Governing the energy transition without certainty

The energy transition is not arriving in boardrooms as a clearly defined agenda item. More often, it is showing up indirectly through cost pressure, supply uncertainty and increasingly difficult decisions about timing and capital.

In a recent Chapter Zero New Zealand webinar on governing the energy transition, this came through clearly. Recent fuel constraints have not introduced new risks, but have brought them forward, reducing the time boards have to respond.

Issues that have been building over time are now showing up together, leaving less room for boards to wait for conditions to settle. As Energy Efficiency and Conservation Authority (EECA) Chief Executive Marcos Pelenur put it, “there’s no such thing as normal . . . it’s always change.”

This is not a temporary disruption, with Pelenur saying: “I would really invite [boards] to think structural and long-term around energy for their business.

“The way businesses use energy in New Zealand is changing fast. More options are becoming available – from on-site and distributed energy solutions to more flexible ways of using energy. New smart, efficient technologies are being tested with early data suggesting real savings, and local renewable fuel options are becoming more affordable.”

At the same time, gas supply is tightening and energy costs are rising. Boards need to ensure their organisations are planning now.

Underlying assumptions about energy availability and cost no longer hold, and strategies built on those assumptions are now exposed. That creates a tension. The signals boards are responding to feel immediate, but the decisions required are long-term.

The instinct in that environment is often to wait for more clarity before committing to significant decisions, but in periods of structural change waiting is not a neutral position and can become the greatest risk.

As Powerco Chief Executive Jason Franklin CMInstD noted, boards need to understand the range of possible scenarios and “not wait for perfect informational certainty”. He pointed to the organisations that had already done the work, saying they were “ready to move when the opportunities arise”.

This is where board discipline matters. Scenario analysis is not about predicting a single outcome. It is about understanding options, consequences and trigger points.

What would prompt a change in direction? What decisions need to be made now and which can be deferred? What are the consequences of moving earlier or later? What might be gained by acting sooner?

A clear plan helps boards move deliberately rather than reactively.

The discussion also highlighted the tendency to approach the energy transition primarily through a risk lens.

Cost, disruption and supply constraints are real, but they are not the full picture. Periods of structural change also create opportunity. The question is whether boards are positioned to recognise it or remain focused only on managing downside risk.

Pelenur observed that uncertainty is causing many businesses to pause investment, but challenged directors to “flip the perspective” and consider whether moving deliberately could allow the organisation to seize opportunity. “They’re not seeing the opportunity,” he said. “They’re reacting to the risk.”

Boards that treat the transition solely as a risk to manage are more likely to be overtaken by change. That requires shifting from risk-only discussions to broader business discussions, where opportunity, trade-offs and long-term positioning are considered together.

As Clarus Chief Executive Paul Goodeve MInstD put it, boards should move “away from risk discussions” and instead have “business discussions that have risk embedded in them”.

It also requires a broader view of energy. From an energy system perspective, there is a tendency to equate energy with electricity. In reality, energy spans fuels, process heat, transport and infrastructure, each with different constraints, timelines and transition pathways.

Goodeve says: “This isn’t about one energy source replacing another overnight. It is about managing a transition across a range of options, including electricity, gas and emerging alternatives, so organisations are not reliant on a single pathway and can manage cost, risk and reliability effectively.”

For organisations with significant energy exposure, particularly those reliant on process heat, these are not simple substitution decisions. They involve long-lived assets, capital investment and choices that are difficult to reverse. This makes early and deliberate planning essential.

Panellists emphasised the importance of organisations understanding their energy exposure, alternatives and timing – in effect, having a clear energy transition plan.

“I would encourage people to have an energy plan,” says Goodeve. “Like safety, HR or financing plans, an energy plan helps boards understand the things that are in front of them, what the organisation can do and what capability it has.”

Across the discussion, panellists pointed to a greater risk: moving too slowly. Board caution has value, but in periods of structural change it can also lead to inertia and delayed decision-making.

As director David Smol MInstD noted, “the biggest risk [for boards] is probably undue delay and thinking about the challenges too narrowly”. The organisations best positioned to respond are those that have already done the work. They understand their exposure, have tested scenarios and are ready to act.

Boards can maintain commitment to a clear strategic direction while adjusting as new information emerges.

The energy transition guide developed last year by Chapter Zero New Zealand and Dentons highlights the importance of understanding exposure, testing scenarios, and being clear on the range of options available to boards as conditions evolve.

The energy transition is already shaping the operating environment boards are governing. The question is whether boards are prepared to respond deliberately, strategically and at the pace the transition increasingly demands.

Across the panel, the following messages emerged for boards:

• • Do not wait for perfect information. Decisions will need to be made under uncertainty and boards need to be ready to act 
  • Treat current energy pressures as structural rather than cyclical, and bias towards readiness and earlier action
  • Maintain strategic direction despite short-term volatility. Avoid reactive decision-making
  • Shift from risk-only discussions to broader business discussions, supported by meaningful scenario analysis focused on options, consequences and timing
  • Develop a clear energy transition plan, including exposure, timing and alternatives

As the panellists’ closing reflections reinforced, boards should be asking whether they are focused on what could happen, whether they understand the consequences of not responding, whether they are getting the most out of their energy, and whether major changes are being managed with the discipline and safety focus they require.