News Archive - Monthly Archives: July 2020

UK’s electricity system could go carbon-negative from 2033, say National Grid

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A combination of carbon capture technology and continued reliance on renewable forms of energy generation could result in the UK’s electricity grid becoming carbon neutral by 2033, according to the latest Future Energy Scenarios report from National Grid.

With investment in renewable energy generation growing, National Grid expects at least 3GW of new wind power capacity and 1.4GW of solar generation every year from now until 2050 as a result of the upsurge in projects.

It is also anticipated that the Electrical Vehicle (EV) market, set for a boom year in 2020 until Covid-19 put the brakes on, will play a big role moving forward with the potential for as many as 30 million EVs effectively acting as smart-charging “batteries” to help balance the electricity grid. For this to be realised, there needs to be a serious upgrade in vehicle to grid networks

Meanwhile, homeowners will play their part by consuming up to a third less electricity after switching from gas boiler central heating systems to heat pumps fitted with thermal batteries.

Mark Herring, head of strategy at National Grid ESO, said: “Across all scenarios, we see growth in renewable energy generation, including significant expansion in installed offshore wind capacity. There is widespread uptake in domestic electric vehicles, and growth and investment in hydrogen and carbon capture technologies too.

“Although these are not firm predictions, we’ve talked to over 600 industry experts to build this insight and it’s clear while net-zero is achievable, there are significant changes ahead,” he added.

Sourcing green energy

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Green business energy is proving more popular than ever as businesses increasingly set out a procurement energy strategy aligned to sustainability as well as cost.

While not all businesses are able to generate their own energy – a sustainable way of putting less pressure on the national grid – green energy contracts are widely available.

But what exactly is a green energy contract?

Basically, the gas and electricity that powers your premises of work comes from a supplier who has sourced it through a renewable energy generator such as wind or solar farms, hydroelectric power stations or biomass plants.

The amount of energy from renewable sources differs from supplier to supplier; however, it is a legal requirement for them to publish details of their fuel mix.

The more businesses (and households) that adopt this policy, the more renewable energy is fed back into the grid, and the country’s dependence on fossil fuels reduces, helping to alleviate the onset of climate change as a result.

If you’d like some advice on the range of green energy contracts that are currently being offered on the market, please get in touch with one of our energy consultants on 01225-867722

Energy procurement strategy – your questions answered

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Energy framework

A good energy procurement strategy optimally matches your business needs with the many choices that are available when it comes to buying energy.

Energy is often one of the biggest overheads for a business, so it is crucial to adopt the right approach in how you go about purchasing your gas and electricity.

Here are a few FAQs around the subject that may help in your decision-making process.

What is the best Energy Procurement Strategy for 2020?

The best strategy will be determined by the needs of your unique business.

Energy prices fell dramatically during the early stages of lockdown to reflect the lack of demand, but following the easing of restrictions and the resulting step up in business activity, they are now climbing out of what appears to be a market trough,

Even so, energy suppliers are being selective about who they deal with and are avoiding perceived high-risk industries, such as hospitality, catering and travel, that have all come under intense pressure since lockdown started back in mid-March.

Businesses within those sectors on a fixed energy deal in a market where prices are rising will feel they are in a relatively good position from an energy procurement perspective as they’ll be protected against the prospect of being hit by increased risk premiums.

However, these are unchartered times, and without a crystal ball, managing risk has never been more important. Hence, having the correct strategy in place and being able to respond quickly to opportunities as they arise is crucial.

What is the best Energy Procurement Strategy to manage risk?

Simply put, it’s the strategy that’s most suited to the business. But first, you need to understand the role of risk in your business.

Some businesses do not have the option of adopting higher risk for potentially higher financial returns as budget stability might be more important to them.

Your business may have long-term fixed customer sales contracts which do not allow for passing on increases in energy costs to your customers.

In order to protect profit margins, having fixed price energy contracts is preferential to having the opportunity to take advantage of falls in the energy markets. This is because the risks of energy price increases would ultimately be more damaging to the financial performance of the business.

For energy-intensive businesses, in order to compete on price, it’s important that you’re buying energy at the current market rate, so a flexible contract that tracks the market could be advantageous.

As a general comment, a fixed price contract which is renewed when the energy markets are low has historically added value, particularly as they often avoid increases in non-commodity costs.

What is the difference between a fixed and flexible energy procurement strategy?

Most people view flexible contracts as riskier than fixed ones but, in reality, they can be used as a hedging tool to smooth out the volatility of market movements.

A flex contract enables you to fix any amount of energy for any period of time. For example, you could fix energy prices for half your anticipated consumption for the duration of the contract, and let market prices dictate the cost of the other half once you have interpreted market dynamics through the use of helpful energy management analytical tools such as EM-Powered. The price you then pay is the average between the two actions.

Whether a fixed, midi-flex or full flexible strategy is adopted, it is important to have a dynamic approach. By this, we mean fixing contracts when market movements present opportunities and not when you come to the end of a fixed period contract in the blind hope that the markets will be favourable.

How can Energy Management guide you in your Energy Procurement Strategy?

We can assist you by establishing and implementing an energy procurement strategy that best serves the needs of your business.

Once the right products have been selected and delivered, the performance of energy suppliers will be audited to ensure optimum budget management moving forward.

Ongoing invoice validation and budget management are also key in managing your energy procurement strategy.

Sign up to our Market Intelligence report

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Analysing the factors behind why business energy prices have risen or fallen over a month-long period, our Market Intelligence report helps to give customers a handy overview of market conditions as they plan their energy strategy.

Before you make any energy procurement decisions it is important to understand what the energy landscape could look like in the future in order to get the best deal at the right price.

So many factors influence the price a business has to pay for their electricity and gas and the Market Intelligence report breaks these down in an easy-to-read format accompanied by historical and present-day price graphs.

To sign up, simply fill in the short form at the bottom of the page.

Renewable investment not keeping pace with green energy progress

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According to a recent report from Imperial’s Centre for Climate Finance & Investment in collaboration with the International Energy Agency, renewable power is outperforming fossil fuels in US and European markets.

Over the last decade, it was found that renewables have offered a significantly higher return on investment than fossil fuels over the same period. Yet, the report reveals that levels of investment in clean energy are still well below that needed to seriously combat climate change.

These findings and the obstacles to putting the world’s energy system on a more sustainable path were recently discussed in the latest webinar of the series entitled Imperial Future Matters. It involved a virtual audience of industry leaders, students, alumni and journalists

Dr Charles Donovan, Executive Director of the Centre for Climate Finance & Investment at the Business School said:  “We are in the midst of a clean-tech miracle—in particular with regards to solar power. We are 10 to 15 years ahead of schedule due to a revolutionary set of changes. If there’s any problem, it’s that solar power is too cheap today. There’s real momentum gathering behind renewable power, based purely on their economic advantage. Our results show that renewable power is outperforming financially, but has still not attracted sizable support from listed equity investors.”

Following the presentation, industry figures offered their thoughts on the key issues. Zoe Knight, Managing Director, Global Head, HSBC Centre of Sustainable Finance at HSBC Holdings PLC said: “In emerging markets, one way to improve things post-COVID is to help liberalise the energy sector in order to bring in either direct investment on a national basis or foreign direct investment from corporates that are operating globally and have made pledges to deliver 100% of their power needs from renewables. This will help to attract the capital that the country needs and in turn decarbonise and create different jobs as we exit COVID.”