Saving corpotare cost on power using alternative energy

Over the past years, more and more corporations have started using alternative energy resources for their electricity and thermal energy needs. For instance: General Motors, FedEx, General Aluminum, Swift Consulting, IBM, DuPont, and other firms 'are buying wind-generated electricity, on-site solar electric (also called photovoltaic) systems and other alternative Energy systems, to provide clean power at some of their facilities.

Why are these and other firms switching to energy from alternative resources such as wind, solar, biomass, landfill gas, geothermal, and low-impact hydropower?

It has been observed that firms in Africa and abroad are switching to renewable energy to obtain one or more of the following business benefits:

1. Lower or stable operating costs,
2. Reduced emissions of pollutants that pose a current or future regulatory risk, and
3. Stronger stakeholder relationships.

Each benefit is a "business case" for using alternative energy. In other words, each constitutes a business rationale for management to switch at least some of the corporation's energy supply to alternative resources.

Before exploring these business cases, three observations should be made. First, not every alternative energy opportunity has a strong business case for corporate energy end users. In some situations, the potential business benefits do not justify the cost of alternative energy.

Second, the particular business case that is relevant to management often varies among companies and even among facilities within the same firm. Furthermore, because of differences in regional incentives, an alternative energy project that is financially attractive to a corporation's branch in one region may not be economically viable in another.

In some circumstances, using alternative energy can directly lower a corporation's energy costs, stabilize corporate energy prices, or reduce operating losses caused by power outages.

A common misperception is that alternative energy is always more expensive than energy from conventional sources, but many companies are finding that under the right conditions, this is not necessarily so. In fact, some firms are switching to alternative resources in order to reduce their energy costs. Several types of on-site alternative energy projects can cut costs. Substituting Solar Generators and inverter power systems for Diesel powered Generators can save money for firms with wide network of branches, especially since the price of the latter has increased 75 percent over the past three years.

In order to lower the cost of their electricity, some companies with sufficient land consider installing onsite wind turbines that deliver power directly to their facilities. Power from wind turbines located at a corporate facility can sometimes be cost competitive, especially if the wind resource is attractive.

Some companies switch to alternative resources in order to hedge their energy costs against volatile fossil fuel prices such as diesel. In 2001, for example, IBM signed a five-year fixed-price contract with its utility to provide wind generated electricity at IBM operations in Austin, Texas.

Solar power, as well, can stabilize corporate electricity costs. The solar system reduces the amount of power a firm spends on electricity, furthermore, the fixed-price of alternative energy provides a hedge against retail electricity and fuel pump price increases, for example Swift Consult saves on the average, 30 million Naira per-annum on diesel, by powering its Server room, Security Lights, security gadgets all night long using alternative energy.

Alternative energy is more likely to offer corporate energy users with a hedge value under certain conditions. For electricity, these conditions include:

• The wholesale prices of the key primary fuels that generate power (e.g., Diesel) fluctuate relatively frequently.
• The price changes of primary fuels are passed on to end users and updated frequently
• The corporate end user is able to get long-term fixed-price power contracts.

On-site alternative energy systems serving as power backup can reduce operating costs during blackouts or grid failures. For many firms, power outages can be very expensive owing to idle production lines, lost data, contaminated processing equipment, or product spoilage. Many companies therefore already have diesel generators in place to serve as backup energy sources. Switching generator fuels to biodiesel can help firms avoid these operating losses in a manner that reduces emissions of greenhouse gases and many airborne pollutants.

Another business rationale for using alternative energy is to lower the emissions of airborne pollutants and also greenhouse gases, which are responsible for climate change. However, when regulated, emissions effectively become monetized; emitters incur costs in the form of pollution taxes, allowance/permit costs, emissions control equipment expenses, or other mechanisms. Alternative energy can lower these emissions-related operating costs by reducing emissions, a financial impact that is readily quantifiable.

Eco friendly alternative energy can help firms lower regulated emissions such as CO2, PM , SO2 In order to satisfy local air quality regulations, for these companies, switching from fossil fuels to renewable resources may be an attractive option. Companies with targets to operate in a carbon constrained world are "green" and proactively addressing the global challenge of climate change.

Furthermore, using alternative energy can strengthen a company's relationships with its various stakeholders, including customers, local communities, etc.

Some companies try to differentiate their brands from those of their competitors by being seen as "green" or as environmentally responsible corporate citizens. Using green power can help enhance this corporate image or improve a company's reputation by demonstrating leadership in environmental performance.

On-site alternative energy generation systems can establish a company as a responsible neighbor in local communities. For example, Mobil Nigeria using solar PV as power back-up for its Rigs and platforms reduces local air pollution.

Switching to alternative energy sources can be one element of a corporate social responsibility (CSR) strategy. Through this strategy, a company communicates and substantiates corporate values that may be important to both current and prospective employees. A commitment to green power therefore can help make its employees, communities and citizens proud of such companies.

Alternative energy can help strengthen a company's image, capital markets have entered an era of resolutions regarding climate change, likewise, many institutional investors are becoming increasingly concerned about companies' financial and regulatory exposure regarding climate change and corporate greenhouse gas emissions. Finally, using renewable energy can make a company more attractive to socially responsible investors  

Many corporations are increasing their use of alternative energy to meet some or all of their energy needs. These companies are switching to alternative to obtain a variety of business benefits.

Each of these business cases directly or indirectly links alternative energy use to better margins and operating performance. As a result, opportunities exist for firms to conduct business in an economically and environmentally sustainable manner.