Australia is facing an energy crisis that has seen electricity and gas prices soar, a number of retailers collapse, and the imposition of caps on wholesale electricity prices. This crisis is likely to last for years into the future, and Philip Hirschhorn, Managing Director and Partner at Boston Consulting Group, says it’s time for companies to stop viewing themselves as energy consumers and start seeing themselves as energy traders.
Hirschhorn recommends that businesses take a new look at the way they utilize energy, encouraging them to take advantage of price differences based on time of day and source, building contractual and operational flexibility into their energy use strategies. A new strategy will take some getting used to, as CEOs are traditionally focused on locking in certainty, and energy flexibility requires taking advantage of variability.
Anthony Roediger, Managing Partner at BCG for Australia and New Zealand, says that taking on an energy trader’s mentality will help companies deal with a world that is much less stable than it was ten years ago. He recommends that companies make both short-term, flexible models that can rapidly respond to changes in the business environment and longer-term plans that provide multiple ways to achieve strategic goals.
“I think boards get that and they’re looking to CEOs who say, ‘we understand our ecosystem and we’ve got plan Bs on lots of different elements—we’re not necessarily going to use them, but we’re ready for it’...It takes a bit of cost and a bit of effort to do that, but the ones who do that end up much better off. Theoretical efficiency is one thing, but actual efficiency—where after all the disruptions you’ve managed to navigate through—is actually what counts.”
With wars, pandemics, environmental disasters, and global supply chain disruptions being only a few of the major drivers of instability in the business world, developing the ability to thrive on volatility will do more than just help companies save on energy costs. An increasingly uncertain business environment provides little time to carefully deliberate changes, and building the expectation of continuing volatility into long-term strategic planning will set up companies to be able to pivot as conditions dictate, leaving them less vulnerable to the—now expected—unexpected.