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Deloitte releases mid-year outlooks for the energy industry sectors

Deloitte releases mid-year outlooks for the energy industry sectors 1

COVID-19 may have catalyzed the industry-led clean energy transition

The first six months of the year, as the spread of COVID-19 disrupted global financial and commodity markets, has presented unprecedented challenges and opportunities to industries across the world. With the release of its mid-year reports, Deloitte examines how the energy industry sectors of oil and gas, power and utilities, and renewable energy have been impacted and examines the emerging trends that now shape the outlook for the short and long term.

Oil and gas, and chemical sector – challenges before recovery

In an industry used to the highs and lows of economic and commodity price cycles, 2020 poses great challenges to oil and gas companies. While the facts on the ground are changing rapidly, the new Deloitte report pinpoints three key trends that could shape the rest of 2020, setting the ground for a challenging 2021 and a nascent recovery in the early-to-mid 2020s:

  1. Companies are looking for the next normal in the oil market during the Great Compression
  2. Need for adapting to “lower for longer” in the global natural gas markets
  3. Companies balancing short- and long-term priorities in the face of low oil prices and the energy transition

Power and utilities – the need to focus on growth opportunities

The power and utilities industry started the new decade in a strong position, identifying new opportunities for growth while leading the economy-wide clean energy transition. But just months later, the COVID-19 pandemic struck and tested the mettle of a crisis-resilient sector in new ways.

The outlook for three trends identified by Deloitte at the beginning of 2020 seems to have markedly changed. First, an industry that was raising the bar on climate goals now appears poised to vault that bar sooner thanks to a raised floor, as renewables abruptly acquired a higher share of electricity demand. Second, ensuring grid stability amid shifting, renewables-rich loads will likely require more demand-side flexibility from distributed energy resources (DER) in the form of demand response (DR). Third, pandemic-related disruptions have strengthened the case for the industry to focus on three growth areas: digital transformation, new services, and M&A opportunities.

In short, COVID-19 may have catalyzed the industry-led clean energy transition while lending urgency to strategic decisions about distributed energy resources and growth opportunities.

Renewable energy – short-term disruption with positive long-term outlook

As 2020 began, the renewable energy industry was just preparing to enter a new phase of growth driven largely by increasing customer demand, cost competitiveness, innovation, and collaboration. But within a few months, the COVID-19 pandemic caused major disruption across the sector.

While tracking the industry’s response to this uncertainty, there are three key trends to watch: market transformation, grid resiliency, and innovation and collaboration. Despite significant short-term headwinds, the long-term outlook for the renewable energy industry remains positive as it builds on the massive economies of scale achieved over the past few years.

Bart Cornelissen, Monitor Deloitte, Energy, Resources & Industrials Leader, Managing Partner, commented: “Amid these unprecedented times, company executives need to remain vigilant to the many risks and uncertainties clouding the outlook for 2020 while standing ready to embrace new opportunities for profitable growth in an evolving market landscape. Our midyear industry outlooks provide actionable insights to help organizations not only recover but also to thrive in the short- and long-term from the impact of COVID-19.”

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