Are Renewables Firms are Ignoring Government Relations?

If so, that’s a mistake!

From regulation to investment, the clean energy industry needs government on its side. Why leave that to someone else?

I love hosting the Conversations on Climate. Every episode has felt like a privilege, as I get to sit down with some of the most thoughtful and impressive people I have ever met, to talk about climate change.

My conversation with Paul Beijer – ex-VP of Government Relations [GR] for Shell, and now an entrepreneur in his own right with GR-IQ– fit the bill perfectly. He is a smart, generous thinker with a wealth of experience and fascinating career history.

But our conversation left me with something that no other episode has yet – a new perspective on the structure of my own business, United Renewables.

Beijer’s specialty is government relations (aka public affairs). This corporate function is dedicated to ensuring a business understands the regulatory and governmental environment in which it acts – and then deciding how to influence that environment to meet the firm’s objectives.

Clean energy as a sector is perhaps more exposed to governmental behavior than any other transformational technology around today. From carbon pricing to contracts for difference, grid infrastructure to charging networks, how the state regulates and invests can make or break its green energy market. And yet government relations departments are a rare sight on a renewables firm’s org chart.

Surely this is just an oversight – and we should make building our GR capacity a top priority. With this in mind, I asked Beijer directly: do you see a good fit between GR functions and renewables, and is this a growth area for GR-IQ? Surprisingly, he said no.

In this article, I want to make the case that businesses like United Renewables should get to work on public affairs. But before I get to that, it is important to understand Beijer’s perspective.

The case against – size matters

“When you then think about renewables businesses, I would ask myself: where would the scale come from that allows them to think systemically about government relations?” Beijer replied. “It’s a very fragmented industry, and there’s a reason for it – because technology is still developing.” We have yet to create the globe-spanning giants that naturally spawn GR departments.

Oil majors have had over a century of growth, consolidation, and political experience after all– and even then, GR remains patchy in its penetration. By contrast, green energy is still young, even immature, as a sector. In Beijer’s view, it doesn’t yet have the heft to start moving government policy in a meaningful way. Perhaps, too, there is a sense in which our industry is guilty of not speaking with one voice. As Breijer put it, “for one problem there are ten different technological responses.” Does that get in the way of us all pulling in the same direction?

This makes a lot of sense. However, I found the rest of Beijer’s arguments in favour of GR also made so much sense! As such, I think the number one obstacle for our sector is simply a lack of awareness.

So, in the spirit of bringing some light to the darkness, here is my case in favour of GR in our industry.

The case in favour – four arguments

1.    Scale is a matter of perspective. True, there isn’t yet a renewables giant quite ready to challenge ExxonMobil or BP. And yes, Beijer is right that the industry would do better if it had stronger trade bodies to advocate for it.

But the great transformation is already underway, and by the time it is finished, it will have revolutionized energy across the globe. It is only a matter of time before scale isn’t an issue anymore. I’d rather skate to where the puck is going to be, and start building that capacity now.

2.    This energy transition won’t be like the last. The age of oil was born in a very different era – a literal Wild West, where governments were a shadow of what they are today. Standard Oil and the like had the freedom to create their own rules.

This time, government cooperation will be essential, because we don’t have such a free hand. Without the right regulatory frameworks and legal changes, green energy will struggle to challenge existing fossil infrastructures in time. Getting government on side isn’t something we can afford to leave until we have already succeeded.

3.    We need not make the mistakes of those who came before. The relative immaturity of our industry has its downsides, but it also offers an opportunity to correct mistakes. Beijer was very careful to differentiate between GR and lobbying, and there is a lesson here: if renewables commit to working with governments transparently, we can avoid the justified reputational damage that Big Oil has suffered.

4.    The gateways to developing markets are through governments. It’s a sad truth that those parts of the world most in need of clean, reliable energy have the least access to it. The renewables firms of the Global North have yet to make much headway in Africa, Asia, and other developing regions. Yet these economies have weak business networks, troubled histories around FDI, and (relatively) dominant governments, particularly in energy and natural resources.

As Beijer put it, ‘if you’re not present yet in a particular country, government relations and business development are two sides of the same coin.’To make real headway in the Global South, we will need to become experts in approaching and collaborating with developing governments, to create win-win markets. As Beijer was keen to point out, this requires local expertise and institutional-grade commercial diplomacy.

Getting government relations going

‘There’s so many myths around [GR]. People make it way too complicated, and the answer to something that’s very complicated is to simplify it.’ When it comes to execution, I couldn’t agree with Paul more. So here is his simple framework for integrating public affairs into your business.

First, work out what you actually want. What is your overarching goal for the next year? If you can get that down – and it may not be as simple as it sounds – then it’s time to set objectives from a regulatory perspective. Where do you need government to get something done? What has to change?

‘Once you’ve done that, you’ve already done 90% of the job, because it’s about aligning [GR] with the business,’ says Beijer.

The next step is to decide how to measure success. Public affairs can feel like a nebulous area to someone raised on the crunchier side of business, so feel free to put some numbers on it. Is a regulatory change worth $10m? $100m? Is there a minimum price or dollar-value subsidy you are aiming for? Can you count success in votes or acreage? Accuracy is not the point – it’s about having rough yardsticks.

Finally, remember to be ambitious, and resource it properly. Government relations requires long-term capacity building, but done well it will pay handsomely. As Beijer pointed out: ‘investing in [GR], you are ahead of some very large companies that still haven’t recognized the value of this particular function.’

Time to take responsibility

It’s time for clean energy leaders need to take responsibility for shaping regulations and public investments, rather than just waiting patiently (or not) for them to arrive. I don’t believe we have the luxury of waiting a few decades until ‘Big Renewables’ bulks up and drifts naturally into public affairs functions; particularly if we are serious about building into developing markets.

I hope this won’t be my last conversation with Paul Beijer; because as a CEO, I’m now taking government relations seriously. I strongly suggest you do the same.

To watch the full conversation with Paul Beijer, check out our YouTube channel here.

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