Energy management as a corporate strategy

What leaders of nations are seeking policy solutions for, business leaders should be seeking in their corporations: securing reliable supplies of energy at reasonable prices. What was once the sole domain of energy traders and analysts must now be taken up by senior management, by getting actively involved in framing a corporate energy management policy and strategy.

For most industries, the cost of energy is outpacing all other variable costs. For example, the cost of crude oil increased by three times over the past decade. In Thailand, consumption of natural gas increased by 82 per cent from 2002-2012, in which 59 per cent went to electricity power generation.  Electricity consumption rose by 61 per cent over the same period. Overall, expenditure on energy has steadily risen in Thailand. The Thai economy spent about 14 per cent of GDP on energy in 2000, increasing to 18.8 per cent in 2012.  

Thus, corporate managers should be asking, “What can we do to better manage energy usage and these high costs?” “How can we better utilise our valuable renewable and non-renewable resources?” 

Additionally, many companies are now recognising that their customers expect them to be part of the national and global energy sustainability solution. Devising strategies to meet current and future energy demands in an environmentally responsible way is no longer the sole work of academia and government.

So what should be included in a corporate energy management strategy? 

The following four components should be addressed: security of supply, security of price, energy efficiency and environmental sustainability.

First, securing the organisation’s reliable supply of energy to fuel its operations can no longer be assumed. Shrinking reserves, instability in the oil-producing regions and global climate change are making it increasingly difficult for energy managers to secure delivery at expected prices. Fuel diversity, energy storage, on-site generation and renewable resources should all be evaluated in the pursuit of securing the company’s energy supply chain.  

Second, security of price can be achieved with hedging energy price volatility, which should be the standard procedure for energy-intensive businesses. Consider companies that have historically purchased energy through standard utility tariffs. It would be prudent for management to develop strategies for non-traditional energy purchases. In fact, consider developing contingency plans to address the catastrophic events that can result in huge price swings. Such price fluctuations can place the company’s ability to meet its business obligations at risk.  

Third, energy efficiency programmes should be implemented. Corporate leaders need to evaluate strategies that can reduce the energy demand-side of the business, and put energy efficiency programmes in place. Such programmes need not be elaborate. For example, installing energy efficient lighting and building energy management systems are a good start. Next, companies may need to create and empower a corporate “energy czar” with the responsibility of implementing the company’s energy efficiency policy and programmes.

Finally, environmental sustainability will be the key to corporate success in energy management. Smart use of renewable and non-renewable energy resources has to be the overriding objective of everyone. Large and small corporations would do well to develop a corporate energy management strategy that incorporates fuel diversity (hydrocarbons, ethanol, biofuels), fuel storage (flywheels, batteries) and alternative energy sources such as wind and solar energy.  

Sustained high oil prices have brought the price point of alternative energy sources into economic balance. Thai corporations need to have a clear environmental policy as well as a practical strategy in their energy management.  

We can no longer take for granted the good old days when energy prices were cheap and environmental degradation was not a major concern of stakeholders. The right time for commitment to better management of energy usage is now.

 

Chodechai Suwanaporn is executive vice president of energy and economics policy, PTT Plc.