How the renewables industry can influence the regulatory framework
The energy transition is on an irreversible trajectory. The world has confirmed it will move away from hydrocarbons as a source of energy @COP28. Regulations are pivoting to favour blue and green hydrogen solutions. Increasingly, governments worldwide look at how they navigate the energy transition as a potential source of competitive advantage. Yet, there are counter currents at play. Cost and interest-rate pressures are putting some renewable business models under strain. And the agricultural sector has been effective in pairing back Europe’s green ambitions. Paradoxically, Russia’s war in Ukraine has acted as an accelerator of and a break on the energy transition at the same time.
In this context, forward-looking leaders in the renewable energy sector are keen to enhance their capacity to engage with governments. Some larger renewable energy businesses have solid GRPA capabilities to leverage and build out. But many don’t. What concrete strategies can renewable energy businesses pursue to influence the regulatory framework?
Build your own GRPA (Government Relations and Public Affairs) capabilities
When renewable energy businesses develop their clean energy solutions and business models, they test them in local markets. Dealing with the municipality, for example, offers these renewables businesses the opportunity to build GRPA experience early. To achieve scale however, renewable energy businesses often need the national regulatory framework to be altered. Whilst engaging the government may seem a daunting task fraught with risk, government officials are actively looking for input. Often, it will be a matter of identifying the right hook for the first engagement. Start, for example, by mapping what your business offers to what your country needs by reviewing the NDC Registry, which captures what nations have committed to in the context of the COP. GRPA is a discipline that you learn by doing. It involves articulating under which regulatory conditions your solution can create the most value for government and society.
Find strength in numbers
To be taken seriously by government officials and effectively create an impact, sector participants have traditionally combined resources in a trade association or energy coalition. In the renewables space, such initiatives exist locally and internationally. In Scotland, the Scottish Hydrogen and Fuel Cell Association has brought together parties interested in Hydrogen since 2004. For example, Wind Europe and Solar Power Europe bring together national business associations and international companies in the wind energy and solar power businesses, respectively. The Clean Hydrogen Partnership is a public-private initiative, also operating at the EU level, that supports research and innovation activities in hydrogen technologies and has three members: the European Commission, Hydrogen Europe (a trade association) and Hydrogen Europe Research. How could you identify the correct trade association for your business? One could contact international agencies, such as IRENA (International Renewables Energy Agency), for advice on which associations serve your sector. And work with thought leaders and the media to amplify your message. Look at RMI or Bloomberg Green as potential partners in this regard.
Know when to reach out to established affiliates
According to Deloitte, 76% of power and utility companies are either planning or depending on new transmission projects to boost renewable energy access, and some traditional Oil & Gas companies are working to diversify their portfolio away from hydrocarbons and invest in renewables. Some established utilities, such as Orsted, E.ON, and Xcel Energy, have dedicated and experienced GRPA resources supporting their renewables portfolio. And despite a recent revival of the primate of shareholder value at oil majors such as Shell, BP, and TotalEnergies, they have also invested in GRPA resources to support the transition over the long term to renewables. These companies employ well-connected and experienced GRPA teams that could be of enormous value to renewable energy companies. They will investigate partnerships with promising renewable energy companies like yours. But whilst it is tempting to delegate the GRPA task to specialists in the corporate eco-system you are part of, no one knows what your business needs better than you. If the design of the regulatory framework can make or break your business, don’t leave the influencing of it to someone who may have a different agenda.
Hire a GRPA Firm to represent you
According to the Economist, renewable energy companies have increased their lobbying spending from around $24 million per year between 2013 and 2020 to $38 million in 2021 and $47 million in 2022. There is fierce competition to obtain available funding for renewable energy projects from government agencies. The substantial government grants available can help up-and-coming companies take their business to the next level. The US Inflation Reduction Act allocates at least $369 billion in direct subsidies and tax credits to decarbonization-related sectors, an opportunity that could easily be missed without the right GRPA capabilities. If your renewable energy business does not have an internal GRPA team, it can be wise to outsource this task to a specialized consultancy. The actual frontrunners in the energy transition are supported by increasingly specialized agencies, such as SustainablePublicAffairs in Brussels.
Contact us
At GR-IQ, we believe the current environment presents an exceptional opportunity for renewable energy companies to enhance their GRPA capability to achieve the regulatory outcomes they need. If one or more of the themes in this article apply to your situation, we would love to hear from you!