28NOVEMBER2023Theenergy-demandopportunity:HowcompaniescanthriveintheenergytransitionOrganizationsfaceanenergytrilemmainvolvingcosts,carbonemissions,andsupplyuncertainty.Butenergysystemadvancescanhelpthemcreatevalueandbecomemoresustainableandresilient—bytakingchargeoftheirenergydemand.byJonChadwick,SamanthaVincent,ReidMorrison,andRobTurnerwww.pwc.com/energyopportunityJonChadwickReidMorrisonspecializesinenergytransition.isPwC’sGlobalEnergyAdvisoryLeader.HeisapartnerwithPwCAustralia.HeisaprincipalwithPwCUS.SamanthaVincentRobTurnerisaleadingpractitionerinenergytransition.istheUKsectorleaderforenergyandSheisadirectorwithPwCAustralia.resources.HeisapartnerwithPwCUK.OrganizationsworldwidespendmorethanUS$10trillionayeartomeettheirenergyneeds,andmanystand-alonecompaniesstruggleunderaheavycostburden.IntheUK,morethanhalfofbusinessessurveyedin2023(54%)saidthatenergyaccountedforupwardof25%oftheirbusinesscosts.1Uncheckedenergyusagedoesmorethancutintothebottomline.Itisalsoamajorsourceofcarbonemissionsandacauseofoperationaluncertainty.Butnewdynamicsintheglobalenergyarenapresentopportunitiesforbusinessestotackleallthreepartsoftheso-calledenergytrilemma—costs,carbonemissions,anduncertaintyofsupply—atonce,byholisticallyevaluatingtheirowncurrentandfutureenergyneedsandassuminggreatercontroloverenergydemand.Ofthesenewenergydynamics,perhapsthebestknownisthedecarbonizationtakingplaceasmorelarge-scalerenewablepowercapacitycomesonline.Butbecauserenewablepowercanbeunpredictable,aswhencloudsblockthesunorthewindstopsblowing,energysuppliesandpricesmaybemorevolatileandharderfororganizationstomanage.Thesecomplexitiesarewhyotherenergydynamicsmatter.Decentralization,resultingfromthedeploymentofsmall-scalerenewableenergygenerationandstorage,letsorganizations1NpowerBusinessSolutions,Businessenergytracker2023,2023,https://npowerbusinesssolutions.com/businessconfidence.2www.strategy-business.comproduceandbankelectricitytoavoidshortagesandsurgingprices.Andthedigitizationoffacilitiesandequipmenthelpsorganizationsmanagetheirenergyusewithmoreprecision,reducingcostsandguardingagainstrisks.Thecombinedimpactofdecarbonization,decentralization,anddigitizationmeansorganizationsthatoncefunctionedmainlyasenergyconsumerscannowplaythedualroleofproducer–consumer.Theseenergy“prosumers”mightstillpurchaseelectricityfromthegrid—onlynow,theycanalsoproducetheirownelectricity,storeit,andsellit.Andtheycanusedataandtechnologytomodulatetheirenergydemandandtimetheirenergypurchasesandsalestomatchfavorablemarketprices.TraditionalenergysystemCentralizedfossilfuelpowerplantsgenerateelectricity,whichflowsinonedirectiontocustomers;energysupplyistypicallyreliablebutemissions-intensive.GenerationTransmissionandConsumersdistributionSupermarketFossilfuelpowerplantsDatacenterBusinessesResidences3www.strategy-business.comDecarbonizationUtility-scalerenewables(e.g.,solar,wind)areintroduced,startingthephaseoutoffossilfuelpower;thisreducesemissionsbutcreatessomesupplyinstability.OffshorewindSupermarketDatacenterNuclearpowerplantBusinessesResidencesFossilfuelHydropowerLarge-scalepowerplantsolarDecentralizationBusinessesandhouseholdsinstallsmall-scalerenewablesandbatteries;bidirectionalflowofelectricitytoandfromdecentralizedassetsrequiresinvestmentinnetworkinfrastructure.BusinesseswithsolarandbatteryinstallationsOnshoreUtility-scaleResidentialwindbatterystoragesolarinstallations4www.strategy-business.comDigitizationInternet-of-thingsdeviceshelpcoordinatedecentralizedenergyassets;energyusersmanagedemandtoachievesavings,usemorerenewablepower,andsupportgridstability.Alltold,actionsthatorganizationstaketomanagetheirenergydemandwillhelpthemcreatecommercialvalue,achieveenvironmentalandsocialbenefits,andboostresiliencetoriskssuchassupplydisruptions.Inthisarticle,we’llshowhoworganizationscanrealizethesebenefitsandbuildcompetitiveadvantagewithfourcomplementaryapproachestodemand-sideenergyaction:optimizingtheirdemandthroughenergy-efficiencymeasuresandmoreflexibleusage,pursuingenergyindependence,maximizinginteractionswiththemarket,andelectrifyingoperations.HowanAustralianindustrialparkcreatedvaluebychangingitsapproachtoenergydemandTounderstandhowcompaniescancreatevaluebymanagingtheirenergydemand,considertheexampleofMoorebankLogisticsPark(MLP),Australia’slargestintermodalfreightfacility.Likeotherlargeindustrialorganizationswithsignificantenergydemandandambitiouscarbon-neutralitygoals,MLPandmanyofitstenantsareseekingtoreducetheScope2carbonemissionsthatresultfromtheiruseofpurchasedelectricity.Thefacility’sownershipconsortiumalsorecognizedthatsuch5www.strategy-business.comeffortswouldhavetobebalancedwithtenants’needforeconomical,reliableelectricpower.Inresponse,theconsortiumpartneredwithrenewablesfundSolarBaynotonlytoinstallandoperateAustralia’slargestrooftopsolarinstallationattheprecinctbutalsotousetechnologytomanageenergydemandinanefficient,cost-effectiveway.Underthepartnership,SolarBaywillinstall60megawattsofbehind-the-meterrooftopsolaralongwith150megawatt-hoursofbatteriesforenergystorage,whichwillservetenantsacrossthefacilitybywayofalocalizedelectricitynetwork,ormicrogrid.Thisintegratedsystemwillbecapableofdeliveringalltheenergythattheparkusesduringdaylighthours,equivalentto44%ofoverallenergyneeds.Therestofthefacility’spowerwillcomefromanoff-sitewindfarm,givingtenantsenoughrenewableenergytomeetthefullneedsoftheirelectrifiedoperations.Theswitchtorenewablesisexpectedtopreventsome67,200metrictonsofcarbonemissionsperyear,significantlyreducingtheScope2footprintofMLP’stenants.Thepartnershipalsoinvolvestheuseoftechnologysuchasefficientheatingandair-conditioning,lightingandcontrolsystems,andextensivesubmeteringandmonitoringsystems,tooptimizethegeneration,storage,anduseofenergyacrossthelogisticspark.ThisapproachextendstoMLP’sinteractionwiththegrid.SignificantportionsofMLP’stotalenergydemand(orload)areflexibleenoughthattheycanbeshiftedtotimesofthedaywhenpowerischeaperorwhenthegridisunderlessstrain.ByadjustingthoseloadsinlinewiththechangingpriceandsupplyofpowerfromAustralia’sgrid,MLPcanoptimizeconsumptionofpowergeneratedon-site.Itwillalsoprovidewhatareknownasgrid-supportservices,whichhelptobalancethesupplyanddemandofpowerandensurethatelectricityflowsproperlythroughthenetwork.AggregatingtheenergydemandoftenantsacrossthefacilityandcoordinatingitsmanagementallowsMLPtomaximizethecommercialbenefitsofitsgridinteractions,whileimprovinggridperformanceforothersonthenetwork.Andastheprojectexpands,MLPintendstooffertenantsadditionalservicessuchasfastchargingforelectrictrucksandhydrogengenerationandsupply.6www.strategy-business.comThebenefitsofdemand-sideaction:Commercial,sustainability,andresilienceeffectsTheshifttobecominganenergyprosumermaybeunusualfornow.Butourresearchsuggeststhatalmostallorganizations—insectorsasdiverseashealthcare,manufacturing,andretail—canusedemand-sideenergyactiontorespondeffectivelytothetrilemmaofgrowingandvolatilecosts,greenhousegasemissions,anduncertaintyofsupply.Thebusinesscasefordemand-sideactionrestsonthreecategoriesofbenefits.█Commercialbenefits.Demand-sideactionhelpsorganizationsandtheirsupplychainsforgecloserinteractionswiththeenergysystem,reducingenergyandcarboncostsandunlockingrevenueopportunities.Withrenewablesandbatteries,organizationscantradeinenergyunits,offergridbalancingservicestoenergynetworks,andcreateancillaryrevenuesourcessuchasenergyattributecertificates(EACs,alsoknownasrenewableenergycredits)andcarboncredits.Costsavingscanbereinvestedinthebusiness.Meanwhile,organizationsmayhaveopportunitiestofundtheirenergyprojectsbyaccessinggovernmentgrantsandincentives,greenfinancethroughloansandbonds,andcapitalfromenergysystempartners.█Sustainabilitybenefits.Fromanenvironmentalandsocialperspective,reduceddemandforgridpowerandproductionofon-siterenewableenergywilldriveemissionsreductionsacrossassetsandoperations.Theseinitiativescanalsoexpandanorganization’ssociallicensetooperatebecausetheydemonstratecommitmenttosupportinggridefficiencyandprovidingenergytolocalcommunitiesduringgriddisruptions.█Resiliencebenefits.Finally,organizationscanboosttheirresiliencetoclimaterisks(bothphysicalandtransition)andreducetheirexposuretooperationalrisksresultingfromgeopoliticalandothersupply-sidefactors,suchasgriddowntime.7www.strategy-business.comThedemand-siderepertoire:FourapproachesthatcreatebusinessvalueSomeorganizationswithenergy-intensiveactivities,suchaschemicalscompanies,manufacturers,andsteelmakers,havelongmadeitaprioritytoimprovetheirenergyefficiency,knowingthiscanreducetheircostsandtheirgreenhousegasemissions.Now,manymoreorganizationshavetheopportunitytotakechargeoftheirownenergydemand—andtoscaleuptheirimpactbypartneringwithotherentitiesintheirsupplychains.Here,weidentifyfourcomplementarysetsofdemand-sidepracticesthatreliablyyieldcommercial,sustainability,andresiliencebenefits.OptimizingenergydemandwithnewefficiencymeasuresandshiftsinusagepatternsWhenorganizationsreducetheirenergyconsumption,theylowercosts,cutcarbonemissions,andbuildresilienceagainstsuchdifficultiesaspricespikesorsupplyshortages.Onesimplewaytosaveenergyistoinstalldigitaldevicesandsystemsthatmonitorandcontrolusageinsmallappliancessuchasairconditionersandwaterheaters.Becausethesebasicinterventionscanyieldenergysavingsofupto40%forlittleornocost,almosteveryorganizationstandstobenefitfromthem.2Thekeytotheireffectivenessistorollthemoutatscale(ratherthanpiecemealoronlyinsomefacilitiesorlocations),increasingtheamountofenergysaved.Businesseswithenergy-intensivebuildingsandequipmentorwithflexibilityinusage,suchasindustrialmanufacturersorretailshoppingcenters,arewellpositionedtoobtainfurtherbenefitsbyadoptingmoresophisticatedapproaches.Forexample,organizationscanusesensorstodetectthepresence2InternationalEnergyAgency,Copingwiththecrisis:IncreasingresilienceinsmallbusinessesinEuropethroughenergyefficiency,October2022,https://www.iea.org/reports/coping-with-the-crisis-increasing-resilience-in-small-businesses-in-europe-through-energy-efficiency.8www.strategy-business.comFFoouurraapppprrooaacchheessttoottaakkiinnggcchhaarrggeeooffeenneerrggyyddeemmaannddtthhaattccaannhheellppccoommppaanniieessccrreeaatteebbuussiinneessssvvaalluueeOrganizationssearchingforvalueintheenergytransitionhavemanyoptions.IOnrtghaisnihzyaptioonthsestiecaarlcuhsinegcafosrev,aaluhearindwthaereenreetragilycthraaninsistiuornvehyasvethmeapnoyteonptitaiolnbse.nefitsInthishypotheticalusecase,ahardwareretailchainsurveysthepotentialbenefitsOptimizingenergydemandPursuingenergyindependencePOopstsimiblieziinnigtiaetniveersgydemandPursuingenergPyosinsdibelepiennitdiaetinvceesPossibleinitiativesEnergyefficiency:UsinglessenergytoPossibleinitiativespEenreforgrmyeafnficacietinvcity:oUrsaincghielevsesaenneorugtycotomeperformanactivityorachieveanoutcomeEnergygeneration:Installingon-siterenewables,Energyoptimization:TimingenergyusesEucnheragsysgoelanr,etroatgioen:eIrnastetaellliencgtroicni-tsyitfeorreunsewoarbslaelse,tEontearkgeyaodpvtaimntaizgaetiofnb:eTtitmerinpgriecneesrgyusesuchassolar,togenerateelectricityforuseorsaletotakeadvantageofbetterpricesPotentialbenefits(illustrative)iizziinneggmaannddinPPduuerrssuuinEnergystorage:Installingon-sitebatteriestoPotentialbenefits(illustrative)ddemindeppeeinEnergystorageb:aInsktaelleincgtriocnit-ysfitoerbuasteteorriessatleo30%reductioninenergydemandeneenregrOgpOtiptmimf3ro0m%lrigehdtuincgtioafnteirninesntearllginygdeenmeragnyd-yybankelectricityforuseorsaleefrfofimcielingthLtiEnDgafixftteurreinssitnalslintogreesnergy-Potentialbenefits(illustrative)efficientLEDfixturesinstorestiotingongmamrakrektetPotentialbenefits(illustrative)ss40%ofelectricitygeneratedon-site40%obfyeinlesctatrlilcinigtysgoelanrearantdedbaotnte-rsiietsebyinstallingsolarandbatteriesnenregrygygegnednednecneceDDeemmaanndd--ssiiddeeeenneerrggyyctcrtraapppprrooaacchheessElEeolepoeprearaElectrifyingoperationsttioiinffyyiinngMaxiimmiizzeiinnraccMaximizingmarketPEolescsitbrliefyiinnigtiaotipveesrationsionssgMaxiinntteraMaximiiznitnegramcatiroknestPossibleinitiativesEquipment:SwitchingappliancesandPossiibnleteirnaitciattioivnessmEqauchipinmeerynto:SewleictctrhicinmgoapdpelsiancesandPossibleinitiativesmachinerytoelectricmodelsEnergytrading:BuyingandsellingFleet:SwitchingtoelectricvehiclesandEnergyternaedrignygo:rBeunyeinrgyacnodnsterallcintsgcFhleaergt:inSgwsitycshteinmgstoelectricvehiclesandenergyorenergycontractschargingsystemsPotentialbenefits(illustrative)Ancillaryservices:ReducingenergyconsumptionPotentialbenefits(illustrative)orApnrcoivllidarinygsbeurvlkiceense:rRgyedautcsipnegceifnicertgimyecsontosusmuppptioornt70%reductioninfleetemissionsfromorprovidingbulkenergyatspecifictimegsrtidostuapbpiloitryts7w0%itchreindgutcotieolnecitnricfleveetheicmleisssionsfromswitchingtoelectricvehiclesgridstabilityEnergyattributecertificates(EACs)orcarboncrEendeitrsg:ySaetlltinrigbucteertcifeicrattifeiscafotersun(EitAsCofs)reonrecwaarbbloenscredits:SellingcegretinfiecraatteiosnfoorruanviotsidoefdreenmeiwssaibolnesgenerationoravoidedemissionsPotentialbenefits(illustrative)Potentialbenefits(illustrative)10%energyspendoffsetbyrevenuefromsolarpow10e%rgenerragtyiosnpaennddsoaflfesseotfbgyrereevnenenuerfgryomcresdoiltasrpowergenerationandsalesofgreenenergycredits60%ofenergyspendoffsetbyrevenuefromusing60%ofenergyspbeantdteorifefsettobmyarienvtaeinnuaesfrtoambleusgirnidgbatteriestomaintainastablegrid100%carbonneutralityachievedbybuyingEACsfor100%carbonneutralityachievedalblyenbeurygiyngpuErAchCassfeosrallenergypurchasesPotentialbenefitsarebasedonahypotheticalusecaseforahardwareretailchain.Source:PwCanalysis9www.strategy-business.comofpeopleorchangesintemperature,sotheycandialtheirlightingandheatingupordownasnecessary,takingintoaccountfactorssuchascostsandenergyavailability.Withdatafromnetworkedsmartdevices,organizationscanforecasttheirenergyneedsandfindopportunitiestoapplytheapproachesdescribednextinthissection,suchasinstallingon-siterenewablesandstorage.DemandoptimizationtechniquescametogethersuccessfullyforoneEuropeanindustrialmanufacturer.Whenmanagersperformedanassessmentoftheorganization’son-siteenergydemand,theyfoundmultipleopportunitiestoimproveenergyefficiency,includingupgradingtomoreefficientelectricmotors,repairingleaksincompressedairsystems,andoptimizinglightingcontrolsoftware.Thesechangesenabledtheorganizationtoreduceitsenergyconsumptionby10%,itsannualenergyspendingby€2million,anditsyearlyCO2emissionsby3,000metrictons.Pursuingenergyindependencewithon-siterenewablepowerandstorageReducingtheirrelianceongridpoweroffersorganizationsanotherwaytoavoidsuchrisksassurgingprices,poweroutages,andserviceinterruptions.Italsohelpsthemsavemoney,becausepurchasingfewerkilowatt-hoursfromthegridresultsinlowernetworkcharges.InAustralia,theUS,andtheUK,thesechargesaccountfor20to40%ofthetypicalenergybill.3,4,5Insomejurisdictions,pursuingenergyindependencewillalsohelporganizationsminimizetheirenvironmentalleviesandtaxes,suchasthoseappliedundertheEU’sCarbonBorderAdjustmentMechanism(CBAM)andEmissionsTradingSystem(ETS).Theactionthatunlocksthesebenefitsisinstalling3AustralianEnergyRegulator,Stateoftheenergymarket2023,October5,2023,https://www.aer.gov.au/publications/reports/performance/state-energy-market-2023.4USEnergyInformationAdministration,Electricityexplained,accessedNovember2023,https://www.eia.gov/energyexplained/electricity/prices-and-factors-affecting-prices.php.5UKParliament:HouseofCommonsLibrary,Domesticenergyprices(researchbriefing),September2023,https://commonslibrary.parliament.uk/research-briefings/cbp-9491.10www.strategy-business.comuserid:414195,docid:150193,date:2024-01-02,sgpjbg.comBasicinterventionscanyieldenergysavingsofupto40%forlittleornocost.on-site,or“behind-the-meter,”renewableenergygenerationandstorageequipment.Anorganization’spotentialtogenerateenergyon-sitedependslargelyonitsfacilities’locationandphysicalcharacteristics,aswellaswhatweatherpatternsprevail—particularly,howmuchsunshineandwindthereis.Potentialisalsocontingentonhowmuchspacetheorganizationhasavailable.Thosewithsignificantrealestateholdingsnormallyhavebetterprospects,becausetheyhavemoreroomforsolararrays,windturbines,orbatteryinstallations.Butthatdoesnotmeanthatotherorganizationsarelockedout.Theymightbeabletoinstallsolarpanelsonrooftops,insomeinstances.Theycanalsolooktoreduceexposuretoenergycostsembeddedinthepricesofgoodsandservicestheybuy—forexample,byprovidingaccesstolow-costrenewablesinexchangeforbettercommercialoutcomes,suchassupplyguaranteesordiscountsongoodsorservices.IKEA,forone,providedsomeofitssupplierswithpowerpurchaseagreementsandothermechanismstohelpthembuyrenewableelectricityfromthegrid.Thecompanyalsoofferedthemdirectfinancingforon-siterenewables.66IKEAwebsite,IKEAexpandsrenewableenergyprogrammetosuppliersintenadditionalmarkets,accessedNovember2023,https://www.ikea.com/global/en/newsroom/sustainability/ikea-expands-renewable-electricity-programme-to-suppliers-in-ten-additional-markets-230215.11www.strategy-business.comReducingtheirrelianceongridpoweroffersorganizationsanotherwaytoavoidsuchrisksassurgingpricesandpoweroutagesandinterruptions.Anotherapproachtoinstallingon-siterenewablesandstorageistoenterintocommercialagreementswithenergyprovidersthatcansupplycapitalandsupportrollout.Asmentionedabove,theMLPownershipconsortiumpartneredwithanenergyprovidertoco-fundinstallationofsolarpanelsandbatteries.Whererenewablepowergenerationispractical,therearemanyprecedentsforitsimplementation.Nearly60%ofthemembersoftheRE100globalcorporaterenewableenergyinitiativenowproducerenewableelectricityfortheirownconsumption,mostusingsolar.7Throughon-siterenewableelectricityandthermalenergygeneration,oneEuropeanfoodmanufacturerreduceditsScope1and2emissionsby68%(froma2015baseline).Contractstopurchaserenewableenergyhelpedtheorganizationrealizefurtherimprovementsinenvironmentalperformanceandstayontracktoachievea100%reductioninoperationalemissionsby2030.7ClimateGroupRE100,Onsiterenewableelectricity:Whyit’sakeypartofabusiness’climatestrategy,August2021,https://www.there100.org/our-work/news/onsite-renewable-electricity-why-its-key-part-business-climate-strategy.12www.strategy-business.comMaximizingmarketinteractionsthroughenergytrading,demandresponse,andproductsalesOrganizationsthatparticipateinmarketsforenergyandenergy-relatedproductsandservicescanbothreducecostsandgeneraterevenue.Timingtheirpurchasesandsalesofelectricity,forexample,letsthemtakeadvantageofchangesinthepriceofgridpower.Organizationscanalsodevelopandsellenergy-relatedproductssuchasEACsandcarboncredits.Andtheycanofferenergyretailerstherighttoremotelydischargebatteriesduringpeakdemandperiodsorearnincomeformoderatingenergyconsumptiontosupportgridstability.Topursuetheseactivities,organizationsmustputfoundationalcapabilitiesinplace.Forexample,theymustoperatetheirownrenewableenergyassetstoissueEACs,andtheyneedoptimizationtoolstoorchestratetheirenergyloads(thatis,theenergyconsumptionacrossaportfoliooffacilitiesandequipment)inresponsetochangingprices.Forthesereasons,participationinenergymarketsislikelytoworkbestfororganizationssuchasretailchains,commercialoffices,anddatacenters,whichhavehighvolumesofcontrollableenergyassetsandtheabilitytotailortheirenergyusagetodailyfluctuationsincosts.Organizationswithlowerlevelsofenergydemand,orlessflexibleenergydemand,mayfindfeweropportunitiestoadjusttheirenergyusageaspriceschange.Theseorganizationsmightconsiderpartneringwithotherstoaggregateenergydemandandcollectivelyengageinthemarket.Organizationsthatdodevelopthecapabilitiestoengageinenergyandenergy-relatedmarketscanrealizesubstantialgains.OnealuminummanufacturerbasedinAustraliaearnedasmuchasAU$19.2millionperyearoverafour-yearperiodafterenrollingintheAustralianReliabilityandEmergencyReserveTrader(RERT)program.Thearrangementallowedthe13www.strategy-business.comOrganizationsthatparticipateinmarketsforenergyandenergy-relatedproductsandservicescanbothreducecostsandgeneraterevenue.organizationtocollectfeesfromtheAustralianEnergyMarketOperatorinexchangeforrampingdownitssmelterwhentheelectricityloadonthegridpeaked,helpingpreventinterruptionsandoutages.ElectrifyingoperationstoboostefficiencyandmitigateemissionsThefourthapproachtodemand-sideactioninvolvesreplacingfossilfuel–poweredassets,includingvehicles,withelectricalternatives.Runningequipmentonelectricity,particularlyrenewableelectricity,isadirectwaytolessencarbonemissions.Itcanalsoenabletheotherthreedemand-sideapproachesbypositioningorganizationsmorestronglyasprosumersinanincreasinglyelectrifiedenergysystem.Andelectrificationcreatesfinancialbenefits,becauseelectricequipmenttendstobemoreefficientthanconventionalequipment.Electricheatpumpsarethreetofivetimesasefficientasnaturalgasboilers,andall-electricvehiclesare4.4timesasefficientasgasolinecombustionenginevehicles.8,9Afurtherfinancialconsideration:earlyadoptersmayfindopportunitiesforgreenincentivesorsubsidiestohelppayforelectrification.8InternationalEnergyAgency,Thefutureofheatpumps,revisedDecember2022,https://iea.blob.core.windows.net/assets/4713780d-c0ae-4686-8c9b-29e782452695/TheFutureofHeatPumps.pdf.9USNationalRenewableEnergyLaboratory,Efficiencyratiosforlight-dutyall-electricvehiclesintheUnitedStates,June2023,https://afdc.energy.gov/data/10963.14www.strategy-business.comOfcourse,electrificationdoesboostanorganization’sdemandforelectricity,whichcanthenexposeittopricevolatilitycausedbymacroeconomicevents,periodsofpeakdemand,orlowrenewablesgeneration.Thisaccentuatestheimportanceofoptimizingenergydemandandcostsorinstallingon-siterenewables,asdescribedabove,whilealsoelectrifyingoperations.Numerousorganizationsaroundtheworldhaverealizedmultiplebenefitsfromswitchingtoelectrifiedtechnologies.OneUK-basedutility,forexample,aimstodecarbonizeitsfleetofvansandheavy-goodsvehiclesbyconvertingtoelectricvehiclesandalternative-fuelsvehicles,therebycreatingthepotentialtoreducefleetemissionsmorethan90%by2030.Thephasedrollouttargetedbytheorganizationisexpectedtoresultina50%reductionofitstransportemissionsby2027.GettingstartedThetrilemmaofhighenergycosts,carbonemissions,anduncertaintyinenergysupplycreatesanever-greaterneedfororganizationstoplaymoreactiveroleswithintheenergysystem.Andtechnologicaladvances,alongwithpolicyshifts,areprovidingorganizationswithnewmeansofrespondingtoenergyrisksandcreatingcommercialandenergy-savingopportunities.Iforganizationscanfullycommittotheseapproaches,theycanrealizesignificantvalue.Infollowingthefourdemand-sideapproachesdiscussedinthisarticle,organizationsneedn’tprioritizeoneovertheothers.Theywillgainmostfrombringingcomplementaryactionsintoanintegratedportfolio—forexample,byimplementingenergy-efficiencymeasurestolowerdemandwhileelectrifyingoperationstosupporttheeconomicaluseofon-siterenewablesandstorage.15www.strategy-business.comLeadingorganizationshavefoundithelpfultoassembletheirenergymanagementportfolioswithafewconsiderationsinmind.Thefirstisthatcreatingvaluethroughdemand-sideactionnormallyrequiresup-frontcapitalinvestment.Thismakesithelpfultocompleteacomprehensive,top-downassessmentoffinancingoptionsearlyon,includinggovernmentincentivesandprivatepartnershipsinwhichenergyplayersmaylooktoprovideorganizationswithcapitalinexchangeforaccesstotheenergyfromon-siterenewablesandstorage.Second,theseorganizationsrecognizethatpaybackperiodscanvarysignificantly:puttingenergy-efficiencymeasuresinplaceislikelytohelpthembreakevensoonerthanbuildingrenewablesinfrastructure.Leadersoftenprioritizeleverswithshortpaybackperiods,whichreducesinitialspendingandsupportsthecaseformorelong-terminvestment.Tomaximizebenefits,leadersalsoassessdemand-sideopportunitieswithawholeportfolioview.Third,leadingorganizationslookforadditionalopportunities—forexample,insupplychains—toacceleratedemand-sideactionandunlockvalue.Takingactiononenergydemandisn’teasy.Butvolatileenergyprices,promisingtechnologyadvances,achangingregulatorylandscape,andstakeholderexpectationsofimprovedenvironmentalperformanceallmeanthatthepotentialbenefitsaretoosignificanttoignore.Fororganizationsacrosssectors,thetimetobegincraftingdemand-sideenergystrategiesisnow.TheauthorswishtothankEmmaCox,MattHowe,TomHughes,AlexandreKeller,EvelynLoveband,DanielMcKenzie,andPaulNillesenfortheircontributionstothisarticle.Thisisthefirstarticleinaseriesfocusingonhoworganizationscancreatevaluefromtheglobalenergytransitionthroughdemand-sideenergyinitiatives.16www.strategy-business.com•strategy-business.com•pwc.com/strategy-business•facebook.com/strategybusiness•linkedin.com/company/strategy-business•twitter.com/stratandbiz©2023PwC.Allrightsreserved.PwCreferstothePwCnetworkand/oroneormoreofitsmemberfirms,eachofwhichisaseparatelegalentity.Pleaseseewww.pwc.com/structureforfurtherdetails.Strategy+businessispublishedbycertainmemberfirmsofthePwCnetwork.Articlespublishedinstrategy+businessdonotnecessarilyrepresenttheviewsofthememberfirmsofthePwCnetwork.Reviewsandmentionsofpublications,products,orservicesdonotconstituteendorsementorrecommendationforpurchase.MentionsofStrategy&refertotheglobalteamofpracticalstrategiststhatisintegratedwithinthePwCnetworkoffirms.FormoreaboutStrategy&,seewww.strategyand.pwc.com.NoreproductionispermittedinwholeorpartwithoutwrittenpermissionofPwC.“Strategy+business”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