The only fluctuations in the constancy of energy are politics
The first law of thermodynamics states that energy cannot be created or destroyed. This is the constancy of energy; a tenet of physics that is all too familiar to energy leaders. Contrary, however, to what might be the common intuition, the energy sector is not tasked with the creation of energy. The task is to harness existing energy in our surroundings in a way that it becomes a means towards the ends of society at large. The problem is a technical one. The solutions are political – and that is precisely the challenge that energy leaders face right now.
Whilst energy might be counted upon and calculated, politics is quite the opposite. Consequently, the disparity between different leadership goals within the energy sector can be as vast as the divide between the first law of thermodynamics and the inner workings of parliament.
What does this mean for energy leaders? First, that they must be equally well-travelled among the upper echelons of the state and the furnace floor of the heating plant. Second, that strategizing must be holistic, not only in terms of operational efficiency, investments, and innovation, but also in terms of alliances that extend beyond traditional transactions of vendor-supplier relationships.
Energy is not scarce, political bandwidth is
In 1943, the anthropologist Leslie White proposed that culture evolves as the amount of energy harnessed per capita per year increases. Crude as a measure of civilisation. Exact as a description of constraint. Society can only attempt what it has the energy to do.
In Denmark, that constraint recently became visible on a map. Energinet's capacity map from July paints the picture of where the grid is bottlenecked. Peak Danish electricity consumption is around 7 GW. Requests for new consumption amount to 57 GW, of which battery projects make up 40 per cent and data centres 29.
The queue is not the only constraint. Environmental case processing has grown from around 100 days in 2020 to around 750 in 2025, and new grid takes eight to ten years to build. The World Energy Council reaches the same conclusion from the European level: permissions, not financing or political ambition, set the pace. Targets that cannot be permitted are not credible targets.
Meanwhile, the bill has arrived. Europe now sits in the quadrant the Council calls robust but expensive. The continent has bought reliability and sustainability with affordability. And resistance to large, visible installations, notes the Council, is no longer a question of whether, but of when.
None of this is an energy shortage. The scarcity consists of room on the grid, permission to build, local acceptance, and someone willing to carry the bill. None of them are allocated by markets, but by politicized intent.
Energy politics is not external to energy leadership
In many sectors, politics arrives from outside. It sets limits, imposes costs, occasionally opens markets. Organisations respond to it, lobby it, comply with it.
Energy does not work that way. The price of electricity to a Danish household is only partly a market price; the rest is tariff, levy and carbon cost, each set politically. The price of district heating is not a market price at all, but an accounting statement of a company's own costs, because the customer cannot go anywhere else. Whether a factory can electrify at all depends on its place in a queue, which, in a Danish context, is administered by a state-owned monopoly.
In other words: Politics is not the climate in which the energy business is situated. Politics is a core part of its mechanism.
An acute symptom of this condition is that the party who decides is rarely the party that pays. The regulator approves the expansion; households carry the tariff. The municipality adopts the conversion plan; the last customer on the gas pipe carries what is left behind. The losing party contests the allocation, and the contest tightens the terms of the next decision.
Political judgement is, in that sense, not a staff function at the fringes of the energy organisation. It is an operating capability, exercised by the same energy leaders who decide where to invest.
Technology is the pacer in the energy sector marathon
Some sectors will only be indirectly affected by certain technologies. This is the case where a technology amplifies or alters some part of an organization's processes, such as what SAP has done to sales in many companies.
Conversely, in the energy sector, technology is the fundamental driver of change. Sure, SAP has enhanced business procedures in energy companies, but the business of energy is itself technological. Our ability to convert raw materials or forces of nature into energy and redirect it to where we need it is, in essence, a technological feat.
In spite of rapid advancements in energy technology, the sector needs to concern itself not only with future possibilities and scenarios generated by new tech, but also the acute and immediate needs of society in the now. The result is a foundational tug of war which resides at the centre of managing an organization embedded in the energy space.
On one hand, you must invest in and leverage technology to meet the energy demands of tomorrow; on the other, you must guarantee that the energy required to maintain a functioning society is available every day. This must all be done while balancing energy equity, sustainability, and reliability.
We are seeing it right now. Who must bear the cost of the massive investments in expanding infrastructure to handle future demand for energy? In the EU, the commission estimates that EUR 660 billion must be committed annually in investments until 2030 and almost EUR 700 billion in the following ten years. How do leaders in the sector avoid decision paralysis amidst calls for affordability, sustainability, and security at the same time?
Not only are the external pressures on energy leaders often conflicting – the above internal strategic tension between investments and operations result in a myriad of different scenarios, depending on how leaders balance the scales.
Energy leaders are systemic change agents
The fact that energy is political is no novelty. What is new is the size of the political field that energy leaders must read. A heating utility could once concentrate on its own owner municipality, a developer on the host council, an industrial consumer on its own tariff. Those vicinities still exist, but they are no longer an exhaustive list of relevant decision arenas. Energy leaders did not choose to step into these arenas, but the system has tightened regardless.
This is where systems thinking stops being a vocabulary and becomes a practical discipline.
Famed change theorist Donella Meadows observed that all system change levers are not created equal. The weakest interventions are adjustments to parameters: a tariff rate, a subsidy level, a deadline. They risk absorbing much of the focus of energy leaders, because they are obvious.
Less obvious are stronger interventions – but they can change the rules: how a queue is prioritised, what a permit must demonstrate, who is permitted to supply flexibility. Stronger still are those that change what the system is being optimised for in the first place, and in which order speed, price and resilience give way to one another when they conflict. Looking beyond immediate financial incentives can help energy leaders identify where alliances might be built to pave the way for equitable, sustainability, and reliable energy.
What are the systemic leverage points to increase the likelihood of favourable scenarios? Who are or could be key up- and downstream alliance partners that increase capacity to affect outcomes? What skills are needed to strategize and problem-solve in a technologically enabled, networked society? These are the burning questions for energy leaders that we endeavour to help clients answer at SJ&K.