Energy Management

Businesses Transition from Oil & Coal to a Less Carbon-Intensive Alternative: Natural Gas

Companies across the country are taking steps to mitigate climate change by choosing less carbon-intensive sources of energy to run their businesses. To reduce emissions from operations, many businesses are making the transition from oil and coal to natural gas. This movement has contributed to the shutdown of coal power plants across the country with gas generation now exceeding coal generation.

Natural gas emits 50 percent less carbon dioxide when compared with coal and about 30 percent less when compared with heating oil.1  Choosing natural gas over coal can be viewed as a step in the right direction in reducing emissions and might be a more feasible business investment when compared with renewable energy, a preferred source of clean energy, that is quickly becoming more competitive in price.2

Dino Caro, senior vice president of sales at Constellation, who spoke at the North American Gas Forum in October in Washington, D.C., relayed to the audience that he has not only seen a trend in businesses making the conversion from coal to natural gas, but there has been an uptick in demand for natural gas as a supply source for fuel cells to generate baseload power. Fuel cells are often installed at data centers and other businesses with critical loads as reliability solutions and eliminate the need to rely solely on the grid.

In addition to converting to natural gas, many businesses are pairing the commodity with renewable energy solutions and energy efficiency upgrades to use less natural gas in order to reduce energy costs and show environmental stewardship.

Managed Solutions for Risk Management & Budget Predictability

Energy managers are becoming more strategic with energy purchasing and are looking to not only reduce their business’ carbon footprint but to also keep energy prices low and align their strategy with their budgets and appetite or tolerance for risk.

Caro mentions that because customers realize gas prices are at all-time lows, some have given up trying to find the absolute bottom and have locked in prices for three to five years. He has also seen that others have taken a more strategic buying approach where they manage price risk over time to create a diversified portfolio.

By proactively engaging and educating our customers about market trends and analysis through one-on-one conversations or in communications such as monthly Market Intel Webinars, customers can be better informed on how to manage risk. For example, if you look at the history of natural gas pricing, prices increase quickly following significant events like the polar vortex and natural disasters and then begin to trickle down. Those events were not foreseen, yet the effects lasted for years. Energy buyers should be looking at their natural gas strategy at these price levels and plan early.

Being educated about how to go about risk management and by applying that knowledge to a diversified energy portfolio, customers could reap benefits of opportunities missed if solely locking in prices.

Constellation’s SmartPortfolio program is a complete approach that manages your total usage through a combination of floating and time-diversified locked purchases. This strategy helps protect your business from market highs while providing the opportunity to capture market lows. To learn more about finding the right natural gas strategy for your business, contact us today.

Sources

  1. https://www.eia.gov/tools/faqs/faq.php?id=73&t=11
  2. https://www.forbes.com/sites/dominicdudley/2019/05/29/renewable-energy-costs-tumble/#1231487de8ce

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