Using Energy and Sustainability to Build Competitive Advantage

Good afternoon, ladies and gentlemen.

My name is Chris Maclean. I am the CEO and Founder of Open Energy Market. And before I begin, I'm just going to say thank you. Thank you for sticking around. I'm very conscious this is the last session of the day. Thank you for coming to it and creating an audience, delaying your first drinks of the evening.

I will endeavour to try and reward you with some very useful information and some insight into how to build competitive advantage through energy and sustainability.

Now I say competitive advantage. Of course there is the advantage, competitive advantage element, which is the pioneering, the innovation side of things. But as much as I say competitive advantage in this industry, there is also the avoidance of competitive disadvantage.

I won't be the first to use the cliche that the data centre world is moving and evolving incredibly rapidly and, as much as is it important to pioneer, it's important not to be left behind by the evolution that we're seeing in energy and sustainability.

Energy and sustainability is a very broad topic. I've only got about 15 or 20 minutes today. I'm not going to be able to cover everything as much as I want to, but I'm going to focus on four key areas that I think will be pertinent to you. And those key areas for data centre operators is around your customers and their growing demands.

So I'm going to focus on some of the short term initiatives that you can employ to delight those customers. I'm not necessarily going to focus on some of the long term ambitions that you might have as data centre operators. I'm going to look at some of the things you can do now, to take away with you now, to delight those customers.

Because those customers have a myriad of demands, whether it's through contracted regulation on your PUE, whether it's through contraction on your grid resilience, whether it's through green agenda. There's a huge amount of demands to a data centre and you are becoming more and more subservient to delighting those customers and meeting those demands.

Now, we support a broad spectrum of data centres, from the boutique to the global hyperscale mega data centres, and our remit, or our ethos, is broadly the same.

We're here, we strive to make you guys heroes in the eyes of your customers.

And how do we do that?

We focus on our expertise in energy procurement, how we deliver the most competitive price to your end users. And we focus on aligning that with a really, really strong sustainability strategy.

And this is not something we typically broadcast, but we look at a reflection of our service returned in utilisation at your data centres.

I personally believe that there is a broad issue around data centres around the level of utilisation. And if we can support our data centre customers, in helping their customers have confidence to load switch to their data centres and increase their utilisation, then we think we've done a very good job.

Competitive price, sustainable strategy

Now there are a myriad of reasons why a customer might use your data centre and then put their technology in your data centre to other data centres. But we believe, and we're very bold in this, that one of the strongest reasons is the confidence in the delivery of a competitive energy price and a sustainability strategy, buying optionality and contract setup.

Now this may sound very dull, very mundane, but I assure you, I think it's critical to delighting those customers.

Since 2022, since the energy crisis, we have seen a growing surge of demand in customers being more switched on, excuse the pun, to price risk and aligning their pricing or aligning their drivers and desires of what they want to get out of a data centre from their pricing with their risk appetite across the rest of their portfolio, they want to build in some of the same rhythm, mitigating products that they'd enjoy on their own portfolio with data centres.

So what does that mean for you? You have to adapt. You have to evolve. You have to look at how you can implement multiple different products that will delight individual customers. Now you have some customers that may be wanting price certainty, three, six month budget price certainty and you have other customers at the other end of the spectrum, typically the hyper scales, that we'll be looking for spot pricing, looking to throw all the risk at it, be looking for cash out products and how can you cope with how those products can be aligned within one data centre.

Well fundamentally, that can be done through contracting with the right supplier. Now there are very, very few suppliers in the UK and across Europe that really get data centres and the risks that are involved in contracting with data centres. But there are some out there, those that understand the ramp up phase, the risks that are associated with ramping up as a data centre. Those that understand what it means to have an umbrella contract, multiple different product options underneath which you can have that myriad of customer centric products. And those that understand how to incorporate private wires, how to incorporate PPE, sorry, Ppas into your pricing.

Ultimately, I believe that the time for having a single pricing product that you deliver to your customer base is over. I think if you want to grow and attract multiple customers or different customers, new customers, you have to be cognizant of the opportunity of their demands, of that they might want to manage their risk.

Location, location, location

The second area I'm going to dive into is site location and metering setup.

Now I slightly regret putting site location on there, because that is in itself a can of worms. It's a rabbit hole that we don't necessarily have the full time to dive into other than there is constantly evolving regulations around things like grid resilience in certain geographies, in certain locations that need to be factored in when you are looking to expand and build new data centres.

There's compliance, potential challenges, potential issues, connectivity issues, DNOS, things like that, which I don't, as I say, necessarily want to dive straight into, but it does need to be considered when you're looking at building new, when you're looking at selecting new sites.

But from an internal infrastructure perspective, from metering, that I think is really, really important. So you see we work with some data centres who came on board and they had very, very few internal controls and very, very few internal metres, to the other end of the spectrum where they are fully loaded with mechanical metres, UPS metres on every floor, every single hall, every division, every possible way of slicing and dicing the centre. And I think that you have to be at that end of the spectrum. You have to look at how you can fully load your data centre with as much information that you can grab out of your customers as possible. Because it ties in to how you can manage those customers different power products, how you can manage their usage, how you can ultimately delight them by invoicing them in the right way by operationally managing them in the right way.

Consider the what if; there are many data centres out there that will have one potential big enterprise or hyperscale customer? And what if that same data centre had to have that hyperscale or big enterprise customer move away? What if that day the same data centre has to have 20 or 30 customers come in? Can you manage that operationally, internally? Can you divide that data centre up? And this is a key area where we can see you future proofing your centres to align with a different spectrum of customers that might come on board down the line

Test renewable strategy against financial reality

Right into the third topic.

And this is looking at a renewable strategy that goes beyond just going green. Now, there is no question that the number one driver to investing in renewable technology, is to save the planet, is to solve climate change.

But what I'd ask you is how does your renewable investment strategy fly in the face of economics? How does your renewable investment strategy look from a financial perspective?

Is there a true financial viability to your strategy?

And ultimately, where we see the difference between ambition and action, and the sticking point in the middle is the financial integrity of your proposal. So there's a huge amount of sustainability ambition. Of course there is, which is fantastic and we should champion that. But is that transition from ambition to getting the thing executed to getting the thing passed the CFO and ultimately getting investment to employ or deploy whatever renewable investment you want to make? That is where the challenge is and consequently that is where our product True comes in.

True aligns all of your procurement, all of your purchasing objectives, all of your purchasing strategies, all the hedges that you'll be making against your customers with your sustainability objectives. It's live, it's dynamic, it's bringing in the market based data, it's bringing in your consumption data. It's giving you an accurate up-to-date analysis of what you could or should potentially be looking to invest in. It's helping you. It's helping you build a business plan that could be audited and ultimately get you through and get that investment made.

But, while on top on the topic of renewable investments, it's really important to look at renewable investments whether they are private wire, whether they’re PPA, not just as carbon mitigating investments but as financial hedges, they are potentially very long term financial hedges. So if you take a PPA for example, you are committing to a certain amount of base load energy at a certain price for 10/15/20, sometimes 25 years.

What I'll stress is that needs to be looked at as a financial hedge against the markets, against what the markets could outturn as against the risk appetite. Because ultimately that PPA, that element of your base load energy is going to be wrapped up in a fully delivered price that you're going to give to your customer on a monthly basis. And if that, hopefully, that decision is correct.

But if that decision is not correct and the markets have moved the wrong way for you, then suddenly that delta between the price you're giving to your customers and the market is going to move very quickly. To give you an example the other way around, if you had bought on a PPA in 2020 and paid £50 a MW hour for it during 2022, you'd be delighting all of your customers in terms of the delta between the market which hit £800 and £900 a MW hour in the UK versus your £50 hedge. But stress that it has to be looked at from a financial perspective, not just as a carbon mitigating perspective.

Align strategy to your long-term ambitions

And the final area I'm going to go into is of course bringing back your own long term ambitions into your strategy, but aligning them together in a way that doesn't create a cliff edge for your customers, it doesn't create any price shock.

So you've got your short term objectives, how you can delight your customers now through energy power products, through energy price risk mitigating through product diversity, metering off subsidy PPAs. I haven't talked about subsidy PPAs yet very short term, don't necessarily create additionality I'm afraid. But you can get these PPAs that are sort of termed off subsidy or secondary PPAs directly from a supplier. Again another financial hedge, but they are a PA that you can pick up for one, two or three years.

Very nice stepping stone into working with PPAs and understanding how they work within your business. Now they don't, I have to stress, have the additionality around them if you are chasing that RE100 additionality if you're chasing that level on your green agenda, but they are that stepping stone for you. Also I'm sure many of your customers will be demanding REGO backed or go back to REC backed energy. There is a strategy now for delivering those that falls outside of your supplier base. Supplier REGOs are known to be very, very expensive. There are opportunities to pick up unbundled RECs, unbundled REGOs through independent traders, trading houses that are much, much cheaper than what the suppliers are offering. So have a look at that from a short term perspective and then like I say marrying that up with your long term ambitions.

So going back to looking at how you grow new site selection, where you're going to pick up the best grid resilience, where you're going to look at new asset PPAs, our new asset PPAs are ones that have not even become live yet. Spade may not even be in the ground yet, understanding when you might jump onto the bandwagon of a new renewable asset PPA, a new wind farm that is being built. The earlier you get in typically the cheaper of the price but the less security might have against that development going live. But these are long, long term strategies. These are strategies of embracing a PPA that may come into play in 2029 and then be a 10 to 15 year agreement from 2029.

But they have to I'm sure align to your ultimate goal of hitting net zero and then you can bring in the other bits, the other bits to your data centre that's slightly ancillary to the power price and what the final deliver price is. For example, heat recovery which we've heard a lot about today, heat recovery and micro grids, all the cool stuff effectively that allows you to operate more efficiently and more sustainable manner but might not necessarily directly impact that final output power price.

So like I say when you're looking at this whole strategy together with the short term customer delighters and the long term objectives of your business, bringing them in together, avoiding those cliff edges, avoiding that customer shock but ultimately aligning them very closely with the fully delivered cost of energy that you are going to be putting on your customers desk every single month as your invoice to them. And making sure that it's at its most competitive at every stage of the journey is absolutely vital, I believe, to you being competitive and growing in a competitively sustainable way.

And that is, that is quite quick. That is the end of my presentation. Thank you very much.