Energy and the environment is currently the largest domestic and global industry. Affordable and clean energy is the lifeblood of industrialized economies. Today, the world community recognizes the need to use energy in a responsible and environmentally-friendly manner to maintain and foster a “green” earth, as it addresses climate-change forces especially reversing the increase in greenhouse-gas (“GHG”) concentrations.

Along with environmental considerations, the energy and utility industry has numerous challenges over the next several decades. SVG offers to its clients leadership concerning pressing issues such as Smart Metering and Smart Grids and Smart Drilling to Smart Pipelines. “Efficiency” in all aspects of the energy and environmental business is becoming a basis of competition.

We are engaged by energy and utility clients to help them address three specific sets of challenges:

• Determine the issues and challenges on the horizon and the issues that will be focused on in the near future
• Progressing and resolving the current issues
• Enabling cost rationalization and enterprise transformation and continuous improvement in governance, efficiency and risk management

Services

Given the changes and forces of uncertainty and opportunity within the energy and environmental industry, SVG supports its clients with teams of professionals who possess deep and practical experience. We bring to bear analysis and insights to identify and exploit winning business opportunities, including assessment, planning and implementation. Our services include strategy, business and process assessment/design and technology consulting: from analysis to implementation. Implementation support ensures performance improvement, including earnings and shareholder value, especially during turbulent times.

Our services include private placement of financial resources when clients need funding for projects, restructuring and/or business acquisition. SVG’s principals work with and advise the C-level and board of directors, as well as engaging mid-level management to fully understand clients’ organizational capabilities and situations.

In summary, SVG offers energy and environmental clients:

• Strategy Formulation (business, organization, technology)
• Business Process Design/Redesign
• Organization Restructuring
• Technology: IT and Hard Science
  • Is the IT investment proportional to competitive benchmarks and aligned to the revenues and costs of the business?
  • Is the IT investment consistent with the rate case filings: delivering what has been promised within the timeframes and budgets?
  • Is the IT investment directed to profit growth segments, customer and by product, sufficient and appropriate?
  • Requirements gathering, design and systems development to support Revenue De-coupling
  • Technology planning and implementation for the data and network systems components of the Smart Grid
• Implementation of business and IT changes

Client Challenges

Despite extremely volatile oil price swings, the Administration has challenged the industry to provide “cheap and clean” energy: “Green energy” need not be expensive.

Climate change forces will cause great shifts over the next several decades as the world demands “environmentally sound” solutions — even from fossil fuel sources. The APOLLO Program, a massive spending effort to develop new technologies that are green and highly efficient, has been adopted. The Stimulus Act has made available billions of dollars for energy efficiency and Smart Grids to retool America’s High Voltage Transmission System.

The Kyoto Protocol calls for reduction in GHGs, especially carbon monoxide. With the exception of the United States, the world community has signed up to reduce GHGs. The Administration is introducing legislation and regulations to effectively bring America into line with the global community’s effort.

Industry change will be driven by public policies such as renewable energy portfolio standards (“RPS”), carbon credit trading and/or carbon taxes that can present enormous opportunities to organizations that understand the trends. Energy firms must stay ahead of the curve, to not only set winning strategies, but also ensure they are properly implemented. Even if the federal government does not enact RPS and cap and trade legislation, over 30 states are moving forward with various versions of climate change laws and regulations.

The Energy Independence and Security Act (EISA) of 2007 establishes a renewable fuels standard for increasing the use of bio-fuels in transportation. The United States currently consumes about 180 billion gallons of gasoline and diesel fuel per year. Over the next couple of decades, 20% of this demand will be satisfied by green bio-fuels (cellulosic, biomass-based diesel and advanced bio-fuels).

The US Department of Energy has developed a new Advanced Research Project Agency to promote “disruptive technologies” that might not otherwise be commercialized. Coupled with new laws and regulations to advance change, there is uncertainty about the extent of disruption caused by these technologies on competition in the industry.

Advancements in smart drilling hold promise to produce additional fossil sources of supply, albeit at higher prices. Additionally, public policy may enable a revitalization of power generation from nuclear power plants, especially if the industry solves its spent fuel storage problem. Smart grids will garner billions of dollars of new investment.

Of greater certainty are the RPS policies for renewable and clean source of energy and the new legislation in some states that mandate greater energy efficiency. Lower energy consumption will help to reduce GHGs; new technologies are being developed — from production to end use.

Business Value

Sierra Vista Group’s cross functional consultants, in advisory and IT services, collaborate to provide our clients with innovative ideas and solutions that directly enhance business value. The following highlights demonstrate our experience and achievements with our clients:

• How will advancements in technology be a threat or opportunity to improving earnings? Incorporating into an overall corporate strategy, we worked with the CEO of a large utility company to increase earnings through improved use of technology.
• How best can a Smart Grid and automatic metering reading (“AMR”) improve customer service and earnings? For an international utility firm, we assessed the opportunity to leverage AMR for improving service and earnings.
• Should earnings be grown organically through new business offerings or through mergers and acquisitions? For a major natural gas utility company, we worked with the CEO to implement an earnings growth strategy through new business development.
• How best should the CEO communicate with Wall Street to ensure accurate reporting of business opportunities for greater price/earnings ratios and shareholder value? For a large gas distribution company, we implemented a communication program that provided a clearer picture of corporate strategy, which enabled analysts to better understand the basis of future earnings. The market responded with an improved Price Earnings ratio and shareholder value.
• As the organization grows, how best can technology support the organization and enhance the growth rather than impeding it? For a major utility, we implemented a technology strategy and organizational change program to support business and earnings growth.

Managing Partner and Practice Leader, Glenn G. Wattley