Large commercial and industrial companies are bombarded with daily challenges that must be prioritized and handled so they can effectively stay the course toward their collective missions and strategic objectives. When executives look over their complicated corporate enterprises, it’s easy to see why noncore expenses like energy have traditionally been overlooked or marginalized.
However, according to a recent Edison Energy white paper, there are more than $80 billion in potential electricity and natural gas savings being left on the table by C&I firms. After all, “every dollar saved in utility costs becomes an additional dollar of net profit,” according to a recent Harvard Business Review article. That should grab any CFO’s attention.
In most cases, corporate management structures were not designed to handle energy management priorities. In the past, there was typically a single supplier — a local or regional utility — so purchasing energy was easy and conserving it was not a high priority. Fast forward and layer on sustainability, renewable and resiliency initiatives — which seldom come with independent budgets — and the energy management picture gets more cumbersome. Energy managers are being asked to do more with less and the stakes are high.
“Sustainability initiatives are making what used to be a mid-level organizational responsibility and cost center into something that’s a lot more visible, if not more strategic for a lot of companies,” Edison Energy President Alan Schurr said as part of his keynote remarks at the inaugural Smart Energy Decisions Innovation Summit in March. “Many firms have their marketing organizations helping to drive sustainability pledges. Their shareholder activists are driving it. Their employees are driving it. It’s different than it used to be.”
Of course, the C-suite needs to focus on executing their business’ core strategies, but the lines between a C&I company’s central mission and its energy/sustainability requirements are blurring.
Just look at major announcements from Apple or more recently Anheuser-Busch InBev, for examples. A computer company and beer brewer have 100% renewable energy goals and serious carbon reduction commitments. Goals of this magnitude need to be considered as part of holistic enterprisewide strategies.
And while well-capitalized industry leaders like Apple and InBev may find it easier to allocate resources toward these objectives, it can be more challenging for others. A regional grocery chain, for example, may see potential value in utilizing roof space for solar panels to control energy costs and reduce carbon emissions, but lack the resources — capital, personnel, subject matter expertise — to do it all internally.
“Sometimes the supply chain people are looking for the lowest price when that’s not the only attribute for something that you’re trying to purchase. The treasury organization that’s looking to evaluate long-term renewable commitments don’t know how to deal with energy contract structures that are past maybe a two-year period,” Schurr said at the Innovation Summit. “That is the large challenge for the energy management professionals to try to get that right so they can do what they know is the right thing … across their organization, across their entire portfolio of properties, contracts, assets, vendor relationships, markets.”
The growing trend in the energy management space at C&I companies is toward integration across multiple departments and elevation to the management level toward thinking about energy as a strategic asset and not simply a commodity. One option is to create a new corporate officer position — perhaps a Chief Energy Officer — who would “centralize decision-making around utilities and rethink its role to support strategic corporate goals,” according to the Harvard Business Review piece. But such a role would require a highly-skilled staff that would need to be recruited, which is a time-consuming and expensive proposition.
Another potentially more efficient option is to work with an energy advisory services company to develop a holistic, enterprise-wide energy strategy. This plan would complement the resources within the company and identify areas for bringing in outside expertise to work with the internal team to effectively implement the plan.
As utility business models continue evolving alongside rapidly growing distributed energy resources, energy management will become increasing complex. Forward-looking companies will look for ways to integrate their energy needs into a holistic, enterprisewide plan that allows them to recapture their share of the $80 billion energy savings opportunity being left on the table today.
Dan Weeden is the President of ENERActive Solutions, an Edison Energy company. He is responsible for leading the strategy and growth of its broad range of energy engineering solutions.
Dan began his career in the nuclear power industry before moving into a role of engineering sales and business development within the energy industry. He previously worked for the New Jersey Natural Gas Co., Sargent and Lundy, Comfort Systems USA and Dome-Tech Engineering. Dan uses his background in engineering and energy project development to bring a unique, solutions driven approach to bring peak performance to client facilities. Dan holds a Bachelor of Science Mechanical Engineering and an Executive MBA from Villanova University.