These last few years have marked a particularly tumultuous time for the energy industry.
From global COVID-19 lockdowns bringing demand to a screeching halt for commodities like crude oil to dramatic shifts in energy supply lines from geopolitical pressures in Europe, the industry is attempting to find footing while facing a new set of unique challenges.
While most experts expect energy consumption to grow by 1.3% in 2023, high prices, extreme weather, geopolitical volatility, and a demand for renewable resources is establishing a new paradigm for energy companies.
These trends will define how organizations interact and do business — and those with the right tools will flourish.
Our methods are trusted by forward-thinking companies across virtually every industry.
While trends in the energy sector may evolve, our training empowers individuals to tackle whatever challenges they might face so they can embrace the tension and find creative breakthroughs.
Let’s explore some key challenges and trends facing the energy sector today and learn how the right negotiation skills can make all the difference.
Facing Headwinds: Geopolitical Pressures, Climate Extremes, and Market Volatility
With an increasingly globalized industry, the repercussions of conflicts thousands of miles away ripple across the world.
In 2022, the sector saw the weaponization of energy exports from Russia after the invasion of Ukraine. Many in the industry consider this event a wake-up call for countries relying heavily on energy imports from sources sensitive to geopolitical risks.
While natural gas prices have fallen to pre-invasion levels, the peak of over $300 per megawatt hour in August 2022 still hangs heavy in the minds of industry experts.
Gas prices and other energy commodities may be stabilizing, but it means organizations will need to practice enhanced flexibility in their approach to negotiations.
Navigating geopolitical pressures like the situation in Europe might mean securing favorable pricing, contracts, and supply chain agreements that provide stability and resilience.
This allows businesses to weather market volatility with greater ease.
If it wasn’t for foundational changes to the gas supply mix in Northwest Europe, partly spurred by new agreements and relationships, countries like the UK would still face challenges meeting demand. These events created a new complex dynamic in the industry and stressed existing global interdependencies.
Of course, it’s not just geopolitical pressures causing pain but also challenges from extreme weather that seems to be the new norm.
Eric Gimon, a senior fellow with Energy Innovation, speaks to this, saying, “changing climate and extreme weather events… are posing a threat to grid reliability.”
These extreme weather anomalies are stressing physical infrastructure.
This puts an emphasis on procurement partnerships for new equipment or stronger infrastructure enhancements. Moreover, these events affect groups of energy companies in particular regions, highlighting the importance of partnerships and collaborative efforts at reimagining these systems.
Climate change is becoming a more salient issue for energy companies.
Effective negotiators will be the key to securing agreements that enhance resilience, promote cooperation, and encourage investment in sustainable infrastructure to better weather these challenges.
RED BEAR Training helps organizations build the negotiation processes that allow them to tackle these new challenges with confidence.
“RED BEAR Training helps organizations build the negotiation processes that allow them to tackle these new challenges with confidence.”
The Increasingly Global Nature of Energy Commodities
The tightly wound global interdependencies of energy commodities are not just a cause for concern.
In reality, the nature of these globalized goods is much more complex.
Take U.S. natural gas.
These levels are expected to stabilize, with LNG production peaking at over 20+ cubic feet produced per day throughout 2023.
As energy resources like U.S. LNG become increasingly critical on a global scale, companies will need to build strategic alliances and partnerships to ensure access to resources and markets while mitigating the impact of geopolitical tensions.
But it’s more than the commodity itself; it’s also the means of production.
These interdependencies affect equipment procurement. For example, microchip production in Taiwan and China fuels clean energy technology in the West. As Adam Tooze of Columbia University recounts, “the energy transition will be a driving force towards a new cocktail of globalization rather than a typical continuity."
It’s becoming more important to interact with a larger, more globalized selection of energy suppliers, consumers, and equipment manufacturers. The right negotiation training will help organizations build strong relationships and secure favorable terms, regardless of cultural or language barriers.
Moreover, the interconnected nature of the market will place a heavy burden on transportation and logistics as well.
Having the framework for effective negotiations in hand, organizations can establish partnerships with reliable logistics providers, optimizing costs and ensuring the efficient delivery of energy commodities to positively impact overall profitability.
Lastly, this new era of globalized commerce means regulatory compliance is paramount.
Skilled negotiation teams will need to establish procedures and methods to navigate complex regulatory frameworks in international markets. They’ll need to navigate these complexities and ensure compliance while minimizing potential risks and penalties.
The Rise of Renewables
Another key trend in the energy sector is the drive toward renewables.
While this trend is nothing new, more organizations are realizing the value of ESG efforts to reduce emissions and provide reliable sources of renewable power to consumers.
In the U.S. alone, this shift toward renewables is expected to reduce overall emissions by up to 40% in 2030. These efforts are almost entirely from solar and wind.
In 2023, these renewable sources will make up 24% of all U.S. energy production.
As renewables gain more traction in the market, organizations will need to establish partnerships with tech providers, suppliers, and other important stakeholders to establish mutually beneficial agreements that drive innovation and growth.
While efforts toward sustainable infrastructure and renewable energy are shaping domestic production, the burden of responsible change will rest in the emerging markets of the Global South.
Emerging markets are looking to successfully transition to cleaner systems.
As it stands today, investments in these areas are looking to increase.
By 2030, annual investment in these critical markets needs to be multiplied by more than seven — from less than $150 billion to over $1 trillion.
These efforts are essential to meeting net-zero emission goals by 2050.
Organizations must secure funding and investment opportunities by effectively presenting the long-term value and potential returns of projects to investors and financial institutions.
Moreover, internal negotiations will drive the salience of these issues within organizations. Negotiators must leverage the power of both competitive and collaborative approaches to tackle these complex and global problems and show value to internal stakeholders.
Additionally, the push to revamp energy infrastructure will affect local communities and the environment — emphasizing tactical cultural understanding and negotiation.
RED BEAR Negotiation Training can help teams facilitate these types of constructive conversations with stakeholders to address concerns and foster a positive relationship between companies and communities.
Ignite Growth: Unleash Your Organization’s Negotiation Potential
The energy sector is facing a fresh set of challenges paired with long-standing issues and trends.
Geopolitical pressures, global renewable energy efforts, and an increasingly globalized supply chain will all shape the industry for the next decade. Organizations looking to take advantage of these shifting tides will need to master skills like negotiation to stay ahead and keep innovating.
RED BEAR Negotiation Training gives your team the tools needed to prepare for current and upcoming volatility and come out successful.
Over 45% of Fortune 500 companies trust RED BEAR Training, and for a good reason.
We use Strategic Alignment to fine-tune and tailor training to meet your organization's specific needs. Moreover, we focus on providing unforgettable learning experiences that stick for teams all over the world.
Our training continues beyond the end of the program. With Coaching and Reinforcement efforts, you can watch your team grow and progress after the workshop ends.
The best part? Our team provides measurable results so you can see the impact of effective training.
Is your team ready to embrace tension, be bold, and learn the right principles and behaviors to master negotiation in any situation?
Fill out our contact form and we will be back to you in no later than one business day.