POWER COMPANIES STRATEGY ADJUSTMENTS TOWARDS GREEN TRANSITION

Abstract

The green transition creates revolutionary challenges to power companies that have to adjust their activity into new conditions. Green transition should be perceived as a transition from the economic system based mainly on fossil fuels to the system based on renewable and low-emission sources and ultimately emission-free production methods. Observed process shall be defined as green industry revolution. The changes in the strategy of power companies are required by the development of green economy, public expectations and changes in financial markets towards decarbonization and renewable energy sources. Hence, power companies need to reorient their strategies in a way that ensures profitable operation in fundamentally changed environment and secure economic results against rapidly increasing climate risk and both customers and decision makers’ expectations to meet climate goals. There is noticed last years an increasing uncertainty concerning the future shape of the market, on which power companies operate, facing the need to take the fundamental decisions related to their future business model. New market conditions change the sources of profits and importance of current value chains elements, new entities enter the energy market, customers expect new services and existing technology does not provide expected profitability. Strategy should provide answer concerning financial perspective of power company ensuring necessary funds for investments and daily activity. It can be completed only when power company meets the requirements of customers that expect primarily the reduction of carbon footprint while providing cheap power and security of supply. It requires to consider in the strategy not only the development of RES technology and expected technology maturation and commercialization of green hydrogen but also changes in grid management, energy storage, digitalization or prosumers. The future of power companies is determined by regulatory environment creating not only conditions for particular technologies development, but taxes, fees and market-based pollution reduction mechanisms. There become useless the existing models of the power sector operating and approach to the analysis of its future. Author proposes to perceive strategy not only as hypothesis about power company future, but as plan for programming the future of company towards necessary developments, securing profitability and continuity of operations in changed market and new regulatory environment. The structure of the power companies’ operations should evolve into business models ensuring success of such defined strategy. The aim of the article is to define necessary changes in the power companies strategy and its scope for their reorganization and adaptation to new challenges of green transition. Conclusions of the research and considerations concluded in the article are presented in the section dedicated to the recommendations for strategy of power companies.