EY - Energy mix optimization can create value

Optimizing the corporate energy mix

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Large corporations are a driving force for renewable energy globally.

Corporations are now challenged with moving beyond conventional thinking when considering how to include renewable energy as part of a more diversified energy strategy.

To achieve this step change, corporations must consider significant shifts within their organizations. Specifically, the financial appraisal techniques used to assess renewable energy projects must evolve.

Corporations should act now and take advantage of the different options to integrate renewables in a way that improves energy security, reduces exposure to volatile and rising energy prices and boosts brand equity while demonstrating corporate responsibility.

The implementation of innovative strategies centers on three main approaches:

  1. Purchasing power directly from an off-site project
  2. Investing equity in an off-site project – with or without a power purchase agreement (PPA)
  3. Purchasing energy from an on-site project

All over the globe, these three approaches have been adopted by market leaders such as IKEA and Google.

Ultimately, the choice of an energy mix optimization strategy depends on the corporation’s risk / reward appetite. The corporation also will have to decide the degree to which it is comfortable either investing in a long-term payback asset outside of its core business or contracting power over a long period than usual.