In early 2018, Google proclaimed that it had achieved its 100 percent renewable energy target. The global IT giant has the scale and resources to invest in novel power-purchase agreements for clean energy, tackle energy efficiency projects and leverage its assets in wholesale energy markets.
Within the same year, large corporate customers signed more than 5 gigawatts’ worth of power-purchase agreements (PPAs) for wind and solar in the U.S., nearly doubling the number of gigawatts signed in 2017, according to Wood Mackenzie Power & Renewables.
And then there is everyone else.
Despite the headlines about bold renewable goals and organizations committing to deeper sustainability missions, comprehensive energy strategy continues to be a struggle even for large energy users.
According to a study by Centrica Business Solutions, one in three organizations are thinking about how energy can contribute to business growth, drive deeper efficiencies and reduce risk. And yet, the study found that more than half of businesses identified themselves in the “least advanced” category when it comes to energy strategy, while less than 10 percent considered themselves “most advanced.”
In other words, there’s a pretty sizable disconnect between businesses that would like to approach energy differently and those that actually do.
Powering performance, not just buying energy
While the energy sector is evolving faster than it ever has before, many corporate and municipal leaders still see energy as a fixed cost of doing business, and not necessarily an asset to be flexed. In many power markets and utility territories, there are increasing options to monetize behind-the-meter assets that did not exist even five years ago.
“Companies on the progressive end are looking to monetize their energy infrastructure in exchange for long-term service agreements,” noted Svejnar, an approach that less progressive companies can take advantage of, especially as other costs, such as labor, are rising for many corporations.
For any entity that is looking to use its capital more efficiently, exploring electricity use can often provide solutions. Investing in assets like advanced demand response solutions or flexible backup power does not necessarily require deep expertise or even a dedicated energy manager; rather, it calls for finding an energy partner that understands what solutions fit a company’s energy profile and economic needs. That partner can then go build a tailored solution.
For example, Centrica Business Solutions brought together various companies, including O,R&L Construction and Power Island Energy, to deliver a combined heat and power system for the city of Bridgeport, Conn. Three CHP units and a standby generator formed the backbone of a microgrid that can power key municipal buildings while offering 100 percent grid redundancy. The project came at no cost to the city but saved the municipality on long-term costs while reducing its environmental footprint.
Innovation beyond technology
For the Bridgeport project, the city pulled together various financing mechanisms from both a traditional bank as well as the state’s green bank and other state incentives.
A host of innovative financial solutions — from shared savings models on efficiency projects to green tariffs from energy providers and novel energy commodity procurement options — are offering businesses and cities of varying sizes an opportunity to make investments that even a decade ago would have been too much of an upfront capital expense.
And innovation is happening faster and faster. There is now energy production insurance available for solar installations and third-party insurance available for energy storage agreements. Large players like Centrica Business Solutions, which is backed by global energy and services company Centrica, can aggregate clients that are not operating at a big enough scale to have the investment-grade credit ratings to allow them to hedge their credit risk. That allows for projects to move forward where otherwise they wouldn’t, because risk-averse financial institutions often shy away from businesses without a credit score that easily allows the bank to quantify risk.
Even for those that live and breathe in the clean energy sector, it’s amazing what capabilities have been developed in the realm of virtual power plants, advanced demand response and renewable procurement options in the past few years. But for the one in three organizations that Centrica found are thinking about how energy can contribute to business growth, the solutions — both technical and financial — must continue to be simplified.
“Many businesses are focused on more traditional methods of adding revenue streams or cost-cutting in their business,” said Svejnar, “and they just aren’t thinking about using energy in this way.”
“To date, the industry and product innovation has largely been driven by various incentives, such as utility RFPs and large corporate goals,” he added. “Going forward, simplified products will be key to engage the long tail of less-sophisticated customers that want to take part in the distributed energy transition.”
By: GTM Creative Strategies