The big lesson big companies can teach their utilities
For the last several years, a fundamental question has hung over sustainability conferences like the proverbial elephant in the room: how can the world’s largest companies truly be green when their business models are predicated on selling – and therefore making – more stuff?
My observation is that many companies have adopted the philosophy that it’s OK to sell more stuff as long as all the resources and ingredients needed to make said stuff are responsibly sourced, sustainably harvested and manufactured with little impact to the environment.
It also seems that the movement toward "Net Positive" impact is an extension of that philosophy – that it’s really copacetic to make more stuff if we’re actually creating a positive impact on the environment while we do it, vs. just minimizing our impact.
(And just in case any of that sounded like I was passing judgment, let’s be clear: I’m a capitalist and an environmentalist. So I’m all about figuring out a business model that makes shareholders happy while simultaneously protecting and nurturing the environment.)
I’d like to connect those dots to the electric utility industry.
It’s also been my observation that most utilities, until recently, haven’t thought much about sustainability. So even though replacing coal-fired power plants with renewable sources of energy and making our homes and buildings more energy efficient are, in fact, the best ways to reduce the amount of carbon in the atmosphere, many utilities haven’t seen themselves as part of the sustainability discussion.
Bottom line: utilities haven’t been tuned in to the overarching movement toward sustainability.
Notice the next time you’re at a sustainability conference — a utility CEO might appear on the main stage, but if you look at the attendee list of who’s in the audience, maybe there will be one or two people from one of the nation’s 3,000-plus utilities. Often, there’s nobody.
So it’s not surprising, then, that utilities have been caught flat-footed by the fact that their largest customers are out doing renewable energy projects with solar and wind developers, intentionally moving the money they’re spending on energy away from their traditional electric utility.
Bottom line: utilities haven’t been tuned in to the overarching movement toward sustainability and what that would mean for their ability to make money.
And utilities are companies who rely on making more stuff to make more money. Building more stuff, to be more precise.
An article in Barron’s Magazine this week did a brilliant job of answering this question: why do electric companies spend so much on new plants when consumers show so little inclination to buy more of the output? It’s because their business models are literally tied to capital investments.
As long as they’re building power plants, they’re making money. But since it’s becoming painfully obvious that this model is unsustainable in the business sense, it’s time for utilities to focus on sustainability in the environmental sense.
If the world’s largest energy consumers — large companies — are out doing their own deals to get wind and solar arrays built, that’s a business utilities should be in.
If disrupters like Sonnen keep building out their own networks for renewable energy users to store energy and sell it amongst themselves at a better price than the rate they’d get from the utility for buying the excess power, then utilities should have their own, competitive network to offer. And the more XFINITY and others try to bundle energy management in with other services, utilities should respond in kind.
A great place to start? All utilities should give their largest customers a call and go grab a cup of coffee with them. Seek to understand how the Fortune 500 are approaching sustainability and why.
Not only will utilities learn something about how to solve the business model problem that companies focused on sustainability have been grappling with for years, but they’ll also learn what their largest customers want from them so they can actually provide it.
THAT’s how sustainability becomes a win for utilities and all their customers, including you and me. And the planet.