Transition PlanningPreventable Surprises lobbies stakeholders to heed the warning signs that could protect shareholders and prevent or mitigate environmental disaster. We seek to identify and address market distortions that incentivise short-term, rent-seeking behaviour that is contrary to the interests of long-term investors. We have identified energy utilities, the largest consumer of fossil fuels, as a sector that is particularly exposed to the type of surprise we seek to prevent in our work.
Utilities face enormous change due to falling prices for, and technology improvements in, renewable energy, energy storage, and smart grid systems. Failure to adapt to these changes will have deleterious effects on: Planet: Emissions-reductions targets will be exceeded as power companies cling to outmoded, carbon-intensive ways of generating and distributing power. Global warming races past 4°C. Profits: Shareholder value plummets as utilities enter a death spiral already witnessed in the coal industry. People: The number of climate refugees spirals as low-lying areas become uninhabitable. The International Energy Agency’s roadmap for limiting global warming to 2°C makes it clear that the lion’s share of emissions reductions needs to come from the utility sector (see below). Our work with 60 positive mavericks led us to conclude that the appropriate ask of utilities is that they develop and publish transition plans that position their companies for a low-carbon future, while protecting shareholders from value destruction during the transition. |
To help utilities tackle the challenges ahead, we developed a transition plan guidance document that advocates a business model based on innovation, risk, and change management, not the highly centralized, low risk, highly regulated model of the past. The guidance is also aimed at investors who wish to advocate for meaningful action by utility company management.
Among the goals set out for utilities in the guidance document:
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