Energy Solutions - Energy Security

In a previous blog, we discussed why companies invest in sustainability and “energy management” programs. In addition to reducing costs, I mentioned brand engagement and reducing business risks, or “risk management”. Good risk management identifies and offsets events or practices that can reduce the profits of a business. If your business involves anything more than running a lemonade stand – access to an energy source that can provide ample, reliable and affordable energy is of critical importance to running your business.  This is called “energy security” and is a frequent point of discussion inside of global companies with operations in developing countries. There are few risks to business with as large a potential impact as energy security. However, these risks can be reduced or even eliminated with strategic planning, vision and firm intention.

The phrase “energy security” is becoming more prevalent these days, popping up in news stories about a nation with poor infrastructure or minimal natural resources.

It is a big deal in geopolitics and in business. The national borders of the Middle East today were established after World War I in part to address the energy and resource needs of the West by allocating spheres of influence to various nations. The expansion of Imperial Japan in the 1920’s and 30’s was driven by the many factors, one of which was access to energy sources. Today, China is investing in oil and gas fields globally and spending a significant amount of capital to ensure future access to energy. 

Without access to energy that is reliable and affordable – both the country and the business will die.

The USA has been very fortunate in recent memory with the last significant disruption to energy resources stemming from the OPEC oil embargo of the 1970’s. The shock to our economy and the fear it created can still be seen and felt today through the Energy Department of the President’s Cabinet, the CAFÉ fuel standards introduced to mandate vehicle efficiency, and the White House installing solar panels on the roof during the Carter Administration, when solar cost nearly $50 per watt. But most of the time when we think of energy security, it’s “over there” in places like Brazil, a country that gets over 80% of its electricity from hydroelectric dams. It is a country that is reeling from political scandals, a sluggish economy, and a Once-In-A-Century drought that has crippled production and increased prices over 200% for many customers.

Overnight.

And it’s getting worse.

On top of between 9 and 20 layers of taxation on energy from federal, state and local Brazilian authorities; grid and transmission fees have increased 25% this year.

The lack of water has forced utilities to generate electricity with natural gas, which is 5 times more expensive in Brazil than in the USA. The high costs, combined with subsidies and price controls imposed by the government less than 3 years ago were bankrupting the utilities. So on March 5th, Brazilian consumers were hit with another 23% increase. The energy problems being dealt with will reduce Brazil’s GDP by a minimum of ½% in 2015. Companies that were used to $10,000 electric bills are now dealing with $25,000 bills (or more) for the foreseeable future.

Energy security should be a priority for any company that relies on energy to deliver their product to the market – whether it is a manufacturer or a service provider. While it is especially important for companies operating in developing countries and economies, it isn’t just for foreign operations as today NASA put out a forecast showing that California’s drought has reduced reserves and reservoirs to approximately 12 months of usage.

If energy security is of interest to your organization – Telamon Energy Solutions is ready to help.

- Mark Brown

Sales Manager

Energy Solutions