In brief
One approach to managing energy demand is very simple: use less energy. Roughly two-thirds of CEOs in PwC’s 27th Annual Global CEO Survey said they have efforts underway to improve energy efficiency, and for good reason. Being frugal about energy lets organizations cut costs and emissions, while building resilience against price spikes. Changes to a company’s ongoing activities—such as using software to control existing heating, ventilation, and air-conditioning (HVAC) systems—can lower their energy intensity by around 10%. The payback period for such moves can be short: less than one year, in the HVAC example. And companies can often fold the costs into their operating expenses.
Making capital investments in energy efficiency is often the next step, particularly for businesses with
energy-intensive buildings and equipment, or with flexibility in usage, such as industrial manufacturers or retail shopping centers. At one company, retrofitting buildings with smart products, LED lights, and better HVAC systems cut energy intensity by around 30%, and paid for itself in less than 15 years.
1. Do more with less
Four fantastic actions
Power moves
Companies can reduce their energy consumption by 31% by decade’s end and save a cool US$2 trillion a year—without sacrificing growth.
“power changers”
In depth
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1. Assess energy demand
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Spending less on energy while delivering the same or better value to customers is simply smart business. Yet it’s clear that, even amid intense pressure to boost margins, most companies still have plenty to gain from changing the way they use and produce energy. New technologies can unlock ample cost savings today and deliver recurring streams of income in the future. In a hypercompetitive world, charging up action on energy demand is one clear way to obtain an edge.
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Dive deeper:
Seizing the energy-demand opportunity
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Dive deeper:
Transforming energy demand
Four fantastic
Further reading
actions
moves
Managing demand is vital in the long term because we can’t simply build our way to net zero. There are too many big gaps to bridge. And in the short term, optimizing energy demand saves companies money
and makes them more efficient. With today’s technologies, it’s possible to lower global energy intensity—the amount of energy needed to produce or support a given output—enough to save US$2 trillion per year by the end of the decade. That would also put the world ahead of agreed energy-efficiency targets set by bodies such as the G20 and the United Nations. Indeed, COP28 identified doubling the rate of energy-efficiency improvements through 2030 as one of the essential levers for slowing climate change.
Companies that lean into the potential of demand can emerge as true “power changers.” Rather than being passive consumers of energy, and victims of volatility in market prices, they think like businesspeople and assert control over this crucial input. They do so in three key ways, as described in new research from the World Economic Forum in collaboration with PwC.
In brief
2 min
Three years into a worldwide energy crisis, businesses still can’t count on having a supply of energy that is economical and readily available,
let alone clean. That’s the bad news. The good news? They can control the other side of the energy equation: demand. In fact, businesses that work systematically on energy demand can boost margins, stabilize operations, cut carbon emissions, and even generate new lines of revenue.
Further reading: Go deeper on the energy transition
Explore the podcast series from strategy+business, which convenes a global community of solvers to tackle the world’s most important problems
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Bridging the gaps:
Setting the stage for an orderly energy-system transition
The energy-demand opportunity: How companies can thrive in the energy transition
Transforming energy demand
This overlooked solution can unlock abundant and affordable clean energy
PwC 2023 US Large Energy User Survey
Hit the control switch: How UK industries are navigating the energy challenge
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Whatever business you’re in, be it transport or retail, whether you’re making smartphones or operating
a mobile network, you can seize the opportunity
to slash energy intensity through efficiency and flexibility measures. And you can go further still—producing your own energy with on-site generation and storage, trading that power in electricity markets, and electrifying operations. That’s the pathway to the ultimate prize: new pools of value found in the large and growing energy-demand ecosystem. It’s time for power changers to assemble. Are you ready to join them?
Unlocking greater gains means installing on-site equipment for renewable energy generation and storage: think solar arrays, wind turbines, and batteries. Relying less on grid power saves money through lower network charges (up to 40% of many companies’ energy bills). It also helps avoid surging prices and power outages. And in some jurisdictions, organizations that generate their own power can minimize their environmental levies and taxes.
It’s easier to reap these benefits if your company has sunshine, wind, and sufficient space for equipment at its own facilities. But there are plenty of opportunities available, even if on-site generation isn’t feasible.
By working with suppliers, companies can lower the energy costs built into the goods they source. IKEA, for example, has offered financing to some of its suppliers to help them set up on-site renewables.
—Ben Parker
With great power comes great responsibility.”
What’s measured gets controlled. Start by getting a full picture of your company’s energy usage—across operations and throughout the value chain. Knowing what kinds of energy you’re using, for which purposes, at which times helps you spot ways to cut consumption and boost efficiency. The resulting savings go straight to your bottom line. Viewing your energy demand in terms of a single portfolio will also set you up to take the next step: repositioning your company within the changing energy system.
As companies assert control over their energy usage and production, they can take a more active—and profitable—role in power markets. Buying grid power when the price is low and selling power onto the grid when prices rise offers a way to both cut costs and generate revenue. Organizations with on-site energy storage can profit from “grid stability” agreements: allowing energy retailers to pull electricity from their batteries during peak demand periods and collect fees in return. Or they can develop and sell energy-related products, such as carbon credits.
Playing an active role in the energy market requires extra capabilities, such as tools to orchestrate energy consumption across facilities and equipment in response to changing prices. So this approach tends to be more practical for companies with high volumes of controllable energy assets and the flexibility to shift their energy usage. Examples include retail chains, commercial offices, and data centers. In some cases, organizations that don’t meet these criteria can partner with others that do, to pool demand and engage in markets collectively.
Energy savings: Making operational improvements that are funded through operating expenditure
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Samantha Vincent
Energy Transition,
Director, PwC Australia
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Reid Morrison
Global Energy
Advisory Leader,
Principal, PwC US
Email
Jon Chadwick
Energy Transition,
Partner, PwC Australia
Email
Rob Turner
Energy Sector,
Partner, PwC UK
Email
Energy efficiency: Implementing measures under direct company control that require capital expenditure
Value-chain collaboration: Working directly with suppliers and business partners to reduce cost and get ahead in the race to net zero
2. Grow your own
3. Play the market
A complementary approach to managing energy demand involves replacing fossil fuel–powered assets with electric alternatives. Electrification creates financial benefits, because the equipment required tends to be more efficient than conventional options. Electric heat pumps, for example, are three to five times as efficient as natural gas boilers, and all-electric vehicles are 4.4 times as efficient as gasoline-powered vehicles. Running equipment on electricity, particularly renewable electricity, is also a way to lessen direct carbon emissions. And this approach supports the other three demand-side plays: the more you electrify your operations, the more worthwhile it becomes to generate your own power, and the easier it is to trade in energy markets.
4. Go electric
Time was that companies played one of two basic parts in the energy system: producing energy or using it. Now those roles are coming together. At energy-hungry facilities—factories, stores, data centers—businesses can install on-site solar generation, store power, and then sell it back to the grid. These energy producer–consumers, or “prosumers,” can also use technology to adjust demand, and schedule energy purchases and sales to take advantage of price swings. Actively managing energy demand in these ways generates revenue, on top of the cost savings from cutting consumption. Further possibilities for profit open up when companies team with other businesses, or public-sector organizations, to pool demand and manage it in a coordinated fashion.
2. Redefine your role
Transforming your company’s energy demand requires ongoing action, not just a onetime effort. You’ll want to set targets and form a plan for progressively reducing energy intensity and unlocking new value. To see that plan through, it’s helpful to form a dedicated team that can run the energy program on a day-to-day basis, monitor performance, and spot further improvements. And you should line up sources of funding—not just banks, but also partners such as electric utilities—who can provide upfront capital in return for a portion of the cost savings.
3. Sustain momentum
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Use case:
A supermarket
Smart, controllable devices work together to optimize energy demand with
respect to fluctuating prices, renewable power generation, and other factors.
On-site renewables and batteries minimize demand for grid power and produce energy to sell; adjusting loads (e.g., HVAC, refrigeration) helps stabilize the grid, bringing in revenue.
Use case:
A supermarket
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©2024 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Strategy+business is published by certain member firms of the PwC network. Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network. Reviews and mentions of publications, products, or services do not constitute endorsement or recommendation for purchase. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. For more about Strategy&, see www.strategyand.pwc.com. No reproduction is permitted in whole or part without written permission of PwC. “Strategy+business” is a trademark of PwC. Cookie Policy
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