Accenture’s Q2 Spend Trends Report explores a number of sourcing and demand management strategies for energy – including advantages and disadvantages of different programs. For example, the rise of real-time pricing programs that request when “the electric system experiences very heavy load, electric system operators ask demand response customers to reduce electricity usage” in exchange for the enrollment and participation in such programs to reduce consumption. Such programs are only likely to increase in the future because renewable energies will impact grid consistency. Specifically, wind and solar are “intermittent” without a constant base load in comparison to traditional energy from gas, coal and nuclear, which results could case a “fluctuating electric supply leading to grid instability and the potential for interesting scenarios.”
In terms of strategies for managing energy consumption and cost in this climate, Accenture recommends first knowing your own data and “leveraging smart meters, data connectivity, and analytics.” It’s then possible to “harness … energy data to alter usage profiles and quantify financial benefits and revenue opportunities.” In the end, “the ultimate value comes from linking demand-side intelligence with supply-side energy procurement strategies to maximize financial benefit (savings and potential revenue).”
While Accenture is deeper in the category strategies than we are (for energy and just about everything else), our macro analysis of the energy trending and markets is almost in lock-step. But we’re raising more red flags.
As we note in the Spend Matters PRO brief, Will the Cost of Energy Increase? On Statistics from the US Energy Information Administration, “What we … see is that the initial more-than-doubling of net new capacity (when retiring capacity has been subtracted) becomes a wash with no net new generating capacity. [At the same time] we are also creating a more nervous grid by loading up on wind and solar – two energy sources that are fickle and prone to fluctuation by the hour if not by the minute. Retiring large amounts of 24/7 steady production coal plants will only reinforce this. With an expanding population, increased expectations of electric vehicles, and more and more electronic gadgets to power, the projected status quo in generating capacity over the next five to 10 years suggests that electricity will become more expensive simply because of demand from demographics.”
But aside from longer-term cost factors, there’s risk as well, if demand outstrips capacity.