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How businesses can turn volatile energy costs into predictable assets
How businesses can turn volatile energy costs into predictable assets
By Kevin Schulte, CEO, GreenSpark Solar
Business and institutional leaders thrive in settings where we can predict outcomes with as much certainty as possible. We spend much of our time closing deals and making our business work, where the end goal is to create certainty in sales or costs. We sign long-term supply agreements with key vendors, recurring revenue contracts with customers, and long-term leases to stabilize business costs.
We invest, divest, and raise capital to create clarity in potential business outcomes. Yet, the last couple of years have been a wild ride for business owners, from shutdowns, furloughs, and even layoffs to tremendous growth and profitability. Stories from business and institutional leaders include the highest highs to the lowest lows, and everything in between. Through all of the undulation, we have seen record inflation, supply chain crises, and once-in-a-lifetime challenges. The last few years may best be described as uncertain times.
One area where uncertainty continues to impact business owners is energy prices. We are seeing headlines like “RG&E rate hikes approved, here is what it means for customers” (1) more often. In some cases, these articles cite rate increases of 10% or more. In 2022, historically high electricity rates were blamed on the war between Russia and Ukraine, and in 2023 and 2024, rising oil and natural gas prices were blamed on the war in Palestine. The reality is that geo-political anomalies aren’t going to stop. Utility companies aren’t going to stop driving toward double-digit profit margins and there does not appear to be enough deflationary pressure to drive energy prices to previous lows. The result is the continuation of volatile and rising energy prices.
There is good news, though. Not since Thomas Edison invented the light bulb has there been a better moment for business or institutional leaders to take control of their energy needs and turn this rising volatile business expense into an asset. By leveraging the ongoing expense of paying utility bills and investing those dollars into solutions like solar power, battery storage, clean heating and cooling, and geothermal energy, leaders can hedge the volatility of the energy markets and turn that expense into an asset that reduces or eliminates dependence on the utility or fuel company. Plus, by using state and federal support dollars, many of these opportunities become more than just a hedge against volatility; they become investments that immediately save money on your utility bill. Even better, as energy prices continue to rise, these assets will increase in value.
Additionally, there are several ways for business owners to stack value and incentives. Each of these technologies generate increased value for your operations, and additional incentives may apply if the product you choose is made in America, if the labor deployed is paid at the prevailing wage, or if the projects are located in underserved markets. Certain industries such as affordable housing, agricultural producers, or rural small businesses and municipalities also benefit from additional grant or incentive programs. Traditionally, not-for-profits, including municipalities, educational institutions, and tribal entities, have been left out of the federal tax benefits for clean energy. Now, these entities can own these systems, and the benefits can be monetized to further the value provided by each of those organizations.
These incentive programs create economic opportunities that are measured in the trillions of dollars (2) according to most economists. The monetary benefits exist for your institution in the form of building assets and saving costs, but it should not be lost that 78% of consumers are attracted to companies with sustainability initiatives. (3) Furthermore, many of the companies that we serve from our manufacturing base here in the Rochester region are subscribed to the RE 100, the global corporate renewable energy initiative, which requires them to have sustainability initiatives that extend to the base of their supply chain. (4) Participating companies include auto manufacturers, consumer electronics, financial institutions, banks, technology companies, and many more. The economy is changing, and economic opportunities to decarbonize your operations will not only create resiliency and predictability with operational business costs but are also likely to further your economic appeal to the market you seek to serve.
Resiliency is the key term that will define business success during our current economic transition – a transition that has likely not been matched since the Industrial Revolution.
Recent articles posted in the Washington Post (5) and New York Times (6) present a reality that energy demand in this country is increasing for the first time in twenty years. There is fear that this rise in demand will challenge our grid infrastructure and even potentially push us back to fossil fuels. This fear can only be deterred by business and institution leaders realizing that we have the power to take our energy future into our own hands. Demand will rise because most of our energy in the future will be electric. From transport to commercial and household energy consumption, the move is toward electrification, and now is not the time to turn back. At this very moment, the best, most resilient, and often the most economical resources to further your operations come from clean and renewable sources.
Business and institutional leaders have three definitive actions to create economic opportunity and take control over their energy futures:
1. Convert your energy spend from a liability to an asset. Take a moment to examine your energy consumption and contemplate how you spend your energy dollars. Most of us will find that unless we have already invested in the energy of the future, we are simply paying our utility in perpetuity. Like many other decisions we make as organizational leaders, it becomes a classic “make or buy” decision. The opportunity to make our energy future for our individual organizations is more accessible now than ever. This opportunity exists in every energy decision we make, from purchasing new vehicles, fixing or replacing heating infrastructure, renewing energy service contracts, installing new lights, etc.
2. Lead our utilities into the future! Utilities in New York State are a public service. How many of us feel our utility is serving the needs of our business or economy well? As we decide to take our energy future into our own hands, let’s ask our utility to be our partner and allay any fears we need to go backward. For existing organizations, look for utility support in your conversion. For those looking for new facilities or expansion, it is critical you look at all these new opportunities to defray expensive grid upgrades that exist only to allow you to buy electricity through utility for the life of your project. Rather, invest in yourself and make your own energy future.
3. Use this historic economic opportunity to help Rochester and the Finger Lakes thrive. Federal dollars are available for implementation, manufacturing, construction, and so much more for the energy of the future. Dollars are available to ensure that we don’t recreate fenceline communities but rather invest in our disadvantaged communities with clean energy choices and jobs that will help drive many out of poverty. It is incumbent upon organizational leaders to drive these funds into this economy. Explore what opportunities may exist for your organization.
The technology is here, the funding is here, and the opportunity is now for Rochester to become a leader in the transition to the energy of the future. It is essential that organizational leaders from across the region evaluate options like electric vehicles, battery storage, solar power, geothermal energy, energy efficiency, and clean heat. Discovery will teach us which of these opportunities are right today and which might be right in the near future. If we poke our heads out to discover, we will find our transition is close, and our energy bills are just the asset we need to increase organizational resiliency.
(1) Democrat and Chronicle: October 13th, 2023
(2) https://climate.mit.edu/posts/economic-implications-climate-provisions-inflation-reduction-act
(4) https://www.there100.org/re100-members
(5) https://www.washingtonpost.com/business/2024/03/07/ai-data-centers-power/
(6) https://www.nytimes.com/interactive/2024/03/13/climate/electric-power-climate-change.html
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