Smart Energy Voices - Episode 106

Smart Energy Voices - Episode 106

Heard at REF: PIVOT! How to Keep Advancing Your Strategy When Everything Changes

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In this episode of Smart Energy Voices, Sarah Johnston, Managing Director of Marketing and Carbon Differentiated Strategy at Calpine, discusses corporate sustainability targets and the challenges of achieving them, particularly among the recent changes in SEC and SBTi guidelines. This was the opening keynote at SED’s recent Renewable Energy Forum.

Drawing from 15 years at Calpine, Johnston explores proactive and prescriptive planning to mitigate risks and optimize energy strategies in an uncertain environment. She also touches on corporate challenges in Scope 3 emissions, advocating for supply chain collaboration to reduce carbon footprints.

 

You will want to hear this episode if you are interested in...

● Corporate challenges in sustainability (04:25)
● Changes impacting energy markets (08:33)
● How the energy market is aligned with the housing market (16:13)
● A tactical approach to sustainability strategy (19:28)
● Scope 3 emissions and how to reduce them (22:26)

 

Corporate Challenges in Sustainability

There are many corporate challenges related to sustainability strategy, and one major theme is self-imposed obstacles by organizations through their actions or strategies. This includes the possible unintended consequences of corporate decisions aimed at long-term strategy or market positioning and how they come up against the uncertainty of rules and regulations
governing energy markets. The evolving nature of regulations necessitates continuous adaptation by companies, who must navigate shifting requirements while striving to meet their sustainability and carbon-related goals.

Risk management in the realm of sustainability involves both financial risks associated with energy commodity markets and operational risks linked to energy availability and reliability. On top of that, add changing standards and requirements. Johnston touches on some priorities to approach amid these risks.

Changes Impacting Energy Markets

One key issue that Johnston highlights is the volatility and unpredictability inherent in energy markets, exacerbated by factors such as the rapid growth in demand for electricity. Another concern is the increasing costs associated with integrating renewable energy sources into the grid. While renewable energy is essential for sustainability goals, the costs of connecting solar and wind resources to the grid have increased, impacting developers, investors, and ultimately, consumers who bear these expenses.

There are also operational risks associated with renewable energy projects, like negative pricing in energy markets, particularly in regions like California and Texas. This poses financial risks for developers and creates uncertainty in project economics. Additionally, there are also lengthy timelines and bureaucratic challenges involved in getting renewable energy projects approved and interconnected to the grid.

Johnston offers a tactical approach to sustainability strategy in this environment: “Be patient, be proactive, and be prescriptive.” She also advises to have an integrated view. Keeping within view what you have, where you have it, and when you have it helps guide you in what to do next.

The Energy Market and Housing Market

Johnston draws a parallel between energy and housing markets, likening the dynamics of both during a seller's market. She advises listeners to define their ideal outcomes before engaging with the market, enabling them to assess available options more effectively.

This proactive approach helps companies align their energy procurement strategies with their long-term goals and operational needs, ensuring they make informed decisions that mitigate risk and maximize returns. By preemptively outlining criteria such as desired project timelines, budget constraints, and regional preferences, organizations can better navigate the complexities of the energy market and optimize their energy investments to meet both economic and sustainability objectives.

An Approach to Reducing Scope 3 Emissions

Johnston emphasizes that three-quarters of corporate carbon emissions originate from Scope 3 categories, many of which lie outside a company's direct operational control and can be difficult to influence. By aligning goals and standards across all stakeholders, companies can collectively influence suppliers towards more sustainable practices. There is great importance to strategic partnerships and transparent communication, which includes setting clear expectations, fostering open dialogue and establishing metrics to track progress. This approach not only enhances operational efficiency but also strengthens the business case for sustainability initiatives by demonstrating shared benefits and cost efficiencies.

DISCLAIMER: Trane does not provide tax, legal, or accounting advice. This material is for informational purposes only and it should not be relied on for tax, legal, or accounting advice. Tax law is subject to continual change. All decisions are your responsibility, and you should consult your own tax, legal, and accounting advisors. Trane disclaims any responsibility for actions taken on the material presented.

Connect with Sarah Johnston

Sarah Johnston began her career at Calpine in 2009, focusing on reporting and analysis for risk management clients. As the Managing Director of Marketing and Carbon Differentiated Strategy, Ms. Johnston manages a roster of Calpine Energy Solutions’ Portfolio Risk Management clients with complex and expansive footprints or portfolios. She is responsible for analyzing data on macroeconomic trends, commodity market influences, and broader energy markets while ensuring that Calpine’s key clients’ electricity portfolios are balanced and well-managed. Her expertise in sustainability and energy portfolio management guides clients through the use of advanced risk analytics, evaluation of strategy performance, and guidance in creating and executing energy policies and strategies that concurrently manage impacts to cost, risk, and carbon. Ms. Johnston is also a frequent speaker on the topics of corporate sustainability, renewable energy strategy, energy portfolio management, and commodity risk management. Education: B.S. in Business Administration, Elmhurst College; Graduate Certificate, Corporate Sustainability and Innovation, Harvard University.

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