Reducing the Power of Suppliers
In Michael Porter’s book on Competitive Strategies, he talks about the competitive forces that shape an industry. One of the main competiitve forces that impact almost every industry is the source of their energy. The more options businesses create for their sources of power, the more competitive they will be long term - espcially with respect to other companies in their industry.
This point was brought home recently by a business I have been working with on assessing, aligning, and expanding their energy options. The company is a small speciality grocery who has seen his electrical bills go up from $700 to $7000 dollars over the past 20 years while his overall consumption has decreased due to efficiency improvements in his refrigeration. When deregulation went into effect, he was able to get a lower electrical rate from an out of state provider, yet had to still pay the local carrier for delivering the electricty. And then last year with the dramatic increase in heating oil prices, it was the first year his company didn’t turn a profit.
With electrical rates expected to experience a simiar increase over the next 20 years. and the impact of volatile oil prices on his long term viability, the business owner wants to develop his own power solutions. The more options he can create to power his store, the less he will pay for his power, the more competitive he will be and the lower he can charge for his products or the more profit he can make on the products he charges that are in line with his local competitors.
Through the Project Energy Independence course, we are looking at two solutions - one for creating his own electricty with roof solar panels and another for heating his store with a removable wood furnace. He doesn’t own the store so any solution he selects, he wants to do it with minimal infrastructure changes - these two solutions enable that. There is a whole foods store in a community 25 miles away that is using a fuel cell as a back up electrical generator - we are looking into some grant money to explore that option.