Energy and business: an operational perspective

The economics underpinning climate change and the future of energy are in the midst of a fundamental change that will heavily impact businesses; even those not part of the energy ecosystem. Unchecked climate change is forecast by Citi to cost the world $72 trillion by the middle of the century. It is also suggested that ‘…the world can spend $2 trillion less in total on energy infrastructure and ongoing fuel costs than it would in the business-as-usual scenario[i].’ Overall then, the case for an energy revolution would appear to be clear – not only could we save $2 trillion but in addition avoid losing up to $72 trillion in economic activity. Simon Dietz of the London School of Economics notes simply, that ‘…long-term investors…would be better off in a low-carbon world[ii].’ There are signs that businesses are aware that they would do better in a low-carbon world too. Nine out of ten executives see climate change as an urgent priority.

energy

Changes in the generation, capture, storage, distribution and use of energy now allow businesses to not only meet their shared environmental mandate, but strategically adopt better processes. Indeed, the energy ecosystem is already emerging as a key area for optimising business outcomes – from partner choice to financial risk and attracting talent. It is not only possible, but necessary for a much broader range of business leaders to implement a strategic energy and electricity plan. Within it, new possibilities will almost certainly exist as well as the ability to better match demand and supply.

Over the coming decade, the emerging energy landscape will undergo considerable shifts. A hybrid of large and small scale elements already visible in over half of large U.S businesses generating a percentage of their own electricity on-site, is likely to evolve further. Ikea is notable for its renewable energy plans and its refusal to rule out selling excess energy to local customers through localised microgrids.  Buildings indicating this imminent opportunity are already appearing, led and exemplified by the Edge in Amsterdam. Its solar panels create more electricity than the building uses – and while the Edge is packed with some 28,000 sensors, it uses 70% less electricity than the typical office building[iii]. In time the concept of solar panels may become antiquated with transparent solar glass already in the labs.

It appears that the main technology components of microgrids are reaching maturity, with energy storage technologies making dramatic leaps within the past two years and set for further gains. As they enable networking and the sharing of resources to match loads, microgrids can play a role in realising greater utilisation of existing generation and load resources. In time the concept of energy-as-a-service could pose serious issues to utilities ill prepared for change, and cement businesses’ place in the local community.

[i] https://hbr.org/2016/04/the-data-says-climate-change-could-cost-investors-trillions

[ii] https://hbr.org/2016/04/the-data-says-climate-change-could-cost-investors-trillions

[iii] http://www.bloomberg.com/features/2015-the-edge-the-worlds-greenest-building/

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