Energy is hot. Oil, natural gas and electricity prices are all near record highs. Debate over global warming continues to divide the US and other nations, as ongoing conflict in the Middle East underscores the strategic importance of natural resources. Meanwhile, ExxonMobil made a profit of $9.9 billion last quarter, the largest ever for any U.S. company.
With all this attention, money, and geopolitical intrigue directed towards the energy industry, it’s no wonder that HBS students are rediscovering the sector’s allure. So how does an enterprising, environmentally-conscious, wealth-maximizing student go about developing a career in this exciting space? There are a surprising number of professional paths available, each with its own risk/return profile, background requirements and job responsibilities
The following is a high-level overview of potential energy career paths:
This is one of the few opportunities in the world where employees routinely work on huge projects over $10 billion. Corporate finance, project finance, general management and strategic planning positions are available with oil majors, independent exploration and production firms, and utilities in the power and gas sectors. An engineering background is not required for many of these positions. However, certain firms have an “engineering-centric culture” that favors a technical background for promotion to senior management, while other firms tend to favor a financial or project development background. New MBAs could be doing anything from structuring a multi-billion-dollar gas supply agreement to studying how global warming might impact a company’s brand.
Consulting and Banking
An energy focus can be a career asset even if a more “traditional” HBS job is what you’re looking for. Banks and consulting companies both have strong hiring needs in their energy groups, as companies look for professional services to navigate today’s high and volatile energy price environment. Additionally, a number of regulatory changes are dramatically changing the competitive environment in the energy sector. For example, merger and acquisition activity between utility companies is expected to increase dramatically due to the recent repeal of 1930s-era regulations on how utility holding companies must be structured. New MBAs could expect the typical trade-offs of these careers in terms of hours, travel and compensation, but would be doing so while working and building contacts in the largest and most profitable industry in the world.
Once the province of futurists and those with small niche applications, renewable energy is now going mainstream. Decreasing capital costs for renewable technologies and increasing prices for fossil fuels mean that renewable technologies are increasingly “in the money.” Furthermore, government programs such as renewable portfolio standards and substantial tax incentives are making technologies like wind power phenomenal investments from a cash flow perspective. According to the American Wind Energy Association, the wind industry has grown at a compound annual growth rate of over 25% for the past decade, and solar development has grown even more quickly (though from a much smaller base).
Utilities and independent project developers are the largest purchasers of established renewable technologies such as geothermal and wind. Additionally, some companies like BP and GE that have large businesses in traditional fossil fuels are making significant funding commitments for development of renewable technologies. In fact, GE now generates over $1 billion in revenue annually from the manufacture and financing of wind turbines, and the unit is one of the company’s fastest growing profit centers. New MBAs could expect to manage construction contracts, negotiate power sale covenants or even lobby the government for the extension of those lucrative tax credits.
Venture Capital / Early Stage Technology Development
Given the massive scale of the energy business, and the volatility it has begun to experience, it should be no surprise that VC firms are giving the sector a long hard look, with particular focus on energy-related information tracking services and other efficiency-related endeavors. Longer-horizon technologies such as fuel cells, wave power, biomass and host of other exotic innovations are also receiving heightened attention from the venture capital community. In addition to traditional private VC firms, there are a number of other career options for early-stage energy technologies. Harvard and MIT provide a wide variety of “gap funding” schemes for aspiring energy entrepreneurs. These include proof of concept grants and development grants such as those from MIT’s Deshpande Center for Technological Innovation, as well as university venture funds intended to yield financial returns. Government-sponsored resources for energy technology development include Department of Energy labs and government-backed venture funds such as the Massachusetts Green Energy Fund. Whether working with the private, public, or academic sides of the business, new MBAs could expect exposure to fascinating energy technologies that might completely fail, or might be fantastic successes that help to save the world.
Financial Investors in Energy Assets
Deregulation has opened up opportunities in the energy sector for many nontraditional investors. Power plants, transmission lines and gas pipelines are now owned by private equity firms, insurance companies and investment banks. Regulated utility companies are also purchasing energy assets far removed from their traditional service territories; certain companies like AES and Constellation now have a portfolio of unregulated assets that is significantly larger than their original regulated base. New MBAs could expect to “run the numbers” on the purchase of a nuclear plant, structure the sale-leaseback for a fleet of coal barges, or manage the IPO of an oilfield services company.
If you have an analytical mind, a lust for a fast-paced lifestyle and a tolerance for stomach ulcers, energy trading may be for you. Standardized energy derivatives are traded on the New York Mercantile Exchange, while numerous exotic and over-the-counter products such as emissions credits and weather derivatives are traded on the InterContinental Exchange and other electronic platforms. Most companies with significant hard assets in the energy space trade in order to manage commodity exposure. Additionally, a growing number of financial players such as investment banks and hedge funds have established highly profitable energy trading desks to take speculative positions. New MBAs could expect to arbitrage gasoline after a refinery explosion, keep risk levels in line using sophisticated value-at-risk methodologies, or maybe even bring home a huge bonus after cornering the market for sulfur dioxide emissions.
If any of these career paths sound interesting to you, a number of on-campus resources can help you with your energy job search. Many companies involved in the energy industry recruit on campus, and almost all have HBS alumni working there (often at very high levels). The Energy Club holds lunch discussions on energy careers, arranges speakers from companies in the energy industry, runs an annual energy symposium and sends resume books to a wide range of companies, including some who do not directly recruit on campus. The HBS Texas Trek, taking place from January 4-7, will allow students to visit the headquarters of major energy companies, as well as consulting companies, investment banks, and other financial intermediaries involved in the energy space. Numerous other clubs, such at the Business & Environment Club, TechMedia Club and Entrepreneurship Club also host energy-related activities.
In summary, the recruiting environment for energy jobs is strong across a wide variety of career paths. Don’t miss out on opportunities to learn
more about the sector, especially the upcoming Texas Trek. See you in Houston!
Matthew Commons is an RC student in section D and member of the championship-winning HBS Rugby Team. He previously worked at Enron and American Electric Power.