The global energy and utilities sector is characterised by several new and powerful market dynamics including nationalism, policy changes, lighter regulations and reduced corporate taxes. Historical industry market leaders are being edged out of their top positions by new and emerging competitors. These forces combined are beginning to shape and drive procurement strategies at traditional energy and utilities companies.
The Trump administration has placed energy policy as a central pillar of its growth strategy. Its rollback of Obama-era climate policies, its reduction of regulations, its ’America First’ policy and plans to lower corporate taxes are colliding with an energy market facing a deepening natural gas glut, depressed oil prices, decreasing solar and wind energy prices, as well as a nuclear power industry that is very much alive outside the US, Japan and Germany.
The emergence of the US as the world’s energy superpower – primarily as a result of hydraulic fracturing, also known as ’fracking’ – is contributing to the resetting of global energy markets. Investment in natural gas electric power production is increasing rapidly due to the cost advantages this technique offers. Wind power has matured following the investment in Europe’s massive ocean-based wind farms. Solar is adding market share with its low-cost manufacturing base firmly established in China. Around 60 new nuclear reactors are under construction around the world, meanwhile, with China actively building 20 and planning more than 50. The nation is expected to surpass the US as the global leader in nuclear power production by 2026.
As the industry undergoes these fundamental shifts, procurement functions buying energy are now becoming strategic partners to their management teams. Implementing new sourcing methods, techniques and tools have improved the speed-to-value role of sourcing decisions.
Yet, the current environment is changing the landscape for procurement. Functions need to be more informed, better connected and highly agile in their response to these evolving conditions.
Fail to adapt or fail to understand what is happening in the market, and procurement executives will be unable able to deliver what they need to support the business.
Stephen Bucalo is a vice president for consulting at GEP
On November 7, a webinar from GEP will evaluate the effect of these current and emerging market dynamics on sourcing and procurement in the energy and utilities sector. The session will cover a broad base of energy topics while focusing on three key subsectors—nuclear, wind and solar—and help forward-thinking procurement organisations meet these challenges in terms of talent, skills and tools
Register for the webinar here: event.on24.com/wcc/r/1533672/5975FDABC4DF7662536503760096BE91
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.