The basis of developing an effective business energy industrial strategy begins with the embrace of innovative approaches to enhance energy efficiency and environmental sustainability.
The global economic crisis caused by the twin and successive blows of the Covid-19 pandemic and the war in Ukraine have forced enterprises to control and reduce costs like never before. The quest to find energy-saving technologies and energy solutions, through innovation and research, has never been higher. Before 2020, the pursuit of sustainable industrial growth through the transition to renewable energy resources was driven largely by the effort to confront atmospheric change. But, pandemic and wars have served to remind leaders something Germany has found out after the explosion of the Nordstream pipeline that energy represents often one of the most significant overheads for businesses and countries alike. Therefore, it has become evident that energy efficiency has, not only, become an integral component of business strategy, it has become synonymous with it.
Energy strategy articulated through the pursuit of economic growth in tandem with practical energy-saving solutions must serve as the foundation of business strategy. Indeed, a business energy industrial strategy could be interpreted as the search to reduce energy costs through efficiency gains. Pressuring energy suppliers, or governments, to secure cheaper contracts or rebates as has happened in Europe in the wake of the recent reductions to the import of Russian natural gas is not a strategy. Indeed, energy strategy, whether at the national or corporate levels, is far more complex than a mere cost-saving exercise. There are multiple factors, not the least of which is the consideration for the growing pressure including political pressure in the shape of legislation seeking to reach net-zero emissions to minimize carbon dioxide emissions. A good energy industrial strategy should help a company progress towards net zero. Achieving net-zero is also relevant to improving company image, as having a minimal carbon footprint and being able to boast about it, will become increasingly relevant for brand success in the next few years.
Energy Solutions for a Sustainable Industrial Growth
Companies and governments must devise an energy business strategy that balances their financial responsibilities with their environmental ones. Organizations that succeed in doing so are truly sustainable and are typically more profitable and better positioned for long-term success than their rivals. McKinsey and Co. found that 35% of sustainable firms expect to achieve annual revenue growth greater than 10% over the next five years, while only a quarter of the least sustainable companies are confident they can grow at this rate. The heads of the most successful sustainable companies have shown that their energy strategy supports both the financial and environmental goals of the company. This elevates energy from an operating cost to a strategic resource. And this is what puts strategy in business energy industrial strategy.
To achieve this goal, successful energy strategies have targeted four key areas:
- Increase visibility into energy use
- Increase energy efficiency
- Balancing renewable energy sources
- Reduce business risks
This is easier to state in writing, but what does it look like in practice?
Energy solutions for Sustainable Industrial Growth
Data is the starting point for becoming a leader in the area of sustainable industrial growth and ensuring that energy strategy assists a company achieve both its business and environmental goals. Without a grasp of how energy is being utilized today, it is impossible to devise the improvements needed to support a business’s broader goals in the future.
What might be described as energy efficiency solutions, such as wireless sensors, analytics, and Building Automation and Management Systems (BMS/BAS), offer businesses the ability to enhance energy efficiency. Our research found that 76% of sustainable businesses use data collected from sensors and smart devices to improve decision making, compared to 56% of other companies.
Using these technologies, it is possible to gain a complete oversight into energy consumption, thereby revealing potential efficiency and savings benefits. This will provide companies with the information they need to improve their financial performance while working towards green energy initiatives toward achieving de-carbonization goals.
Adopt advanced energy solutions
Having gained a better understanding of how a company utilizes energy thanks to BMS/BAS, it is necessary to address waste: that is it is necessary to find ways to cut waste. Measures that provide energy efficiency enhancements for buildings, including energy-efficient HVAC and lighting, are the first step toward smarter energy. Such measures can add comfort and productivity to a building or facility even as they reduce energy costs and carbon emissions.
Sustainable business leaders will adopt innovative technologies that generate energy. Companies with significant heat loads (such as hot water, steam, chilled water, or hot air) and high electricity expenses should consider distributed energy solutions, like cogeneration. Others may find that on-site renewables, such as solar, are better suited to their needs. If renewables are identified as a potential additional energy solution, the business may consider partnering with other organizations. This will allow them to share the expenses of purchasing and distributing them, and generate higher returns by selling excess energy to the grid.
There are many possible strategies to reduce CO2 emissions
Energy saving, the use of renewable sources, the use of biofuels, and a broader level the use of nuclear energy, reforestation or carbon sequestration are just some of the strategies to reduce CO2 emissions. As for the latter As well explained in a famous article written about 20 years ago by two professors from Princeton University (Robert Socolow and Steve Pacala), unfortunately none of these options alone can solve the problem, given the enormous size of CO2 emissions caused by human activity. It is therefore necessary to integrate the different de-carbonization strategies with each other, trying to balance in the best way aspects of technical feasibility, environmental impact and economic sustainability.
As for carbon capture, its idea is to use gas separation processes already known in the chemical industry (absorption, adsorption, and phase change/distillation, membranes) to separate CO2 from the combustion product stream. The separated (or “captured”) CO2 is then either sequestered in permanent storage sites (Carbon capture and storage, CCS, with storage in sites such as depleted gas fields or other deep geological formations) or reused to manufacture other carbon-containing products (Carbon capture and utilization, CCU) such as cement, plastics and biofuels; or it can be subjected partly to one and partly to the alternative of the two processes (sequestration and utilization, CCUS). Permanent CO2 storage locations are very deep geological formations, such as saline aquifers, depleted gas fields, or depleted oil fields. There are already several CO2 storage facilities that have been operational and monitored for decades.
Strengthen energy security provisions
Power outages can significantly affect a company’s financial performance and customer loyalty. Energy security and lack of resilience is considered one of the top four enterprise risks. This means that a company’s energy strategy must include ways to maintain continuity of energy supply in the event of a major outage.
Business energy strategies address this challenge in two ways. They first balance their energy sources by supplementing grid supply with additional sources such as cogeneration and renewables, which not only supplement grid supply but also ensure a supply of clean, renewable energy. And then, they deploy energy storage solutions, such as lithium-ion battery technology, to maintain power in the case of an outage. Not only does this provide steady power in the occurrence of a grid outage, it may also help when on-site generation facilities are unable to meet demand and can reduce costs when grid prices are highest. But while sustainable business leaders know that integrating multiple energy technologies can unlock added value, such integration is not without its challenges.
Minimize Risk
An innovative approach to energy is important, but it is not without risks. To stay ahead of the curve, it is important to understand and manage these risks. After all, any disruption to supply chains, processes, or systems may be exceedingly costly.
The most important differentiator between mature and less mature firms in the energy sector is how they craft their energy strategy. Energy leaders connect their strategies to broader business results. These companies have a comprehensive energy strategy that includes specific goals, actions, or funding for elements they have recognized as essential to their energy use. Each improvement or efficiency is intended to assist the enterprise achieve broader goals.
In addition, leaders of sustainable companies clearly recognize the connection between energy, corporate values, brand image and end customers – and this helps make their energy strategy relevant to the people in their business. An energy strategy cannot be delivered by one role alone. The answers, budgets and results often lie across multiple business areas, so ownership needs to be on board as well. Involving the right people early in the strategy development process can help reduce the possibility of unforeseen issues.
