EY - Energy mix optimization can create value

Energy mix optimization can create value

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Energy mix optimization is now a business imperative and a board-level priority.

We conducted a global survey of senior executives at 100 energy-intensive companies with over US$1b each in revenues. Our survey confirmed that energy mix has become a strategic issue at the C-suite level of billion-dollar corporations, especially given that a significant — and rising — share of operating costs is being spent on energy.

Key questions for challenging your energy strategy

The following questions are designed to assist you in assessing your energy strategy and implementation plan. If the answer for your organization is “no” or “not sure” to any of these questions, you may be missing an opportunity to optimize your energy mix:

  1. Do you have a global energy mix road map to achieve your carbon reduction or renewable energy targets?
  2. Are you on track to achieve your corporate targets?
  3. Have you taken into account the complexity of the key aspects of an energy strategy?
    • Your global energy footprint and number of locations around the globe
    • Different renewable energy incentive and tax regimes
    • Current and future environmental legislation
    • Various energy procurement approaches
    • Rapid technology advances and cost reductions
  4. Have you involved all internal stakeholders in your integrated and change-driven approach to maximize value?
  5. Does your plan focus on how to minimize energy consumption and optimize renewable energy procurement?
  6. Does your plan have the right balance between capital deployment and procurement?
  7. Does your energy mix optimization road map include third-party capital providers? Have you structured the contracts yet?
  8. Have you designed the right processes to monitor progress and make adjustments as needed?

Two approaches to energy mix optimization

There are two approaches to implementing a corporate energy strategy: procuring energy from an external provider (contract-led) or self-funding energy asset investments with the expectation of generating a return (investment-led).

We recommend a sequential approach in both cases with an initial focus on reducing energy consumption and carbon emissions directly through efficiency measures. Once commercially justifiable energy efficiency measures have been explored, the focus should shift to integrating renewable energy into the energy mix.

EY - graphic - energy mix optimization