Lean and green: How businesses can control energy spend and still make climate progress
By Enel North America
September 12, 2023
As organizations look to reduce operating costs, climate and sustainability initiatives might take a back seat to other functions viewed as more mission critical. Consultants found that 50% of global CEOs plan to pause or reconsider ESG efforts due to economic uncertainty, while 34% have already made the call.* What’s concerning is that ESG efforts can often make a business more resilient to disruption in the long term.
When it comes to an organization’s energy consumption — a permanent and significant fixture on all expense sheets and emissions reports — there are effective ways to control costs and still make progress toward emissions and sustainability targets. Climate disasters won’t wait for a bull market, so large energy users must strive to maintain their climate progress in financially sound ways.
To stabilize an organization’s energy spending with sustainability in mind, focus on three driving forces of cost: how you procure energy, how much energy you use and when you use energy.
“Cost-cutting and carbon-cutting aren’t mutually exclusive. Organizations can and should leverage their clean energy strategy as a competitive advantage in the face of economic uncertainty.”
– Joel Obillo, Head of Sales & Marketing, Enel North America
How you procure energy: Choose lower carbon, lower rate options
The route a business takes to procure energy plays a major role in its overall energy costs and emissions footprint. Buying electricity from a local utility company might be the simplest route, but it’s not always the most cost-effective or low-carbon option. Businesses will need to ask themselves questions such as: Are we paying the best price per kilowatt hour? What options are available to us? What’s our market risk exposure? What are all the cost components of our energy supply?
For those organizations with ambitious decarbonization goals, some of the best options for clean energy procurement include:
- Installing energy generation at facilities, such as solar panels paired with battery storage. Generating and storing renewable energy on site allows organizations to offset how much energy they’re purchasing from the grid and reduce exposure to energy price volatility. These systems also help cut Scope 2 emissions by powering business operations.
- Entering into a physical or virtual power purchase agreement with a clean energy partner. By signing multi-year contracts to procure renewable energy directly from a power plant, businesses ensure price stability and obtain renewable energy certificates.
- Signing a green retail energy supply contract with a reputable energy retailer. Energy retailers often have lower rates and cleaner energy options than a local utility company, especially if they’re providing energy directly from a renewable generation portfolio.
How much energy you use: Leverage data to identify waste
The more energy an organization uses, the higher their energy costs will be, meaning any wasted kilowatt-hour of energy is wasted cost. When businesses have multiple locations or facilities, each powering a complex web of equipment or machinery, energy waste can add up quickly.
If an organization doesn’t have visibility into how much energy it’s using in any given hour or minute, it’s missing a critical first step in curbing costs. Without that data, it’s difficult to identify sources of energy waste or causes of cost hikes.
But with usage insight in hand, a business can incorporate energy conservation solutions that will make an impact, such as upgrading to energy-efficient equipment or implementing smart energy reduction tactics. These tactics minimize energy use during non-critical times and can include turning off lighting, adjusting thermostats or powering down equipment.
When you use energy: Strategize around time of day
The cost of a kilowatt-hour fluctuates throughout the day, so when energy is consumed plays a key role in an organization’s overall energy costs. Additionally, commercial customers pay peak demand charges based on their highest level of electricity used, which can make up a large portion of their energy bill.
There are three primary ways to reduce net energy costs based on time of day: shifting energy consumption to off-peak hours, lowering peak demand and earning revenue for reducing energy usage during grid stress.
If operations fall primarily within high-demand hours during the day, a business will incur higher charges per kilowatt-hour consumed. Businesses with more flexibility can opt to shift production schedules, turn off non-essential equipment or take a less energy intensive approach during peak period to save on energy costs.
Companies also use technologies like on-site battery storage to reduce their reliance on the grid during peak demand hours. Batteries can draw from the grid to charge during low-priced hours, then discharge for business activities during high-priced hours, reducing an organization’s peak demand charges.
With the third approach, organizations enroll in demand response programs and collect payments from utilities and grid operators for curtailing energy use at specified times — typically during grid emergencies — to help avoid blackouts.
Evaluating clean energy solutions for cost and carbon
Every organization needs energy to power operations, so it will always be a critical line item to analyze. Since there are variety of avenues a business can take to control energy costs sustainably, the real challenge comes with deciding which solutions will maximize desired impact. For any cost-cutting measure related to energy, decision makers must consider — and balance — its potential to reduce emissions, complexity, implementation process, required upfront capital and cost effect.
Every option will have trade-offs, but organizations who are serious about their decarbonization targets should look to energy solutions that deliver long-term business and sustainability value. Oftentimes, tapping a team of clean energy experts can help determine the best use of resources for increasing business profitability, mitigating risk and creating a competitive advantage in the energy transition.
Learn more about partnering with Enel North America to simplify the path to net zero.
Source: *KPMG 2022 CEO Outlook
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