Business Secret Weapon - Onsite Energy

Focus, Onsite Energy & The Cost of Inaction

Aug 28, 2024

Beyond the Boardroom

As summer fades, routines return, and the pace of business life picks up. It seems like the perfect time to introduce 'Powering Profits,' a newsletter born from repeated requests and the need to bring responsibility and profitability together in the corporate world. I hope you'll find a moment to dive in.

This summer has been nothing short of epic for me —marked by unforgettable weekend adventures, which I plan to share more about in future editions. From running a 100-mile ultra-marathon to paddling 26 miles from Catalina Island to Long Beach, and summiting Mt. Whitney, the highest peak in the contiguous U.S., I’ve lived in alignment with my core values of challenging limits, adapting purposefully, and collaborative success. These experiences have fueled my commitment to inspire others to commit to huge goals, take that first step, embrace the journey with grit, and enjoy every moment along the way.

As we transition into the focus of this first newsletter, I want to address something I hear often from clients, colleagues, and friends alike: “I just don’t have time.” Reflecting on my summer, the broader societal shifts, and current business trends, I’ve come to believe that it’s not time we lack, but attention and focus. In today’s inflationary environment, where we’re cutting operating costs, reducing roles, and stretching resources, everyone is expected to do more with less. The ‘to-dos’ pile up, and we get bogged down in bureaucracy, meetings, reports, cold messages that offer little value and screen time distractions. Meanwhile, the most critical business initiatives, relationships, and personal projects—the ones that truly align with our strategic goals and passions—get pushed to tomorrow.

I would put energy squarely in the “push to tomorrow” category for most companies. And that’s a huge misstep.

On a weekly cadence, I’ll dig into why energy should be top of mind, the massive opportunity the energy transition offers and what business leaders need to know to make informed decisions - along with personal tidbits and recommended resources. Let's dive in.

The Cost of Inaction: How Hesitation on Onsite Energy Is Leaving Your Business Behind

With this being my first newsletter, I’d like to dive into why I am talking about onsite energy and what it means for you as a business leader. Let’s break it down.

For those who are not familiar, onsite energy is where we actively generate and store energy right at our facilities, using a combination of technologies that could include; solar, energy storage, gas and diesel generators and turbines, wind, fuel cells and electric vehicle infrastructure.

First of all, when I put myself in your shoes – that of a company owner, board member, executive or leader – who has a fiduciary responsibility to my company both in the near and long-term. We have to tread the line between keeping stakeholders happy today while setting ourselves up for longevity. In this inflationary environment this is not an easy task, and while we are not here to predict the economic future, I believe based on my research that this environment is here to stay for the next year or more: CPI increasing, wages and competition for top talent increasing (as baby boomers retire), raw materials (aluminum, oil, water and more) costs escalating, and for the purposes of this discussion electricity prices continuing to rise in volatile and unpredictable ways.

As business leaders we ultimately want to reduce operating costs, grow the value of the assets we have, be more efficient and productive, attract and retain the best employees, get access to the most competitive capital, win the best contracts, meet “production” targets reliably, build our brand, add value to our communities, grow enterprise value and increase profits and returns. This is a dreamscape. If we can achieve all this, we are truly differentiating our business and positioning our companies for long-term profitable success while meeting short-term objectives.

This is a Herculean task and I have huge empathy for all of you reading who are expected to do more with less and pull all of these levers as quickly and as capital efficiently as possible. With all that said, there are many factors discussed above that are out of our control. This is why I am excited and I want you to be too about the energy transition and the massive opportunity of deploying onsite energy systems. Not only can we own our power, we can use it to achieve all the benefits described above and more.

I will not go into the details of why electrical energy prices are escalating at a minimum of 4% year on year (and often a lot more), other than to say that the infrastructure and utility commercial model we now rely on is antiquated. The infrastructure can not deal with our current energy needs, let alone growing needs and according to Rystad we need to invest approx $3.1T before 2030 in grid infrastructure alone (this does not include power generation). These costs are passed on to utility energy consumers, and as spend increases so will our bills, with no end in sight.

In keeping with the theme of this newsletter, “Focus,” we should control our controllable’s. The business landscape is strewn with moments in time when proactive leaders excelled and the laggards were disrupted, often without seeing it coming and no longer exist. In the ever-evolving landscape of business, timing is everything. Today, and for the next 20 years there are several macro trends every business that wins and survives must embrace at scale:- AI, IOT, robots/drones and energy.

What's more, none of the other innovation trends are possible without energy. The future belongs to those who take control of their energy and see it as a strategic asset and not a passive purchase. By doing so we take control of our energy - completely or partially and then optimize when we interact with the grid to be as cost effective, sustainable and reliable as possible.

Why I believe the time to act is now:

Business Pain Points - paint points for our businesses have never been bigger:

Energy makes up 5-40% of our operating costs and these costs continue to increase annually in uncontrollable and volatile ways - making it very hard to manage and predict expenses. Increasing energy costs have been the course of doing business. Since 1970 they have risen at a rate of about 4% each year, from 1 cent per kilowatt hour to 8.06 cents for Industrial customers (Statistica). Over the last year, companies in higher-cost energy states have contended with an average 7% increase in rates from 2023-24, with the greatest rate jumps being in Rhode Island, New York, Illinois, Montana, California and Oregon which averaged an 18% increase in Industrial rates (EIA).
Outages are increasing in frequency and severity costing our businesses $150B /yr in lost revenue in the US alone.
Our key stakeholders expect us to be more sustainable, yet the grid is not transitioning quickly enough to meet our needs and commitments. According to research from the Lawrence Berkeley National Lab, grid interconnection queues in the U.S. have increased from three years in 2015 to nearly five years in 2023 and our capabilities to develop large-scale projects are becoming harder, longer and more expensive.

Market Trends Never Better - The timing for deploying onsite systems has never been better and barriers to entry never lower:

Solar and battery costs have dropped by 90% or more in the last decade and we have seen incredible developments in capabilities and reliability across all technologies.
Governments and organizations around the world are offering incredible incentives for businesses that invest in onsite energy. From tax credits to grants and low-interest loans, the financial support available can significantly offset initial investments. You are actually being incentivized to improve your business. With the Inflation Reduction Act in the U.S., businesses can get a minimum of 30% of capital investments offset by tax credits.
There has never been more capital and companies that want to invest in these systems because the economics are so lucrative. You can gain all the benefits of deploying a system with zero capital investment. Companies will finance, build, own, and operate the assets and just sell you energy back, often at a cost less than what you pay today, with little/no escalations. This alone is an incredible risk-hedging strategy - lock in your energy costs now, so you have consistent and predictable costs against which to plan and grow your business.

Enterprise Value - You will grow the value of your company on multiple fronts, let's quickly address the ones that stand out to me:

Compete on Price: Energy costs are a significant line item in any budget. By generating your own energy, you can control costs and protect your business from the volatility of energy markets. This ability to compete on price gives you a distinct advantage in the marketplace.
Manage Inflationary Pressures: Onsite energy systems provide price stability, allowing you to forecast and manage costs more effectively.
Increase Property Value: Typically a property or facility with an onsite energy system increases the property value by $5-11/sq foot. Onsite energy systems increase the value of your assets by transforming your facilities into self-sufficient entities. This not only reduces operational costs but also boosts your company’s overall market valuation.
Grow NOI: For companies that are motivated by net operating income, NOI typically increases by 2.4-5.6%.
Attract Customers, Employees, and Capital: In a world increasingly driven by values-driven leadership, making a positive impact, and social and environmental consciousness, companies that demonstrate a commitment to sustainability attract top talent, customers, and investors eager to associate with brands that are future-focused and responsible. With regulations in this arena growing and more customers demanding that products and supply chains are sustainable proactively staying ahead of your competition is critical.
Build and Protect Your Brand: Reliability and resilience are key to maintaining a strong brand. Onsite energy ensures that your operations continue uninterrupted, regardless of grid failures or price volatility. This reliability translates into trust—a currency more valuable than ever.
Stock price growth: It is reported that companies that deliver real emission reductions (not just offsets - more on this later), compared to their peers can realize as much as a 15% stock price increase and watch their peers get called out and punished for inaction or greenwashing.

I know you have a lot of competing needs for your money, resources and attention. But, is there any other area of your business that can have such dramatic and compounding value? Without energy, our businesses stop. Without clean, affordable and reliable power, our potential margins and brand are limited.

The window of opportunity is open, but it won’t stay that way forever. Businesses that move now will reap the rewards of early adoption—establishing themselves as leaders, innovators, and visionaries in their industries. Those who wait will find themselves playing catch-up, struggling to compete.

Now is the time to challenge the status quo, to adapt purposefully, and to act decisively. The tools, technologies, and resources are at your disposal. The incentives are in your favor. The risks of inaction are too great to ignore.

By embracing onsite energy, you’re not only future-proofing your business—you’re positioning it to thrive in an era where energy is more than just a utility; it’s a strategic advantage. The companies that recognize this and act now will not just survive—they will dominate and be the brands of this new era - one where profits and purpose are aligned, where innovation drives success, and where energy is no longer a cost, but a cornerstone of growth.

As with any other aspect of our business, execution is key and this is why I am dedicating my career, time and passion to streamlining and modernizing how we deploy onsite energy at scale - efficiently, cost effectively and with confidence.

Power Picks

Best read - Innovation & Momentum by Industry

Best listen - Understanding the Energy Transition

Best watch - Too busy to win?

Power Moves

Spend 5 minutes to find out how much your business energy costs have increased in the last two years. Many of us have our bills set to autopay and we do not scrutinize them - how much have your bills increased, what are you actually paying for - energy delivery/energy use/energy demand charges/special projects, which of your facilities have the greatest costs and why, are you on the right tariffs and are you maximizing programs available? As an example, look at what has happened to businesses in my home City in just the last 3 years. Most of us do not realize this or are aware - confirm who in your organization is tracking this data and can provide updates to you on how the market is shifting and the impact of inaction.