How Can Businesses Capture Additional Value In An Energy Cloud Future?
During the next decade, Navigant expects massive disruption across the entire energy value chain. Driving the energy transition are multilateral efforts to address climate change through the decarbonization of our economies and a shift toward an increasingly clean, distributed, mobile, and intelligent energy ecosystem, which we call the Energy Cloud.
The energy transition will have a significant impact on companies as they implement new energy solutions in their operations that are clean, resilient, reliable, and cost-effective. Large corporations continue to set more aggressive sustainability goals to reduce carbon emissions and waste. They are also pursuing new ways to use and produce energy and implement circular concepts. Finally, there is an increased focus on the sourcing of renewable energy and local energy resources that provide cost savings, reduced carbon emissions, resiliency, and flexibility. Due to the large size of their facilities, industrial companies are prime candidates for becoming prosumers, not only through self-generation of energy, but also by providing storage and demand response solutions to an increasingly agile energy market.
Companies that take a proactive approach have an opportunity to grow their business and create value amidst volatile conditions and uncertainty. The linear systems in many companies increase their exposure to risks, most notably increasing resource prices, while high and unstable commodity prices dampen the growth of global businesses. Corporations are therefore exploring innovative ways to finance long payback periods on renewables and distributed energy resources, like energy efficiency. Signing long-term power purchase agreements to buy renewable power helps protect against future power price fluctuations, but also makes commercial sense due to the declining costs of wind and solar power.
The aim of greater resilience also comes into supply chain management, which evolves from simple exchanges of money and commodities or services to partnerships with mutual decarbonization goals. Long-term contracts enable increased investments into emissions reductions and help to reduce climate- and market-related risks.
Finally, as we continue to think about a clean, intelligent, mobile, and distributed Energy Cloud future, we must do so in the context of long-term climate risk and scarcity of resources. Demand for raw resources is expected to continue increasing due to population growth and a global expansion of the middle class with greater means and demand for modern conveniences. Currently, the world economy is only 9.1% circular, leaving a large gap. This alarming statistic is also a sign of a massive untapped business opportunity that some large corporations have yet to harness. Implementing a circular economy can have a direct impact on regulations and policies that govern the way companies operate, as well as its direct effect on the bottom line in an ever-changing environment.
Without strategic understanding and preparation, companies can experience disruption at any point in their value chains. Those that successfully navigate the energy transition will be those that react now and capture existing opportunities, but also prepare an action plan and define their sustainability journey to capture the long-term opportunities.