The urgency in energy

In 2021, The Economist reported that children born today are likely to experience seven times more extreme weather events than their grandparents. Just a few years later, the BBC reported that 2024 was the first year to exceed the 1.5°C global warming limit. Since then, we’ve already witnessed California’s devastating wildfires – and the year has only just begun.

Meanwhile, the demand for data centers is surging, driven by their rapid expansion in both size and number. AI is amplifying this trend, pushing energy consumption to new heights. In October 2024, the International Energy Agency (IEA) reported that annual investment in U.S. data center construction had doubled in just two years. The report also highlighted that data centers now account for 20% of Ireland’s total energy consumption, with a single large facility requiring as much power as an electric arc furnace steel mill.

From climate change to AI, the energy and utilities sector is undergoing a once-in-a-century transformation. The push toward renewable energy, nuclear power, and electrification is reshaping the industry. While renewables are driving decentralization, nuclear remains a critical centralized energy source. At the same time, new business models, services, and players are emerging in an increasingly competitive global market.

Bringing together the digital and the physical

To succeed in the evolving energy landscape, energy and utility companies must do more than just transform – they must lead the way in driving solutions for global climate change.

However, managing the energy transition requires massive investment. Lowering the Levelized Cost of Energy (LCOE) remains a critical challenge for all industry players. To make green energy affordable at scale, companies must develop and deploy advanced technologies while addressing the complexities of decentralized and variable energy production and distribution.

At the same time, organizations must maximize the efficiency and lifespan of existing assets, reduce total cost of ownership, and streamline operational expenses to stay competitive.

Beyond technology, another urgent challenge looms: the need for skilled talent. The energy sector faces a projected shortage of seven million skilled workers for climate and energy projects by 2030. To capitalize on emerging opportunities and maintain a competitive edge, companies must tap into a global talent pool.

Clearly, this is a substantial to-do list – one that demands not only significant investment but also long-term commitment.

To better understand how organizations are navigating this complex environment, we recently conducted research with 300 senior (VP and above) decision-makers at global engineering and R&D (ER&D) intensive companies. We explored the challenges they face and the strategies they employ in response.

Our findings reveal four strategic imperatives. As expected, digital transformation plays a key role in addressing ER&D challenges. However, success isn’t solely about digital innovation – it also requires physical change. Organizations must rethink objectives, refine processes, and adapt their overall approach. In short, those that thrive focus on both the digital and the physical.  You can learn more in our report, Engineering and R&D trends: Strategies for a fast-changing world.

Four key focus areas for energy and utilities organizations

Let’s now look at those four areas of focus highlighted in that report and see how this twin-track approach is working in practice in energy organizations.

1: Achieving sustainability

Delivering affordable, low-carbon energy is the top priority for the energy and utilities sector. Achieving this goal requires substantial investment. For example, Spain’s Iberdrola has announced a €41 billion investment plan focused on grid expansion and renewable technologies.

However, these investments must strike a balance between innovation and the ongoing need to maintain and upgrade existing infrastructure. In short, making green energy both affordable and sustainable at scale requires a holistic approach – one that encompasses every aspect of the energy mix, from research and innovation to industrialization, scaling, operations, and the optimization of industrial products and plants.

2: Accelerating towards value

The growing demand for green technologies and renewable energy presents an exciting opportunity for energy companies to explore new revenue streams and innovative business models. Areas such as energy storage, demand response, charging networks, and other energy services offer promising pathways for growth.

Canada’s Hydro One exemplifies this transformation. The company has been actively modernizing its infrastructure to meet the rising demand for renewables and green technologies. It is investing in advanced grid solutions, such as Distributed Intelligence (DI) applications and Distribution Automation (DA) systems, to enhance grid performance and seamlessly integrate renewable energy sources.

However, modernizing decades-old infrastructure is complex and costly. Integration challenges, regulatory constraints, and the need to ensure resilience, security, and uninterrupted operation add layers of difficulty. Balancing energy production and consumption while upgrading infrastructure is a major challenge for energy providers.

Capgemini collaborates with organizations and a global partner network to digitize energy infrastructure and operations in a predictable, cost-efficient manner – enabling companies to unlock new revenue streams at speed and scale.

3: Upgrading core operations

Modernizing traditional engineering practices enables companies to enhance efficiency, reduce costs, and extend the lifespan of existing assets.

AI adoption, for example, is already transforming operations in the energy sector. In the Permian Basin, AI-driven solutions have significantly increased oil production while lowering costs. By predicting optimal drilling locations and automating equipment control, companies have substantially reduced the break-even price of oil production.

However, achieving this transformation requires streamlining, standardizing, and upgrading operations, processes, and data foundations. Automation and AI thrive on high-quality data, yet the energy sector remains relatively under-digitalized, making this shift a challenge.

Capgemini helps organizations modernize their engineering methods and processes by integrating IT and OT, enhancing operational excellence, and leveraging next-generation technologies such as AI / Gen AI. For instance, we worked with an energy provider to implement a data-driven approach for predicting the Remaining Useful Life (RUL) of its turbines. Using advanced analytics, we enabled failure predictions up to 18 months in advance – helping to mitigate operational risks and reduce costs in aging hydroelectric infrastructure.

4: Increasing operational agility

Companies with agile operations can mobilize a global talent pool of skilled professionals at scale, enabling them to seize the opportunities presented by the energy transition efficiently and effectively.

BP, often recognized as a pioneer of agility in the energy industry, has restructured its production and operations around an agile operating model in recent years. This strategic shift has allowed the company to better leverage global talent, optimize costs, and enhance overall efficiency.

However, transitioning to more agile engineering operations is complex, making the right expertise and support essential. For example, Capgemini India partnered with a global leader in the reprocessing and recycling of spent nuclear fuels to establish an offshore team supporting its engineering and R&D activities. This included specialized guidance on radiation and shielding, state-of-the-art infrastructure, and advanced simulation software for spent nuclear fuel management systems. The result: improved performance and annual cost savings of $3–4 million.

Success requires partnership, determination, and coordination

In the energy sector, progress comes from the seamless integration of digital and physical – driving growth, enhancing competitiveness, and ensuring long-term relevance in an ever-evolving world.

Equally important is having the right partners on this journey. As the stories above illustrate, navigating a complex and challenging path becomes easier with the guidance of an experienced and knowledgeable companion. The experiences of the many major engineering and R&D-intensive (ER&D) businesses we’ve worked with bear this out.

Learn more

If you’d like to learn more about how Capgemini is helping to tackle the generation-defining challenge of the energy transition, visit our Energy transition and utilities hub.