How energy companies can most usefully deploy generative AI is a hot topic for the sector. A new survey from consultancy Bain and Company suggests that a rising proportion of executives across the energy and natural resources (ENR) sectors think the technology will have a significant impact on their businesses, though probably not in terms of emissions reductions.
Bain reported that its annual survey of more than 600 executives in oil and gas, utilities, chemicals, mining, and agribusinesses around the world found that 65% of respondents believed AI – including generative AI – and digital technologies would have a significant effect on their businesses by 2030. That compared with 56% in the 2023 survey. Improving maintenance, production, and the supply chain are seen as the areas where deployment of the technology looks most promising in terms of generative AI.
Bain noted companies are using generative AI in combination with other AI technologies to create more value. It cited the example of one renewable energy developer that used AI-enabled analytics software to identify maintenance issues before they occurred. By also deploying more recently developed generative AI tools, it could access information and recommendations to help resolve maintenance requests more rapidly.
“Over time, we expect ENR companies to pursue more advanced and potentially higher-value use cases, such as increasingly automated design and engineering work,” Bain said.
Of those surveyed who expected significant impact from AI and digital technologies on their businesses by 2030, only 25% thought generative AI would help reduce carbon intensity from their operations, while 21% thought it would reduce emissions from their products. Bain suggested that outcome was unsurprising, given the large amount of energy required to run AI applications and to build the physical infrastructure needed to achieve the energy transition.
Energy transition challenges
The survey also revealed growing doubts about the speed at which the energy transition could be achieved, given the challenges of decarbonisation. About 62% of executives said they expected the world to reach net-zero emissions by 2060 or later, compared with 54% in the previous Bain survey. The proportion that thought net zero could be achieved by 2050 slipped to 38% in the 2024 survey from 46% last year.
Bain said this year’s survey indicated that energy and natural resource companies still had ambitious plans for their “transition-oriented growth businesses”, such as renewables, hydrogen, bio-based products, and lithium and other transition commodities. Most companies said they were maintaining or increasing investments in these areas, with executives in the Middle East, Asia-Pacific, and Latin America the most optimistic about the contribution that transition-oriented growth businesses would make to their company’s valuation and profits by 2030.
However, the survey suggested executives were becoming more concerned about customers’ willingness to pay transition-related costs and whether companies could generate adequate returns on investments in transition-oriented projects. As a result, firms were focusing more on projects with the best prospects of a return on investment.
“Clearly, the longer that executives on the front lines of the energy transition grapple with the challenges of putting decarbonization plans into action, the more sober they’re getting about the transition’s practical realities,” Bain said.
The consultancy said it believed the impact of higher interest rates on the cost of transition projects was a key factor in shaping executives’ perspective on this issue. Bain noted that a 500-basis-point increase in the cost of capital could increase the total annual revenue required to finance a project by as much as 50%, according to its research.
*Results of the Bain survey can be found here
* The application of generative AI within the energy industry will be a central theme at the Future Digital Twin & Generative AI conference, to be held in Houston on 23 May 2024.
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