Think back to a recent corporate announcement trumpeting a renewable energy installation and the sustainability goals it helps achieve. Chances are you won’t have to think back very far.
While laudable, and representative of a new energy future, these approaches are by no means the endgame when it comes to the overall impact and significance of a corporation's energy system.
To realize the true endgame, large organizations need to go beyond splashy, surface-level projects. They almost always need energy partners who can identify more deeply rooted energy management solutions and then make them happen. Today’s major energy players, from energy suppliers to equipment vendors, are competing fiercely to do just that.
Getting to more holistic energy solutions is the logical next stage for both the energy industry as a whole and individual companies. However, it can be challenging to get customers to move beyond one-off showpieces that support a single, specific goal. The trick in executing an enterprise-wide integrated energy services strategy is realizing the “integrated” part of the offering — the part that's often more difficult and less glamorous.
An integrated approach must be comprehensive in planning, yet modular in execution, as organizations grow comfortable with increasingly sophisticated projects. For the companies serving this market, it means providing education on the goals, process and stages of the outcome are as important as the project’s deliverables.
“One-off projects are definitely an endemic challenge of the energy services business,” said Lynda Clemmons, vice president of business solutions for NRG, one of the companies aggressively pursuing the integrated energy services market. “An initial project is often just that — the first step on a company’s energy journey. To help them advance further, education has to occur on two fronts — first, to explain to customers what’s possible and, second, for us to really understand their business and use what we learn to tailor a solution that fits their needs.”
For an example of how the evolution of an energy approach can unfold, look to Las Vegas. In June 2016, MGM Resorts International completed an 8.3-megawatt solar installation, one of the world’s largest rooftop solar PV arrays, at the Mandalay Bay Resort Convention Center, with guidance and development support from NRG.
Completed in two phases, the onsite solution was the kind of tangible, accessible project that outsiders can immediately grasp. But for MGM, it was just the beginning of the company's energy journey.
A few months after the project went into service, the company struck a deal representative of a more wide-reaching energy strategy: to leave Nevada Power’s sales system and procure mostly renewable energy from an independent power producer.
Despite the $87 million fee to leave their local utility (slightly more than its annual energy spend) and an additional $80 million in related project costs spread over the next six years, MGM expects to recoup its outlay within a total of seven years. While the company is still committed to using solar power, it now also understands the bottom-line benefits of leveraging much larger offsite generation available through third parties.
Moving from a large solar installation atop one of the most iconic buildings in Las Vegas, to entirely overhauling energy procurement while maintaining a commitment to sustainability, took the type of education and deep, far-reaching conversations that Clemmons described.
“It doesn’t matter what industry you’re talking about. When dealing with publicly stated goals about energy or sustainability, there’s almost always an internal disconnect between the goal-setting and the roadmap to get there,” said Clemmons. “The people tasked with executing plans to meet those goals often face requirements or constraints that might conflict with that roadmap.”
The conversations around an initial project can go very deep and help get everyone thinking and acting as a team. “Often, something that once was a routine matter handled at the facility level might need to go all the way up the approval chain,” said Clemmons. That might mean the C-suite needs to rethink contract durations, or that different departments need to better coordinate, or even work together for the first time.
“For example, if a customer wants solar at 40 facilities, what does that really mean?” asked Clemmons. There are many considerations: Do they own or lease those properties? What are the locations, what's the climate, the roof quality and the local energy prices? What are the customer's current procurement practices? What are the renewable portfolio standards and regulatory considerations in the state they're working in? Might they be in a position to invest in a local community solar project?
“As their energy supplier, NRG serves as a primary conduit for making sure the right questions are asked, the right data is analyzed, and the full scope of what is possible and each scenario’s impacts are presented,” added Clemmons. “For people who are busy running a company, it can seem daunting and distracting. We are cognizant of that and present all the factors in a concise, actionable way.”
The value of starting small
Often the goal-setters have very different motives and incentives than those who must meet those goals. For instance, a corporate chief sustainability officer might be very focused on the company’s rating on the Dow Jones Sustainability Indices or the CDP, formerly known as the Carbon Disclosure Project.
The sustainability officer may also seek to engage external influencers, such as government or media, with the company’s energy plans. But facility-level staff often lacks insight into those interactions, and instead tend to be motivated by the need to maintain operations, enhance resilience and reduce costs.
As such, initial showpiece projects that focus on a single technology or facility can have value. Clemmons has found that they tend to launch useful and necessary conversations that can shift the consensus on how to address energy across an organization.
“Really, the only way you can get integrated energy services done is to understand what the customer is trying to achieve, in terms of both energy and business goals.” said Clemmons. “That’s not always obvious, and it’s where the ability to provide diligence, perspective and a longer-term solution comes into play.”
An organization’s true energy goals often begin to emerge through early projects. If, for example, they just want a lower price for cleaner energy, then that goal might be most feasibly addressed by focusing on procurement practices, including long-term power purchase agreements. A cost/benefit analysis comparing large offsite renewable energy PPAs to facility-specific renewables projects can clarify intent, as well as bring goals and plans into alignment.
“We are making this process easier and always start where the customer is willing to begin,” said Clemmons. This can lead to projects that are more strategically aligned and that address a complete energy strategy after the short-term payout projects are identified. Customers often want to start with an energy efficiency audit, followed by some retrofits of HVAC or lighting.
Typically, achieving clear positive results on energy consumption increases customers’ curiosity and confidence — especially for adding monitoring, controls and analytics, as well as renewables. And once they understand load patterns better, organizations might be more interested in demand-side management, such as demand response programs.
Crafting holistic energy strategies that are truly integrated requires finesse in relationship-building.
“There are many factors to look at and a lot of moving parts — some controllable, some not,” said Clemmons. “The time for education is often underestimated. You have to be patient and understand that it’s an iterative process. You can’t walk in to a customer and say, ‘Here’s our bag of answers; we think three apply to you.’ What you can do is to look at their current state, gain consensus on where they ultimately want to end up, and craft a simplified solution and a plan to take them there.”