By Erin Decker, Director, Cleantech Client Management
Schneider Electric Energy & Sustainability Services
Energy associated risks could leave businesses in challenging situations with respect to meeting operations and budget goals. However, if businesses can properly prepare for such risks now, they can remain resilient against disruptive operations.
Resilience is paramount to business success. And sustainability and energy initiatives are increasingly taking center stage, as companies work to become more resilient. However, because the energy landscape shifts daily, organizations must continuously adapt to mitigate climate threats.
New, innovative technologies and strategies are needed to provide corporates with the stability needed to improve resiliency and achieve their goals.
One of the most common tools businesses are using to mitigate risk? Wind power.
Combat global warming and improve resiliency
Businesses are seeing an increased risk with energy costs and availability, as severe weather events and global warming become more serious. And, simultaneously, investors and consumers are keeping a close eye on corporate risk management efforts.
In the U.S., corporations have historically turned to wind as the predominate resource to achieve renewable energy goals, meet sustainability targets and fight against global warming. Wind power lets a company become a lower carbon-emitting electricity user while gaining reputation benefits and economic value.
Wind also has many co-benefits. In regions with heavy coal use, wind energy serves as an alternative to carbon-emitting energy sources — which can provide long-lasting environmental benefits. It also has community-focused economic benefits (particularly in rural geographies) by adding valuable tax revenue and new jobs in local communities.
Understand the bottom-line challenge
To fully maximize the benefits and use of wind power, it benefits an organization to understand how global warming and resource scarcity are affecting the bottom line. Scenario modeling and structured risk assessments are strong approaches to measure the challenges of global warming. The Task Force on Climate-related Financial Disclosures (TCFD) has a great framework to help organizations identify such material risks.
With a greater understanding of how global warming is affecting business resiliency, organizations can explore a broad range of strategies and technologies, including wind energy, to mitigate risks.
Although these ideas vary by industry, here are a few tangible measures businesses can implement to improve energy and resource management in the face of climate change:
- Implement efficiency measures
- Commit to a carbon reduction target
- Adopt processes to identify, quantify, and mitigate physical and market risks
- Actively disclose emissions and water consumption data
- Set targets for renewable energy purchasing
- Integrate circular economy practices
- Explore the use of distributed energy resources (DERs)
Global warming, however, is not the only area businesses see risk.
Consider the additional risks
Physical infrastructure failure is another risk that could pose a serious threat to business, affecting downtime, and putting an organization in operational and financial jeopardy. Companies can protect against physical infrastructure risks by exploring opportunities to improve control over power supplies.
For example:
- Implementing grid-balancing measures, such as demand response, to manage peak energy loads
- Deploying microgrids that can be disconnected from the main grid, while delivering energy from onsite sources, to layer insulation against outages
- Using DERs to create reliable energy through renewable sources such as wind energy
Policy and regulatory reform can also cause threats to business resiliency. For instance, in 2018 alone, the U.S. renewables market faced a solar manufacturing trade case, power market rule changes, corporate tax reform, and rumors of impending industry-hampering tariffs that caused many to rethink their strategies. But companies can build resilience plans to combat the effects of policy change. Such plans include an integrated strategy that blends a well-defined risk management approach with real-time intelligence that spans all relevant markets.
Market volatility is another common issue businesses react to, as energy supply and demand and the related costs are in constant flux. Business leaders need to have in-depth intelligence about the state of the market and available options to determine and mitigate exposure. Australia’s 2017 energy market is a great example. When two baseload, coal-fired power plants shut down, wholesale electricity prices nearly tripled in some areas. Renewable energy PPAs proved to be a viable solution to combat future market instability and lock in a low, fixed price for electricity.
Organizations need to look at their risk tolerance, as well. Financial considerations, such as energy spend, cash flow and operating margins, can determine exactly how much risk a business can withstand.
But above all, businesses may face serious repercussions if they are not taking the aforementioned risks into consideration. To date, nearly 500 companies have set a science-based carbon reduction target (commonly achieved with a combination of energy efficiency and renewable energy), and over 165 have committed to source 100% renewable electricity via the RE100 initiative. Companies and their stakeholders are taking climate action seriously. Implementing strategies that proactively reduce risks related to sustainability and resilience are necessary to protect businesses from risking their reputation.
While organizations cannot plan for the unknown, they can take preventative steps to protect themselves from repercussions associated with global warming and market changes. Employing the correct strategies, renewable energy resources, and other technologies can reduce concerns and set businesses up for future success.
Filed Under: Financing, News
