There’s been a lot of discussion lately about natural resources in the energy sector. And for good reason: the global demand for resources is one of the biggest trends shaping the energy industry. These raw materials include everything from the oil, coal and gas that provide energy, to copper, aluminum and steel used in the equipment that distributes it. As demand increases, especially in emerging and closed economies, the competition for these resources will continue to change the way utilities and energy companies operate in the U.S.
The Way It Was
Like we said in our last megatrend post, in the past, much of the world’s supply and demand was concentrated in the U.S. and Europe. Capitalist structures could balance production and consumption, i.e. get what you need, sell what you don’t, negotiate the rest. Today, capitalistic markets have less buying power than rapidly developing countries like China and India, who now draw more of the demand to support larger, wealthier and more urban populations. In fact, by 2030, two-thirds of the world’s middle class will live in Asia.
The Way It Will Be
What does this mean for U.S. energy companies and utilities? As control over the supply chain shifts to more closed economies, energy providers will have to contend with long-term market volatility, rising prices, increasing competition and growing risk. At times, the competition for these natural resources like copper, aluminum and steel will be fierce. Other implications that may at first seem unrelated suddenly gain strategic importance. For example, when considering the fact that over 90% of rare earth minerals such as neodymium for wind turbines are mined in China, the ability to plan and adapt become critical to understanding and exploiting these changes.
Energy providers should view this increasing competition on a global scale, and consider it as an opportunity to implement new business models and strategies. The competition for resources will only continue to increase, so understanding how this trend will change global industry and impact your profits will be crucial to success. Want to know more? Talk to Southwire to find out how we can help your utility use these trends to your advantage. And stay tuned for Energy Megatrend post #3 on Renewable Energy and how its expanding use continues to reshape the energy industry.
– Carol Godfrey