Energy Strategy Insights for Manufacturers
The following article recently published in Facilities Management Advisor. You can access the original article on the magazine's website here.
For more insights from IGS Energy, visit our Energy Resource Center.
Why Manufacturers Should Consider Diversifying Their Energy Supply
Even those who aren’t regular consumers of energy industry news have likely come across a news report focused on how (and why) the American power grid is evolving.
In the U.S., we have a a complex grid grid in which electricity is generated at centralized power plants and decentralized units before being transported through a vast system to end users. In the last couple of decades, as renewable energy technology has progressed, the mix of generation sources on the grid has changed significantly, further complicating distribution and storage and increasing calls for further grid enhancements. As of 2020, natural gas had the largest share of U.S. electricity generation in the U.S. at 40%. Nuclear and renewables, including wind, solar, and hydro, accounted for 20%. (The EPA offers a great breakdown here.)
As that percentage of renewables on the grid increases, consumers are likely to see an impact on their energy bills, though we’re still years away from a mostly "green" grid. In the near term, there are steps that manufacturers can take to diversify their energy supply and, possibly, lower energy spending.
The following are ways in which diversifying energy sources can protect manufacturers from market volatility and some key questions for your organization to consider.
Enery supply and risk mitigation
Beyond the positive environmental impact, there are a few reasons to make the transition to a cleaner energy source, including economic and risk-mitigation benefits.
It’s important to understand how the energy landscape in the U.S. is evolving and the impact that the sustainable energy transition will have on both the power grid and how consumers interact with it. We’re in the midst of a critical transition period, shifting from a stage in which the grid reacted to consumer demand, to one in which generation fluctuates more and end users will need to be more flexible. Investing in sustainable energy and technologies like increasingly cost-effective solar power and battery storage could help your business be better prepared for this future and minimize risk by hedging against rising energy prices.
Of course, there isn’t a one-size-fits-all approach to sustainability, and your energy options should be tailored to your business needs.
The benefits of on-site generation
Perhaps the most obvious way to save on your energy bills is to invest in on-site energy generation, most often via solar panels. On-site power generation can cover a significant portion of an organization’s energy needs. By generating power on-site, businesses can also benefit from selling their surplus energy back to the power grid.
On-site generation may also mean greater reliability. When you own your generation resources, in addition to being connected to the grid, you may have a lower chance of experiencing a power outage. Pairing your on-site wind or solar generation with an energy storage battery makes your system more resilient.
If your business is reporting carbon emissions, switching to a cleaner energy source may be a necessary financial decision, as well as one that could earn the support of sustainability-minded consumers. Depending on where your business is in the U.S., there may be financial incentives for greening up your energy consumption.
Is on-site generation right for your business?
If your business is considering on-site generation, you need to invest the time in an analysis of your ROI. Importantly, when working with a third-party solar energy partner, it’s important to be aligned on what savings you’ll truly experience. If the primary goal is a lower energy bill, on-site solar might not be your organization’s first choice, as it’s possible that your facility’s demand charges won’t be offset through solar. (Your utility’s demand charge won’t go away even if your company is generating power on-site.) But in some cases, offsetting the energy portion of the bill alone can create savings, especially where there are state incentives or high energy rates. Adding battery storage is another way to reduce demand charges.
Here’s the list of questions to consider:
- Do you own your building?
- Is your site suitable for solar?
- Are you interested in owning solar equipment?
- What are your energy goals?
Ultimately, pairing an intentional and data-backed energy efficiency strategy with renewable energy, whether generated on-site or not, can do far more toward helping your business save on its energy bills.
Choosing the right energy partner
An important first consideration: Can your energy supplier look at your needs holistically? Often, multiple companies can be involved, such as a solar developer, a retail supplier, a broker, or a consultant. These parties may have contradictory incentives, while a retail supplier that has multiple options may create a package to best meet a customer’s needs.
With energy technologies evolving and options increasing, making the transition to sustainable energy may seem daunting. The good news is that working with an experienced energy supplier can take the burden off your team.
The first step is to take your questions to your supplier. These should include:
- Which emerging sustainability technologies and solutions should we consider now?
- Is solar the right choice for our business now – and why or why not?
- How would you manage renewable energy certificates (RECs) and carbon offsets for our business?
- What incentives are available at the federal and state levels that can support our sustainability investments?
For organizations considering sustainability efforts but unsure where to start, energy efficiency is another great focus. Start by benchmarking your efficiency data to find areas for improvement. Many energy suppliers have tools that can support efficiency data benchmarking and management efforts.