Corporate social responsibility is playing a major factor today in company's decisions on where they're locating their business. That's happening for a few reasons. I think companies are realizing that they need to be more conscious as to what's going on in the environment today, and they need to react to that. But primarily that's being driven by their consumers (for any company that is selling a product to the consumer base). Consumers want to know that the company is delivering on certain sustainability goals. They want to feel like they're connected to the company and that they can buy from a company or support a company, or even work for a company that aligns with their social goals as well.
I think companies are reacting to this and so what we see is a lot of companies looking at various sustainability factors in their corporate site selection decisions. That could include using green building techniques in their construction practices, looking at the utility generation, and what the makeup of the energy sources are at the company that they're ultimately going to be buying utilities from. It could be looking at the potential for purchasing or developing alternative energy resources to use in their manufacturing facility as well, or their distribution center or a data center. All of those factors are coming together now in a way that we haven't seen before. This was not a factor 10 years ago, but it certainly is a factor today.
Considerations for choosing utility partners
Companies do have the ability from time to time to choose their utility partner. There are special instances where companies can choose to separate themselves altogether from being on the primary utility provider service. I think MGM Resorts did this, where they completely decided to be off the grid and handle the utilities on their own. They decided to purchase their own power and figured out how to get that delivered to them. That really is a big shock to a utility company. Utilities companies need to be prepared for something like that.
But there are other factors that companies are looking at as they're making decisions, even if they can't choose their utility provider. Because many times, even if you can choose utility provider, they’re more the distribution arm of the utility, they're not necessarily the power generator. Most of the time, the power generator is fairly set because it requires a huge amount of infrastructure to be able to produce enough power to run a city with manufacturing operations, people living there, retail, etc. So the factor that’s coming into this is the makeup of the generation of those utilities. ...even if a company doesn't fully buy into the social responsibility aspect of choosing a good utility partner, this is a cost and risk mitigation issue as well. Brian Corde, Managing Partner, Atlas Insight, LLC
Let’s say it’s primarily a coal-based generation model. Is it a model that is a little bit more mixed? Maybe the utility company has some coal, some nuclear, some wind and some solar power. Those are very important factors to companies today because even if a company doesn't fully buy into the social responsibility aspect of choosing a good utility partner, this is a cost and risk mitigation issue as well. So if you can imagine if you're partnered up with a utility company that's primarily coal-producing or coal-generating from their production standpoint, if there was the institution of a carbon tax at some point, you would see a tremendous increase in the price of that utility rate. That would potentially be a problem for a company that's reliant on that energy. If they use that energy in their in their production process, and if the price of utilities was a major cost driver for them, that could kind of throw everything out of whack.
And so having a utility partner that is generating electricity using various sources helps mitigate some of that risk of that potential downfall. If there was disruption, let's say in one of those energy sources, or if there was a major cost increase for another, that would be mitigated if there are multiple sources. It's definitely a social responsibility play, but it's also a risk mitigation as well.
The importance of a mixed energy source program
For example, one of the programs that we've seen, which has been wildly successful, is the ability for a company to pay a little bit extra on their utility bill so that the generation of the utilities is being done through renewable resources. Now, that's not to say that they are absolutely taking electrons off the grid that were generated by green energy sources, because the electrons don't care, they're just in the system. You don't really know which ones were pulling off. However, if you are paying for the generation of an equal amount of utility through renewable resources, you can make the claim that from a utility standpoint, you're carbon neutral. And having that ability to say that or show that you're reducing your carbon emissions in your manufacturing footprint and your logistics footprint is something that's resonating very well with consumers. Choosing those partners wisely is very important.
I don't know if choosing a program where you're paying a little bit more for the additional generation of renewable utilities is going to help you avoid any sort of financial implications in the long term like a carbon tax. Only because I think those costs will probably be passed along throughout the entire system. If a utility company was facing that challenge, my guess would be that they probably would have to kind of spread the additional costs across all of their customers, regardless of whatever they were doing. Unless they were self-generating on their own property, it would probably still impact them.
So, it’s still important to choose that partner wisely. But I think the ability to invest by paying a higher price for energy that's being produced by renewable resources gives companies the ability to state that back to their potential consumers and the C-suite, and explain to them that they're doing everything they can to meet sustainability goals that the company has put forth so that they can pass that along to their consumers. That seems to be the driving factor.