Environment & Energy | Wednesday 10 January, 2018 12:45 pm |

The energy and utilities sector in KSA must harness innovative strategies to overcome some of the greatest sustainability challenges in the GCC, Booz Allen Hamilton has said in a report titled ‘The Future is Innovation’.

 

Combined, the Gulf Cooperation Council (GCC) states hold almost a third of proven crude-oil reserves and approximately a fifth of global gas reserves. However, declining reserves and revenues along with increased consumption due to rapid industrialization, population growth and rising domestic energy demand, are testing the region’s capacity to its limits. Policy changes and shifting national budgets across the GCC indicate that the region’s governments are responding to these challenges, and the region’s key energy and utilities players will need to adapt to new realities.

 

According to a report by MEED titled ‘Renewable Energy in the Mena Region 2017,’ Saudi Arabia is looking to reduce its dependence on oil and enable a sustained and diversified economy. The Kingdom seeks to generate 70 per cent of its power from natural gas and allocate the residual 30 per cent to renewable and other sources.

 

Many economic and social reforms have recently been announced in an increased effort from the Kingdom to diversify its oil economy. At the heart of these reforms lie Crown Prince Mohammed bin Salman’s privatization initiatives, including the initial public offering (IPO) of potentially five per cent in Saudi Arabian Oil Company (Saudi Aramco).

 

For the country’s non-oil economy to thrive in a sustainable manner against a fast-growing population and to streamline the complexities of the IPO process, it is essential to keep innovation at the forefront of sustainability strategies. This can continue to drive Vision 2030, help avoid domestic non-oil recession, and boost international confidence.    

 

Dr. Adham Sleiman, Vice President, Booz Allen Hamilton MENA, said: “The key to sustainable success lies in innovation, which is a force constantly promoted yet all too infrequently embraced. Energy and utilities companies often face concerns over the sharing of intellectual property, stakeholder reluctance to invest in new research, and financing issues – all of which can impact innovation.”

 

To make sustainability a viable alternative, Booz Allen has identified a number of key considerations for successful innovation strategies that could enable GCC energy players to fuel the region’s growth, long after the world’s fossil fuels run dry:

 

• Encourage employee out-of-the-box thinking: One of the key ingredients outlined includes encouraging employees to think outside the box and making innovation a part of the corporate mandate. Even for energy companies rich in natural resources, human capital counts as their most valuable asset, and it is imperative that they use creative incentives to promote innovation within the organization. A key ingredient in motivating employees to innovate is to accept failure on the road to success. It is vital to develop a “fail-forward” culture because unless employees feel safe to experiment, they will not be willing to come up with or share innovative ideas as the fear of failure and resulting consequences will overpower their creativity.

 

• Work out what to share and what to protect: Industry concerns over sharing intellectual property have often hampered the growth of the energy and utilities sector. Evidence suggests that the most effective way to access innovative ideas while protecting vital intellectual property is to combine both open and closed techniques. The former largely revolves around collaboration between companies on the one hand and academic institutions, research centers, startups, communities or individuals on the other. The latter, meanwhile involves internal R&D and the creation of corporate ideation platforms. Google’s mother company, Alphabet, is one example of how a company can blend both models successfully.

 

• Engage stakeholders through innovative R&D: As a key step to alleviate the concerns of stakeholders in the energy and utilities space and boost investment in research and development, organizations must first make a choice of whether to pursue fundamental research, or pursue applied research. Once this choice is made, the organization needs to develop a strategy to make the R&D process more efficient and transparent. For example, a start-up could help test a product with a much faster turnaround, or a crowdsourcing challenge could be used to create multiple solutions to an issue. Such an approach can help manage costs more effectively, increase stakeholder buy-in and reduce risk for the organization.

 

Fady Kassatly, Senior Vice President, Booz Allen Hamilton MENA, said: “Innovation is driving the national agenda of a number of countries in the region. In the energy sector, there is a big opportunity to harness the potential at the grassroots level by empowering human capital. Energy companies must consider fostering an innovative corporate culture that encourages employees to experiment without fear of failure. This will go a long way in ensuring that innovation is not just a buzzword, but a very tangible outcome of out-of-the-box thinking that can help address some of the most pressing global issues today.”