Today there is a huge amount of hype in our industry regarding the value of microgrids and Distributed Energy Systems. This is a powerful driver of growth for businesses across the spectrum of the Energy Transition, but it is no “free lunch.” There are many reasons for this, and this blog is focused on one of the big ones: our inability to rapidly assess the viability of new projects.
There are some interesting parallels between project development and people leadership:
- More isn’t always more. Working longer and harder is often less effective than being disciplined and focused and ensuring we are in flow.
- I recently read a HBR article, Hire Slow, Fire Fast. Its central point is that too many leaders (especially in high-growth businesses) put off the awkward, hard people conversations. When he was still at Apple, Guy Kawasaki called this “the bozo explosion”
Hype means a lot of “potential” projects. Energy projects are delivering genuine, new value, so are rapidly attracting attention. Motivated customers, often with big targets and bigger budgets. This becomes a problem when there are an infinite number of potential DES project candidates—every energy consumer could have their own onsite energy system. But which consumers should have one? To create a sustainable, profitable, and thriving future for our industry and our clients, we need projects that have a great return on investment and will provide value for the life of the asset.
Stop Wasting Your Time And Money
Every hour invested in unviable potential costs time, focus, energy, and quickly hits the bottom line. Consumer needs are accelerating, and the supply chain is scrambling to gain market share. Just penciling out a project can take days to assess business needs, and that is before we start to prioritize and rank projects and thus make the greatest return on our investments (time and money!!). For many, this scramble means we are overlooking the cost of developing bad projects too far. Motivation and big targets take energy consumers only so far, before the numbers don’t stack up and the projects fade away (taking that time and money with them!).
Bad projects can come in many forms, and the ones that stand out for me are:
- Inability to perform desired, expected or promised outcomes (technical/financial).
- No return on investment over the life of the asset or within the desired period.
- Project development red flags not being caught before significant time and costs are incurred and should have been captured a lot sooner in the planning cycle – energy user commitment, technical issues, permitting, credit worthiness – examples of just a few.
- Projects that will become a good project, but should be put on hold until circumstances and conditions change.
The worst news about it… bad projects impact everyone:
- Unhappy clients and bad projects result in a lack of trust, no referrals, and reduced enthusiasm across the market.
- The costs being wasted developing and pursuing bad projects must be accounted for and ultimately get wrapped up into the costs of the projects that do go ahead. Therefore, the good projects incur a significant premium. High-cost limits adoption.
- Wrapping our limited resources up chasing bad projects limits our ability to deploy incredible solutions for the projects that should have our collective attention.
Kill Bad Projects Early And Often
In our experience at VECKTA, letting bad projects run too long is less about attitude and more about not having access to processes, systems, and tools to facilitate a consistent, accurate, and effective framework for making these critical decisions.
So what can we do as a collective?
- We need to be willing to let our clients know that a project may not make sense for them and be disciplined to not force a project for the sake of a “win.”
- We need to have the right processes and tools within our businesses to facilitate project screening and assessment to assess a project’s technical and commercial viability.
- We need to critically assess opportunities from a risk perspective, early in the lifecycle.
- We need to focus on quality AND quantity.
- We need to have the confidence to make the tough decisions and discard/place on hold bad projects.
At VECKTA we firmly believe we need to focus all our efforts on the most profitable and sustainable projects that create the desired business outcomes and value in the most coordinated, efficient and cost-effective ways possible. We think of a project in three phases; Accelerate, Optimize and Deploy. In the Accelerate phase we empower energy users and the supply chain to rapidly and accurately identify, assess and prioritize the most viable and valuable projects.
This starts with our Rapid Project Assessor and then leads to our project onboarding and insights module. In minutes to hours, instead of weeks to months, we can empower effective decisions to be made regarding whether a project should be discarded or warrants more time and attention and progression to the optimize phase.
By collectively being more focused, we will create a positive, energized and buoyant industry that will create better deployments and enable our industry to achieve its potential and deliver on the hype.