Is your plant leading energy policy change?

Peter Garforth explores how to take advantage of an increasingly multidimensional regulatory playing field.

By Peter Garforth

Industry has long recognized the importance of understanding and influencing the cost and reliability of energy supplied to facilities. Most industries assign high-level resources to build relationships with local utilities to negotiate future terms – those charged with this task inevitably take on many government relations functions in the name of influencing ongoing regulation.

Traditionally, this role has prioritized utility contract negotiation, and it has frequently found a home in the procurement department. Success has been measured broadly on the negotiated price of the next utility contract. Changes happening around the world make this a role that should be re-evaluated both in scope and in performance targets. Not least to be reconsidered should be the title of the role – perhaps “Energy Policy and Utility Relations Director”?

Depending on regional, national, or even local policies, the political context for individual plants in the same company can be deeply different. As the result, policy and relationship priorities should be locally aligned. Senior management must resist the temptation to view recommendations through the lens of the prevailing policy framework in the headquarters location. In fact, the reverse should be true, with leadership demanding differentiated game plans.

Local policy increasingly will be aimed at a range of measures designed to dramatically reduce greenhouse gas emissions. If the company’s energy plan for that site can be seen as a significant contributor to that policy, the possibility of negotiating mutually advantageous positions opens up.

The most obvious area is efficiency. Most industries have energy-efficiency programs that are far better structured and managed than most other sectors of the economy. Simply making this visible to the broader community, along with making known a continuing commitment to systematically improve, will be a valuable example to share locally. This may also attract statutory or negotiated incentives.

The next priority area of focus is carbon content of the energy supply. This will open discussion of the carbon balance between public networks and any current or future on-site or localized clean and renewable sources, including combined heat and power (CHP). The plant proactively working with the local authorities and utilities to plot an optimum carbon balance has the potential to yield mutual benefits and avoid the risk of stranded assets for both parties. This is the platform for discussing feed-in tariffs, standby charges, and carbon pricing and negotiate predictable frameworks.

Jurisdictions with aggressive climate goals are increasingly realizing that a large part of the answer lies in their cities. This is resulting in increased community focus on widespread efficiency programs, distributed generation, district heating and cooling, e-mobility, and so-called smart city information networks. An industrial plant has the potential to be a partner in these efforts, to the benefit of all parties.

On-site CHP can be optimized across the power and thermal needs of the plant and the neighboring community. Waste heat from the plant can be a useful thermal resource for the community. Manufacturing schedules could be adjusted to optimize overall community demand profiles. Employee transportation could be integrated into the community’s mobility goals.

As important, the plant and the parent company could bring their energy management expertise to local working groups, associations, and colleges and universities. This would not only accelerate the community’s efforts but also create networks to attract and train future employees.

Teaming with the surrounding city creates fundamentally different relationships with local and regional government. It ensures that the plant remains competitive and attracts ongoing investment and quality employees. By aligning with the surrounding energy and climate goals, there is clearly room for mutually beneficial discussions around regulation, investment, and incentives.

In this changing world, energy policy relations will need localized understanding of national and community policy goals, and it will need to ensure that corporate and community dialogues are aligned accordingly. Gaining clarity about one another’s goals and finding commonalities can be fertile ground for redefined government relations.

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