The Central European Review of Economics and Management

Scenario’s for the hydrogen market and strategic options for MNEs

Bartjan PENNINK — 2024-03-30

Aim: The purpose of this article is to investigate how hydrogen-based energy will be implemented in the future economy and to find strategic options in the future hydrogen market for multinational enterprises (MNEs) active in the energy sector.

Design/Research methods: The current literature on hydrogen production tends to focus on the technical and cost aspects, while there is limited attention on how one could implement hydrogen in the future. In this explorative research, interviews with experts formed a basis and the scenario planning methodology was used.

Conclusions/findings: The three scenarios that were developed are based on the potential strategies of the European Union, which are Hydrogen Independence, Cost Optimization, and Energy Security. Based on a literature review, five key characteristics that will impact the functioning of the future hydrogen economy were selected. By using notions from the environmental- and positioning schools of Mintzberg, strategic options for MNEs were identified in each scenario. In all three scenarios, the implementation of hydrogen-based alternatives will differ. Besides this, the strategic options that MNEs can obtain will also change.

Originality; value of the article: This article helps us understand how hydrogen-based energy sources will be implemented into the economy, taking on board the priorities of the European Union. Furthermore, it gives managers of MNEs guidance to identify strategic options that fit alongside their firms’ strategy. Finally, this research gives an incentive for future research as, on several topics, the interviewees could not find consensus.

Keywords: Hydrogen Market, Scenario Planning, Renewable Energy Sources (RES), Strategy, Multinational Enterprises (MNEs).

JEL: L22 L25 Q40 Q47.

Emerging alternatives in megaproject management

Andrey AFANASIEV — 2024-04-15

Aim: The aim of this paper is to contribute to the project management studies by systematization, generalization, and structurization of information about an energy megaproject in Cyprus, as well as to provide practical insights and guidance on how megaprojects can be started and managed in other locations.

Design / Research methods: By its research design, this paper is a case study analysis. The major focus of the case study is the decision-making process of the LNG energy megaproject in Cyprus.

Conclusions/findings: Even positive emerging alternatives, like the discovery of newly natural resources, can delay a megaproject instead of speeding up it due to impact on the decision-making process and reassessment of the value creation.

Originality/value of the article: The LNG energy megaproject in Cyprus provides a unique example of an emerging strategic alternative which requires a reassessment of the initial approach and its comparison in terms of value creation with the newly appeared opportunity.

Keywords: project management, emerging alternatives, megaprojects, LNG energy project, value creation, risk assessment, ESG

JEL: G31, H43, P28.

The importance of timing in energy shipping

Olga KANDINSKAIA — 2024-04-15

Aim: Investment decisions in shipping are notoriously difficult. The key reason is that freight rates are highly volatile and often unpredictable. The energy shipping sector is most challenging. The paper formulates an investment decision rationale in energy shipping and provides insights as to the ability of experts to predict market trends when it comes to the oil tanker supply and demand and the resulting freight rates. Moreover, we focus on the timing of such investment decisions and ways to identify when the timing thereof is right. This paper aims to develop an investment decision framework in energy shipping, specifically investigating the importance of timing when making investment decisions in this sector, and to test the suggested rationale by applying it to a specific oil tanker purchase case.

Design / Research methods: The research process started with a Delphi study to gather expert opinions on the changes taking place in the shipping market. We continued our research process with a concise economic analysis of the 2018 shipping market, and we then applied the findings to a feasibility study for purchasing a specific type of small-scale (Aframax) oil tanker by a company based in Cyprus.

Conclusions / findings: Our main findings were that the opinions of the selected commercial experts supported the results of the secondary data analysis, and all the respondents found the year 2018 an attractive time for investing in ships. The results of an investment appraisal financial modelling exercise for the above-mentioned specific purchase case were satisfactory for accepting the project. Due to low purchase prices and high residual value, the initial required investment was lower while the return and other results would be better for a 15-year-old ship than for a 10-year-old unit. However, the risks were to increase together with age. Considering that the prices of Aframaxes were hitting their historically low levels in 2018, and that within the next five years the demand for modern tonnage was anticipated to be firm and thus raise their values up to 35% above the 2018 levels, the purchase of a more modern unit was recommended as it could give an opportunity of a beneficial resale at the end of the project or earlier. In view of the latest market developments, we can now conclude that overall, despite the unprecedented turbulence during the pandemic years, the 2018 investment recommendation proved correct and insightful.

Originality / value of the article: The current paper’s intended contribution is an investment analysis based on the primary data from a relatively small shipping company. The disclosed primary data for the intended 2018 purchase of an Aframax oil tanker is unique. Thus, the current paper provides useful practical guidance for potential investors and other professionals who follow the energy shipping market as well as contribute to academic research in shipping finance by providing a framework that is applicable well beyond the described case study. Considering the upward move in the crude oil freight rates and anticipating investment interest in energy shipping, following the Covid-19 pandemic and the war between Russia and Ukraine, we believe that this research paper has a good timing.

Keywords: energy shipping, investment appraisal, oil freight market, shipping cycles, decision framework, decision timing

JEL: F44, G31, L22, L91, R42

Resource efficiency awareness of companies

Sıdıka BAŞÇI — 2024-03-30

Aim: This paper aims to identify the characteristic variables that influence firms’ resource efficiency awareness and subsequently group countries based on the similarities of these influencing factors.

Design / Research methods: We utilize data from the GESIS Data Archive and Flash Eurobarometer, which conducted a survey in 2017 across 36 European countries and the United States of America. Machine learning tools are applicable to the analysis. Specifically, the Chi-squared independence test is applied to determine the impact of characteristic variables on resource efficiency awareness. Following this, unsupervised learning (clustering) algorithms are used to identify countries that exhibit similar patterns.

Conclusions/findings: The findings reveal that turnover performance over the past two years and last year's turnover significantly influence firms’ resource efficiency awareness, while factors such as employee number of the company, one-person company or not (sole proprietorship), and the establishment year of the company do not seem to have a notable effect. The impact of the customer profile of the firm on resource efficiency awareness remains uncertain. Based on these dependency results, the study identifies ten potential clusters of countries with similar characteristics in terms of resource efficiency awareness and related factors.

Originality/value of the article: Machine learning methods are relatively novel approaches that have gained prominence with the rise of extensive datasets. As a result, the paper exhibits originality in terms of research methodology. Furthermore, when considering resource efficiency as a significant topic, the article holds considerable importance.

Implications of the research (if applicable): Utilizing the findings of the paper, it becomes possible to develop an application suitable for an Erasmus project. Given that resource efficiency is one of Erasmus’ critical focal points in 2023, the likelihood of approval is considerably elevated.

Keywords: Energy, Resource Efficiency, Machine Learning.

JEL: F64, C55