Opinion Piece by Viaro Energy CEO Francesco Mazzagatti

The energy transition was rightfully a key topic at this year’s World Economic Forum meeting in Davos. And while the event served its main purpose by gathering world leaders and subject matter experts to highlight progress, start productive discussions to inspire solutions, and provide a space for networking and collaboration around positive change, it is what we do after it that really counts.

During his panel, the US Special Presidential Envoy for Climate John Kerry made an excellent point that the multitude of available choices to tackle climate change can only be reconciled by combining it with unity in regulation. For this, private-public sector partnership is necessary, he said, and it makes economic sense to do it.

The Controversy Surrounding the UK’s Energy Profit Levy (EPL) and Its Impact on Citizens and Industry

A simple enough truth, and yet the reality in the UK in the aftermath of WEF is that the Energy Profit Levy (EPL) has not only been increased to the unprecedented 78% but has also been extended until 2029, with politicians pledging to put an end to new North Sea licences altogether.

The reasons for introducing the EPL in the first place cited obscenely high profits by oil and gas majors while the average citizen cannot afford their electricity bill and considerably fewer tax incentives for renewables producers that needed to be addressed. Valid points that cannot be disputed in themselves.

However, earlier this year the Department for Energy Security and Net Zero reported that around 13% of households in England were in fuel poverty for two consecutive years in which the EPL has been in force, with a disposable income below poverty line after housing and fuel costs. A recent letter signed by thousands of individuals, companies and trade groups in the UK warns that the newly increased tax can affect the job security of up to 100,000 workers. And the UK is reported to be facing an all-time low in terms of living standards despite budget cuts across the board.

Windfall Tax Dilemma and Reliability of the Renewables

The energy transition is supposed to be people-centric, but this begs the question – who is the windfall tax in its current form really serving? And in the meantime, renewables have a long way to go before they can be relied upon as a stable source of clean energy. There is no question about the need for increased investments in renewable technology, but in the meantime, results are mixed and the approach requires constant adjustments, whether it’s malfunctions, agricultural land being excessively used for solar panels to the detriment of food security, or the statistic that a third of freshwater thermal power plants being located in areas of high water stress. This is only natural at the current stage and a balance is bound to be struck over time.

On the other hand, the delays in building new power plants, coupled with the dwindling upstream investments due to the windfall tax, stand to have serious ramifications for energy security, which is crucial for the UK’s ability to fulfill its net-zero goals by increasing energy efficiency and reducing emissions. We cannot hope to transition to a clean energy system by rebuilding the world from scratch – it is clear we have to work with what we’ve got. If reducing our environmental footprint is key for addressing climate change, and the energy sector is responsible for three quarters of current emissions, that also means it holds the most power for a major contribution to net-zero.

Walking the Fine Line of Innovation, Decarbonisation, Industry Competitiveness

Reflecting on this year’s World Economic Forum in Davos, one panel discussion left a significant impression: “Tapping AI’s Power to Optimize Our Working World.” The discussion stressed the importance of organizations transitioning from job-oriented structures to a skill-centered mindset. Technological innovation can assist in addressing the reskilling of workers in the energy transition, thereby avoiding job losses. Additionally, Generative AI holds great potential for improving energy efficiency and reducing the risk factors associated with unnecessary carbon emissions in oil and gas production.

The oil and gas sector is essential for decarbonisation and energy efficiency, which have the best chance to protect consumers from high electricity bills and help UK industry remain competitive. And energy security is at the heart of this, especially with current geopolitical divides to consider. But in order to play this part, the upstream energy sector must be allowed to remain operational. And instead of punishing taxation whose only effect is to further decrease investments in one of the country’s main economic pillars, the right policies could actually pave the way for increasing the much-needed investments in climate philanthropy, as well as in energy transition research and innovation. It is not about fighting to keep the status quo that has brought us here, but rethinking the solutions outside of the fixed framework of the good guys vs. bad guys variety – and making the energy transition truly just and inclusive.

Viaro CEO, Francesco Mazzagatti, recently attended the World Economic Forum in Davos: