Lessons from Enron

This week, subject to court approval, Enron Europe moves out of administration – and presumably into history – twelve years after its collapse.  Even after this length of time Enron is still a by-word for corporate malfeasance but its legacy – both good and bad – is extensive.  Enron was nothing if not innovative.  Amongst other achievements Enron:

• drove deregulation of energy markets

• drove standardization of commodity contracts

• combined energy supply and energy efficiency deals

• pioneered online trading of energy

• introduced weather trading.

The Enron organizational culture was one of hard work and high energy as well as open-ness (at least at the operational level), with a big focus on creativity, education and training.  The Enron diaspora has gone on to inhabit significant positions in the energy markets in many energy companies and banks but most of us who worked there would agree that there was nowhere quite like Enron as a place to work.

Enron Energy Services used tools and worked on ideas that were ahead of the their time – many of which are only now starting to become better known – including:

• data driven design to right size plant and equipment, reducing both energy use and capex spend

• risk assessment of energy efficiency projects using statistical analysis and portfolio management tools

• big data (albeit small by today’s standards)

• measurement and verification of savings

• automated distributed demand response across large portfolios of properties

• conversion of traffic and street lights to LEDs.

The two deals I was involved in at Enron and then RWE – Diageo and Sainbury’s -were both very different but truly ground breaking.  The multi-utility outsourcing deal that Enron pioneered with Diageo led to very large energy savings (40% in the case of the Park Royal brewery) and was taken over and then replicated by the team at RWE Solutions (later part of RWE npower) in Diageo’s Dundalk and Dublin breweries.  The RWE – Diageo deal at St. James Gate in Dublin, (the home of Guinness), is still in place ten years after it started so it must have worked for both parties.   The Sainsbury’s deal which combined energy supply and energy efficiency (also originally sold by Enron but implemented by RWE Solutions), installed many hundreds (even thousands) of efficiency projects across the Sainsbury’s portfolio over five or more years, helping them to significantly reduce energy use and carbon emissions.

Right now in the UK (and Europe) we need a lot more innovation in the energy markets to disrupt the Big 6 – particularly around:

• transparency

• combining energy supply, energy efficiency, demand response, data and finance

• real customer focus.

We need an organization as innovative and as bold as Enron to disrupt the energy markets and to take market share from the Big 6  – but definitely one without the dodgy accounting!