Managing the current energy crisis is essential for surviving, but understanding the lasting impacts is key for the longer term. Alvarez & Marsal with its multi-functional team and broad expertise supports our customers understanding current situation and deliver customized mitigation approach.

There are two potential scenarios in the near future to the development of the energy crisis:

Understand the lasting impact of the current energy crisis 

The ongoing global energy crisis since 2021 has been proven quite economically impacting due to its sheer price increase and the speed at which this has happened.

European natural gas price increased dramatically, reaching a peak of 34 USD per million Btu in August 2021. Electricity prices have risen sharply over the past year, and reached the peak over 500 €/MWh2. The uncertainty about a potential gas shortage comes on top of the pure price increase and affects individuals, companies and societies as a whole.
Currently the unexpected warm winter, coupled with the efforts put in by European countries to source natural gas from regions other than Russia, have helped Europe avoid an energy collapse. Europe has managed to solve the dependency on Russian natural gas and is very unlikely to return to it.

However the crisis is not over. Lack of energy security has shown the European countries their vulnerability and is likely to result in an accelerated push for renewables, investments in grid and storage infrastructure to improve energy security and autonomy on a European level.
As a result, with the still ongoing uncertainties companies as well as individuals should base their decision making and capital allocation on the assumption that the prices will remain high and unpredictable. At the same time it is also key not being caught with high price contract in low price environment, developing a better understanding of energy markets dynamics, creating more agility within the organization to act faster in case of any unexpected change in the market environment

Higher energy prices affect all industry sectors, some more strongly and immediately, requiring different responses. 
The economic outlook is further negatively influenced by additional aspects.

• Eyewatering energy prices
• Insecurity over energy supplies
• Expected weaker demand
• Disrupted supply chains
• Pressure to raise wages due to increased inflation
• Higher raw material and commodity prices

Dealing with the energy crisis requires a holistic approach. A&M can help in these endeavours as we bring Finance, Operations, Commercial and Product experts to the table. Some potential mitigating actions across a company could be (non-exhaustive):

Before initiating an overall improvement program first focus should be on reducing and optimizing energy consumption. A&M developed a three step approach to enable organizations to manage their energy needs/goals as well as support achieving sustainability targets.

1. Energy Conservation Due Diligence: Using historical inputs, we focus on cost reduction, risk mitigation and identifying the path to energy savings