Strategy Execution Life Cycle – Identifying and Defining, Analysing and Syndicating, and Formulating and Documenting.
Background context – Australia has an opportunity to become a clean energy superpower by coupling cheap renewable energy with energy intensive industries. Australia is positioned well to be the natural home for an increasing proportion of global heavy industry. However, this opportunity is at odds with much of Australia’s energy intensive industry being under financial stress due to energy costs that are not internationally competitive. The competitive position is further being undermined in a world where emissions and carbon intensity are relevant.
Australian heavy industry is facing community and investor pressure to re-energise their industrial facilities with low carbon energy sources. At the same time, renewable energy companies are seeking large energy loads with long-term supply contracts to underpin the most cost competitive renewable energy solution. The opportunity to operate energy intensive industry in flexible operating modes can materially reduce the overall systems costs of a globally competitive and ‘green’ heavy industry. In addition, the opportunity for a large energy user to flex demand in times of short energy supply (i.e. at times of peak demand or low energy supply) can position the energy user as an integral element (i.e. akin to a big industrial battery) in a much broader energy system that is in transition. New operating models between energy user and energy supplier are required to liberate these opportunities.
Strategic Challenge – Guberno was engaged by a new energy company that is seeking to assemble an equity consortium to acquire and repower energy intensive industry in Australia with renewable energy. The strategic challenge was to identify the right target asset owners to engage with, assemble a consortium of relevant equity partners, and create a viable and credible re-powering value proposition for engaging with the target corporate owners.
Strategic Activities – Guberno provided strategic support and specialist industry knowledge to the new energy company across a range of workstreams. Key activity workstreams included;
- Strategy development – Guberno worked closely with the new energy team to develop and refine a strategy, business plan, and target engagement strategy with the right asset owners in the initial target industry.
- Flexible operations – Guberno assembled a pool of relevant industry experts to develop a ‘frontier’ of flexible operating modes for the target energy intensive assets. This operating flexibility was then valued using technical and financial modelling in the context of an integrated renewable energy solution.
- Consortium development – Guberno worked with the new energy team to develop the consortium engagement strategy as a pathway to developing an equity venture to fund and execute the green energy repowering solution.
Outcomes – The project delivered a clear strategy and engagement plan that enabled the new energy company to interact with the target industrial asset owners. The engagement was underpinned by a credible operating plan assembled and quantified by deep industry experts. The project continues to progress in the execution phase.
Key Learnings – The opportunity to fundamentally reposition Australia’s energy intensive industry is real. To liberate this opportunity, it requires a new model of ownership and integration between renewable energy suppliers and industrial asset owners. To achieve this new model, a degree of strategic alignment is required between the energy supplier, the asset owner and the government. Not only can this re-energising solution improve the competitive position of the energy intensive industry in Australia, it can also serve as a cost-effective virtual battery in an energy network in transition to greater penetration of renewable energy.