@ the World Economic Forum in Davos: How can reducing energy demand accelerate the climate transition and create economic opportunity?

Sarah von Fischer: Hello, and welcome to a special live recording of Take on Tomorrow. I’m Sarah von Fischer in Davos, at the annual meeting of the World Economic Forum. For over 50 years, this has been a space where businesses, governments, and civil society meet to discuss and tackle some of the biggest challenges facing the world. One of the big issues on the agenda is climate change—and the need to deliver a net-zero transition by 2050. On current estimates, global energy demand is expected to rise by up to 33% over that period. So the world doesn’t just need to turn existing energy generation green; we need to create additional capacity, as well. But is there another way to take action? What if we could bring energy demand down and make the challenge of transforming energy supply easier? Transforming energy demand, a recent report published by the World Economic Forum in collaboration with PwC, found that by using simple solutions right now, business can reduce their energy demand and save trillions annually. And to discuss this opportunity is Rob Turner, a PwC UK partner in PwC’s energy transition business who has been working on this energy demand report with the World Economic Forum. Welcome to you, Rob.

Rob Turner: Thank you.

Sarah: And Ramya Krishnaswamy. Ramya manages the International Business Council, a community of over 120 CEOs convened by the World Economic Forum. And most recently, they’ve turned their attention to energy demand. Ramya is also a member of the executive committee of the World Economic Forum. Welcome, Ramya.

Ramya Krishnaswamy: Thank you for having me.

Sarah: So, Ramya, I want to start with you today. You’re in charge of bringing together this large group of CEOs, really, from around the world, from some very big businesses. So why did they decide that energy demand was so important to focus on right now?

Ramya: As you know, the World Economic Forum is a foremost institution for advancing public–private cooperation. And no issue is bigger than the challenge of driving energy transition, and it’s forecasted to be a US$30 trillion business by 2030. And public–private cooperation in this area is more important than any other issue we probably are thinking about today. And one area we thought was a clear white space was thinking about transforming energy demand, really thinking about energy consumption, and how do we get to the growth that the world needs by using less energy, by using it more efficiently, and making energy do more for us? So that’s really the angle which we find is less, sort of, tackled by governments and businesses worldwide. And hence, we started to work on this topic.

Sarah: And, Rob, I know you’ve been very involved in this, of course. So why is it so important that businesses work on reducing their energy demand?

Rob: Growth. The real thing is growth. A lot of the discussion at the forum is how can we deliver prosperity and economic growth across the economy. That’s growth in developed markets, but it’s also growth in developing markets. If you then think about the drivers of growth, you’re looking at doubling GDP by 2050. We’re expecting to have 2 billion more people on the planet by 2050. So, to deliver the growth and to ensure that we’re also pulling people out of poverty and enabling an improvement in their quality of life over that time, a lot more energy is typically required. But now our challenge is, we need to dismantle one energy system, which is the hydrocarbon system. We’ve got a huge pressure in the economy to grow that renewable system. And at the same time, we’ve got to support a degree of economic growth. Now, to say, therefore, the key lever in balancing that huge take down hydrocarbons and build up renewables has to be to make sure that that growth is under control. We think that by concentrating on efficiency, we could get the same level of economic output, the same level of empowering growth with 30% less energy demand over the next ten years. And that would be an extraordinary achievement. Think how many fewer power stations that requires. Think of how much less capex that requires. So, if we can get demand to sit alongside those supply parts of the equation, we’re really creating a much more realistic pathway to net zero.

Sarah: And, Rob, sort of piggybacking off of this, I mean, one of the things that is really interesting is that we do have some of these things in place now. It’s cost-effective. There’s current policy in place, current technology. So, from your point of view, why is this really the right time to be doing this?

Rob: Well, look at the global trend. We’re trending on about 2–2.2% improvement in efficiency annually, which means that when Ramya and I are working together, talking to CEOs about what they’re doing in their business, their typical first reaction is: yeah, we’re on it. Because any sensible business is looking at their cost base. Any sensible business is going to be getting a better machine when they’re replacing their machine or doing their building-up as part of their normal capex cycle. But that 2.2% is not getting us onto the right pathway to net zero. We believe our 30% benefit or demand reduction by 2030 implies over 4% gain. So what we need to do is say: go further. You can double it. You can go faster. Now, the good news, though, is that we know what the tools are. So actually, we know how to do it. And actually, even more importantly, we know those tools are, today, economic, attractive, deliver business benefit. We can go to business and say: hey, it’s three things. One, look at your business, look at how you run your day-to-day activities, how you run your heating, how your staff act in the office, whether you close down the space on a Friday if nobody’s there, that kind of thing. That’s savings. Then you’ve got efficiency investments. So that might be upgrading your office. It might be improving your heating and cooling systems. It might be adding AI and how you’re managing your basic processes. So, a bit of capex. But that gets you an improvement in core efficiency. And then you do the last thing, which is look around you into your ecosystem and say, my contact with the energy system isn’t just a procurement point. It’s not just how I buy my energy. It’s how I drive the demand of energy around me. So to do that, you need to change your consciousness around energy and to look at who you’re going to collaborate with. So, savings, efficiency, collaboration—and, really, in some sense, that’s what you can control and how you think about it, how you run your organization, how you manage your capital. And then the exciting last point is the kind of thing that we really get out of being here in Davos with the forum is, how do you collaborate with your value chain? Who are your partners? How do you think? How do you change your consciousness on energy? So, take excitement from the fact that in a way it’s BAU [business as usual], you know how to do it. But then, challenge yourself to double that number.

Sarah: So, Ramya, as you’ve been working on this for the last year, are there any examples of what success looks like? Any real-life examples that are being put into practice?

Ramya: The good news is there’s plenty. And this notion around effective use of energy, being more efficient and being more productive, is as relevant in the United States or in the EU, or it’s going to be in India and South Africa or in Saudi Arabia. So it’s really something. No matter where one finds oneself, the solutions are going to be feasible. I’ll give you two examples. So, one of the partner companies—Indian manufacturer—their company has been able to kind of bring 95%. I really mean it, right? So, basically, they are using 5% of what they used to use 14 years ago today as a result of how they’ve changed technologies, their processes, and really starting to measure and make energy per unit of production, as a way to sort of keep themselves accountable to being much better at the way they think about their processes and their production, and how they operate as a company overall. This is in India. And it’s possible. And they’ve done it over a 14-year period. So it’s a really impressive story. And another example I want to bring together is really thinking about margin pressure. A pharmaceutical company based in the United States, by really driving better energy efficiency in their operations, was able to see 27% of cost gains. And, of course, I’m not able to state exactly the equivalent of carbon emissions avoided, but that’s another gain that they saw as a consequence. So, no matter which industry, this is a clear possibility.

Sarah: It seems too good to be true. It seems like a dream. So, Rob, why would businesses not be doing this already?

Rob: It’s a different way of thinking to take direct responsibility for your own energy costs. A lot of businesses, a typical business, let’s say a retail business, their board, their overall strategic brain is going to be focused on their customers, their clients, their growth opportunities. OK? So it’s quite natural and normal, but something which might be a below-the-line cost, an incidental way of doing business, is not thought of centrally within that business, is not a central priority. OK? But at the same time, look at how the world’s changing. Most countries have their own version of an energy crisis playing out. And I use that word advisedly, not in an alarmist way. In Europe, we’ve got pressure around conflict, but we’ve also got pressure around the fact that we’re trying to make a very quick change to green the energy system. Ramya’s referenced India, looking at how they can get accelerated economic growth. But they don’t have a mature energy system there. So the challenges in those markets might be: how do I get stable and affordable energy into my economy to enable me to grow? Europe might have a slightly different challenge, which is: how do I transition that energy mix and deal with all the insecurities that come with that? But if you think about that as a triangle: you’ve got affordability and security. The third one’s green transition, and that’s obviously a shareholder pressure and a right-to-operate pressure. But, actually, I don’t know if you’ve noticed for the last few minutes, but neither Ramya nor I have used any words around moral imperative or what companies ought to do. Companies should do it, not because of that third leg of the triangle—although, we passionately believe that getting to net zero is important—they should do it because affordability is an issue. You’re facing your own energy and security issues. Get into the question: why don’t they? Because it’s not a simple fix. It’s a whole way of thinking differently. You’ve got to then intervene, so, across the business, and do that on a continuous improvement basis, year in, year out. Now, that contrasts with a lot of the dialogue we see around energy transition. “I’m going to go and build a wind farm or a hydrogen plant”—the mega projects to solve the mega problem. Demand is not a mega-project solution. It’s everything. It’s around how you travel, how your team travels, and how your value chain travels. It’s how you heat and manage your building. It’s how your ecosystem manages their building. So you’ve got to have a look across the whole thing and embed continuous awareness and performance improvement. Ramya’s Indian story, did you hear, it’s 14 years? So it was 95%, which is an extraordinary number, but it’s also 14 years. They did it by committing every single year to improve their energy performance. And that’s the shift in mentality.

Sarah: And, Ramya, companies can’t necessarily do this all on their own. You have to think about policymakers, governments. What role should they play in moving this along?

Ramya: Oh, the role of policymakers, especially in advancing energy demand, is so, so vitally important. First and foremost, we are delighted that there is a global goal coming out of COP28. This is, sort of, the leg on which some of this is going to be built upon, that countries around the world are committing to double their efficiency. So, it’s a great starting point, we find. So what we’re not asking is that they don’t have energy demand or grow, but it’s: can they use their energy better? So it’s, use less energy to produce the same product and make it better, right? So, with that said, there is at least two or three areas, right? Let me maybe take emerging markets where so much of the growth is going to come from. Buildings? A code for green buildings can reduce by up to 40% of energy use vis à vis the materials and the way in which we build today and maintain today. So, great opportunity there. The second is around lighting. I have even an example where, again, one of the emerging market governments was able to really scale LED lighting in a matter of three to five years to get close to a billion LED bulbs installed. And they did it across the different ways—from swapping it, tendering it in public to reduce the cost of the bulb being used. So again, access to technology became cheaper because they had the scale, and they were able to reduce the energy consumption in a significant way. And a third area could be standard setting, to energy-efficiency standard for devices. Energy-efficiency standard for transport vehicles or fuel sources. And, finally, energy-efficiency standards for industrial motor use. These are technical things, but they all add up like Rob was saying. And having to do this across the board, governments can really help build the regulation and the standards to drive this forward.

Sarah: And as we kind of wrap up this conversation, I’d love to hear from both of you about what you want to see in the next 12 months when it comes to energy demand. And we’ll start with you, Ramya.

Ramya: What we really want to see is several companies coming forward to work together with each other to deliver on possibilities we haven’t yet seen happen. So that would be my wish, that we see several of these value chain collaborations take off, and equally several governments put this as one of their key priorities.

Sarah: And, Rob?

Rob: A hundred percent agree. We’ve been asserting and saying it’s out there. What we want is more examples and more leadership, and people to say, this is how I’m going to make that stretch—either a stretch into deciding to invest in efficiency or that stretch into finding that new partner. And what we’d like to sort of bring back is those success stories. And we think they’re out there, and we just want to get that momentum building.

Sarah: Fascinating conversation, and great work that you both are doing. Rob, Ramya, really appreciate you being on Take on Tomorrow.

Rob: Thank you.

Ramya: Thank you, Sarah.

Sarah: And that’s it for today’s episode of Take on Tomorrow recorded live from Davos, Switzerland. Join us next time for another special episode from Davos, as we dive into the findings from this year’s CEO Survey with PwC’s Global Chair, Bob Moritz. We’ll discuss what thousands of business leaders are thinking about right now and look at what it’ll take for companies to survive in an age that requires continuous reinvention. Take on Tomorrow is brought to you by PwC’s strategy and business. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. 

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