How CFOs are gearing up for growing energy risks to their businesses

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Financial leaders are increasingly recognising the need for innovative solutions to not only drive cost savings but also enhance resilience and reduce operational risks. Against this backdrop, the American Express 2023 CFO Survey, conducted in France, Germany, and the UK, reveals compelling insights. A staggering 78.2% of finance leaders consider energy disruption to be a very or extremely important risk, with an additional 19.9% viewing it as moderately important. The potential costs of energy disruption are equally significant, with large businesses facing £8,500 in costs for every minute of downtime from power cuts.

In this post, we delve into how these findings underscore the critical importance of exploring alternative energy solutions, particularly the adoption of solar energy on rooftops for self-consumption. We’ll explore how embracing solar power can be a strategic financial move that not only addresses the specific concerns highlighted in the survey but also revolutionises the way companies manage energy costs and navigates the challenges of the modern business world.

1. Substantial Cost Savings

Investing in solar power for self-consumption presents a tangible opportunity for organisations to reduce energy costs significantly. By installing solar assets on roof-tops, companies can create a stable and predictable energy budget. As the cost of solar technology continues to decline, the return on investment becomes increasingly attractive, offering a long-term solution for financial stability. For e.g, several businesses in the UK are increasingly at an electricity tariff that’s 28p and above, and those that are locked into old tariffs but are soon approaching the end of their contract are likely to be at 35p and above.

2. Independence from Volatile Energy Markets:

From 2021 to 2023, there has been an unprecedented period in the energy sector. Almost 30 energy companies in the UK went bust, while most of Europe experienced over a 250% increase in energy prices. Although the prices have started to settle down, energy experts and traders agree that they are unlikely to ever return to the levels seen in 2018-2019.

Solar power provides organisations with independence from the volatility of traditional energy markets. A self-sustaining energy source on the rooftop shields operations from unpredictable fluctuations in energy prices. This autonomy not only stabilises budgets but also insulates companies from external economic factors, providing a strategic advantage in uncertain times.

3. Enhanced Resilience:

With extreme weather patterns, there has been an increased risk of energy grid failure and power outages, at such times, solar installations act as a reliable source of electricity, ensuring uninterrupted business operations. This resilience is crucial in today’s world, where unforeseen events can have a profound impact on the continuity of business activities. Solar power serves as a dependable and continuous source of energy, reducing downtime and associated financial losses.

4. Reduced Operational and Financial Risk:

Relying solely on traditional energy sources exposes companies to inherent risks, from supply chain disruptions to regulatory changes. Integrating solar power into the energy portfolio allows organisations to diversify energy sources, reducing vulnerability to external risks. This not only safeguards operations but also contributes to a more sustainable and responsible corporate image.

5. Long-Term Financial Stability:

As energy prices are increasing and the cost of solar is reducing, the return on investment from solar is more attractive than ever before. In typical cases, if businesses invest their own capital, they can expect an 18% to 25% Internal Rate of Return (IRR), or even higher in some outlier cases.

Solar investments offer a long-term solution for financial stability. With government incentives, tax credits, and decreasing solar technology costs, the financial benefits extend well into the future. The installation of solar panels on rooftops becomes an investment that pays dividends over time, contributing to the overall financial health of the organisation.

Conclusion:

Embracing solar power is not just a green initiative but a strategic financial move that addresses the concerns of today’s CFOs. It provides a path to cost savings, independence from market volatility, enhanced resilience, and reduced operational and financial risks. The time is ripe for financial leaders to explore how solar energy can redefine their organisation’s energy strategy and contribute to long-term financial stability.

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