Innovation as Catalyst for Advancing Energy Management in Large Enterprises
Thumbnail: The City Rises by Umberto Boccioni (1910), depicting the contrast between the new, modern city and the old school, physical labor.
Traditionally, energy management in large enterprises is the focus area of two important functions: Procurement and Operations. Procurement focuses on securing favorable energy contracts, while Operations works to reduce energy consumption through efficiency initiatives. Both are vital to the business, but they operate rather independently, often without real-time collaboration.
Today, however, the energy landscape is rapidly changing. The growth of renewable energy is causing large price fluctuations in the energy market. Flexibility will be key in reducing energy costs and managing risk. As the European Environment Agency highlights: “By 2030, flexibility needs will double compared to today.”
Procurement and Operations need to work more closely than ever to unlock this flexibility. Other functions, such as Sustainability, start becoming key drivers in the way energy is managed too, as stakeholders increasingly seek to align cost reduction with environmental goals.
In this new environment, Innovation departments play a critical role in connecting these functions, integrating their efforts, and ensuring that enterprises can not only manage energy costs but also navigate the ongoing energy megatrends and turn them into a strategic advantage.
Turning Fluctuating Prices into an Opportunity
As renewable energy penetration increases (renewable electricity capacity additions were >500 GW in 2023!), energy prices are becoming more dynamic, fluctuating throughout the day in response to supply and demand. What was once a stable cost item is now a moving target, and many enterprises see this as a challenge. But these fluctuations also present an opportunity.
According to the International Energy Agency (IEA), industry accounts for 30% of the world's final energy demand, highlighting the significant role that large enterprises play in global energy consumption. With real-time, proactive management, companies can adjust their energy consumption to take advantage of lower prices, unlocking significant savings. However, doing so requires close collaboration between Procurement, which oversees energy contracts and financial management, and Operations, which controls energy consumption “on the ground.”
This is where Innovation comes in. By connecting internal experts, data champions, and partnering with external specialists, Innovation teams can create the necessary infrastructure for advanced energy management. This not only helps manage costs but also positions the business to actively take advantage of fluctuating prices, turning a potential risk into a competitive edge.
The Unique Role of Innovation
Innovation departments have a unique ability to lead (energy) transformations within enterprises. While other teams often have established responsibilities and routines, Innovation teams are more agile, and tasked with embracing new ideas and technologies. Their ability to explore, experiment, and push boundaries makes them well-suited to advancing energy management.
For instance, one of our large customers engaged their Innovation team to tackle the new energy price fluctuations introduced by evolving energy markets. By analyzing market dynamics, they identified several use cases that could optimize energy cost stability. The Innovation team then brought together key stakeholders from both Procurement and Operations, helping the company turn these ideas into action.
Innovation acts as a bridge, not just connecting departments but also driving cultural change. By consistently delivering value and fostering a data-driven mindset, they help organizations evolve from traditional practices to more forward-thinking, agile approaches to energy management.
Identifying Low-Hanging Fruit for Energy Flexibility
When it comes to energy management, quick wins are essential for building momentum and getting stakeholders on board. One way to achieve this is by identifying low-hanging fruit—opportunities that deliver immediate benefits with minimal investment. Innovation departments are often the best equipped to spot and exploit these opportunities.
For example, one of our customers had a solar installation and was facing challenges with overproduction during periods of low or negative electricity prices. By leveraging solar curtailment to avoid producing excess power during these periods, the customer was able to mitigate costs associated with negative day-ahead prices and profit from imbalance benefits through their energy supplier. This simple adjustment allowed them to maintain operational stability while optimizing their production schedule, delivering immediate value without requiring additional capital investment.
Innovation teams should focus on similar opportunities within their own organizations. Often starting with defining a flexibility scope that is not critical to the process or where necessary buffers are in place. Some examples are cooling systems, process water purification, nitrogen production, etc. These initial successes create enthusiasm and set the stage for more complex energy flexibility initiatives.
Aligning Stakeholders on Success
Different teams may have varying goals. Procurement might prioritize cost stability, while Operations focuses on efficiency and productivity. These differing incentives can make collaboration challenging.
Innovation teams are well-positioned to offer a neutral perspective in this discussion. By focusing on the overall value that can be delivered through energy management—such as reduced energy costs, improved sustainability metrics, and increased operational flexibility—Innovation departments can align stakeholders and drive progress.
Tweaking F. Scott Fitzgerald’s quote, one could say that:
“The test of a first-rate (intelligence) Innovation is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”
Measuring success is key to maintaining momentum. Relevant metrics for energy flexibility initiatives might include:
- Flexibility in MW: How much energy consumption can be shifted to match price fluctuations.
- Flexibility in hours: Over what period can energy consumption be shifted?
- Percentage of Total Demand: The proportion of energy consumption that can be made flexible.
- Energy OPEX: Reductions in operational energy costs.
- Energy CAPEX: Any CAPEX implications of the flexibility build-out, e.g. by investing in more process buffers.
By using these shared metrics, Innovation teams can ensure that both Procurement and Operations see the value in collaboration, creating a common ground for future initiatives.
Scenario Planning
Unlocking energy flexibility often requires CAPEX investments, especially when new infrastructure like electrified utilities, process buffers or energy storage is involved. However, not all energy flexibility projects require major investments—many companies already have some built-in flexibility that can be leveraged immediately.
When CAPEX is required, Innovation departments can offer a balanced business case by presenting multiple options, including third-party investments or energy-as-a-service models. This provides flexibility (pun intended) to the business and ensures that financial decisions are grounded in a variety of market scenarios.
It’s also important to avoid overly optimistic assumptions, such as using high crisis-time energy prices to justify short payback periods. By benchmarking investments against realistic, diverse market conditions, Innovation departments can ensure that energy management projects deliver sustainable value over the long term.
Energy Management as Commercial Differentiator
In today's market landscape, energy management can be increasingly leveraged as a commercial enabler for industries where power consumption is substantial. For data center capacity, for instance, companies are now more willing to pay a premium for renewable energy-matched power as part of their sustainability efforts. Innovation teams are perfectly suited to spot and seize these kinds of opportunities. By staying ahead of emerging trends and identifying ways to integrate renewable energy into operations, Innovation departments can turn energy management into a strategic business driver.
Innovation as a Key to Proactive Energy Management
In today’s rapidly evolving energy landscape, large enterprises need more than conventional energy cost management—they need agility, flexibility, and a focus on sustainability. Procurement, Operations and Sustainability must work together to manage energy effectively, but it is the Innovation department that often serves as the catalyst for this transformation.
By fostering collaboration, identifying opportunities for energy flexibility, and driving sustainable investments, Innovation teams can help turn fluctuating prices into an advantage while aligning with the growing emphasis on Sustainability. The enterprises that embrace this holistic, forward-thinking approach today will be the ones leading the energy transition tomorrow.