as a starting point for anyone working on JET, not only for content, but also for seeing who is collaborating on what. Those we defined as “Super Nodes” are visible in our Directory, and include the Grantham Research Institute at the London School of Economics (LSE GRI), Financing a Just Transition Alliance (FJTA) which is coordinated by the LSE GRI, Council for Inclusive Capitalism, Sustainable Markets Initiative, Impact Investing Institute, and Impact Management Platform.
Super-nodes have a crucial role to play in fostering Collaboration and Transparency, in particular by finding common ground between initiatives, helping spot and address duplicated effort, and connecting stakeholders from different parts of the system.
Opportunity to be explored further
It is particularly important that Super-nodes have visible and accessible mechanisms for engaging with their work, to keep networks open to the broadening circle of stakeholders who want to participate in the JET agenda.
CLOSING THOUGHT
Evolving from a trade-off mentality to being purpose-driven
The transition to clean energy presents fantastic commercial and economic growth opportunities, alongside energy security, the social benefits of cheaper energy and the environmental benefits of reducing reliance on fossil fuels. JET is intrinsically purpose-driven. And yet the notion of ‘purpose-driven’ is all too often perceived as compromising - or even being at odds with - profitability and growth.
Energy transition can not be at the expense of the poor. The jobs, local regeneration and new era of greater energy security present huge opportunities to mitigate adverse impacts of transition on the poorest, and improve lives.
Purpose-driven companies deliver their commercial outcomes in a way that benefits people and the planet, without profiting from harm. The superior performance of this approach is now well evidenced in both research and real world examples. Applying the purpose-driven approach is to apply a cutting edge, commercially powerful strategic frame. Though more and more businesses are attempting to operate in a purpose-driven way, it is not as easy in practice, and reaping its full commercial and societal benefits will require better collaboration from the wider system, including government and the investment community.
Calling for government, investors, businesses and other stakeholders to rally behind a Just Energy Transition is not a call for nice-to-have philanthropy, anti-growth, or a trade-off between profit and “doing the right thing”. It is a call to embrace a new commercial and economic era, and all the innovation, growth, skills and job-creation opportunity this presents.
