A 5-Step Litmus Test for Sustainable Power Utilities

A 5-Step Litmus Test for Sustainable Power Utilities

Image CC licensed by Flickr user strollers

Join the words 'sustainable' and 'power utilities' together and you can be forgiven for thinking it's an oxymoron.

The very nature of power utilities is to make money from energy consumption, so it's hardly surprising that clients are skeptical about what motivates utilities to encourage energy saving in the first place. But as Verdantix research shows, market dynamics are shifting, and the traditional role of power utilities is changing (although the speed of change varies considerably between suppliers).

From buyers' viewpoint, the need to seek out lower cost energy solutions and means to reduce energy consumption in their businesses couldn't be more acute. Across all industries, senior energy managers are under considerable pressure from regulations, stakeholders and finance departments to cut energy expenditure, raise the renewables mix and reduce carbon emissions. In the U.K. alone, legislation, such as the CRC Energy Efficiency Scheme and the E.U. Emissions Trading Scheme, defines clear timetables for carbon cutting that businesses cannot ignore. In the face of such targets, businesses are taking steps towards making their operators more sustainable.

Utilities are not standing still in the face of this shift towards sustainability. Partly out of a genuine commitment to energy efficiency, and partly because of legislation, utilities have begun to pay attention to their environmental footprints, and are working to raise the proportion of renewable energy in their energy mix. In the U.K., Renewables Obligation mandates licensed electricity suppliers to source an increasing proportion of their electricity from renewables or face a fine. The U.S. is working along similar lines: California's goal to increase the percentage of renewable energy in the state's energy mix to 33 percent by 2020 is just one example.

Power utilities, in the traditional sense of the word, are changing and are starting to pay more attention to their customers. Remember the days when you never interacted with your power supplier and contracted an energy consultant to address efficiency concerns instead? Today customers expect more from their incumbent energy suppliers, so they ask them directly. And other utilities are winning new clients by telling them exactly how they can cut costs and reduce emissions. Unfortunately, in many cases, utilities that are keen to help clients save money often fail to communicate this desire effectively.

Verdantix has investigated these two sides of the market in the U.K. We interviewed 15 potential customers from eight different industries, and analyzed the operations of 13 U.K. power utilities, with revenues ranging between $16 million and $113 million.

In the Verdantix report, 'Green Quadrant Sustainable Power Utilities (UK),' we used 33 assessment criteria to examine the sustainability capabilities of utilities' operations, so that buyers have clear criteria to help them select a sustainable power utility, one that practices what it preaches. Our research identified five best practices for buyers that want to put electricity, gas and energy services utilities to the sustainability test:

1. Seek Integrated Energy Provision

Verdantix analysis shows that suppliers delivering an end-to-end service from supply to demand management are capable of offering an end-to-end program (incorporating consulting, implementation, operation, and optimization and reporting).

2. Examine Low Carbon Energy Offerings

Businesses in the U.K. can claim tax exemptions when purchasing low carbon energy, so it is crucial to question power utilities on the source of their renewable energy.

3. Look for Innovation

Utilities with a strategic commitment to sustainability invest in R&D and pilot projects for new technologies. Innovation will help accelerate sustainability initiatives.

4. Identify Sustainability Leaders

If a utility is serious about sustainability, then it will have senior leaders with the power to implement change. Internal success bodes well for fulfilling clients' sustainability objectives.

5. Consider the Specialists

A few giants dominate the energy supply market and while this provides scale benefits, buyers mustn't ignore smaller players. They often have valuable specialist capabilities.

In the course of its research, Verdantix identified four leading players in the U.K. sustainable power utilities market: Centrica, EDF Energy, E.ON Energy and RWE npower.

These suppliers have driven their sustainability strategies forward through investment and leadership. E.ON Energy's Sustainable Energy business, for example, has grown organically to 400 employees since its launch in 2007, and now covers five practice areas: carbon consultancy, community energy, microgeneration, infrastructure services, and sustainable cities.

As utilities shift their position from a distant provider to sustainable suppliers, customers must respond -- asking questions, looking for evidence and interacting with potential energy suppliers. To test power utilities' sustainability capabilities, use this best practices analysis to shortlist suppliers that will support your firm's sustainability strategy.

Image CC licensed by Flickr user strollers.