As has been well documented, many businesses are battling to keep afloat and are taking measures to cut costs wherever they can, energy being one of them.
There are plenty of energy efficiency initiatives that can be taken whilst a well-planned energy procurement strategy will also mitigate against one of the biggest overheads in business – heating, lighting, refrigeration, and ventilation.
But given the costs of gas and electricity, it also pays not to be negligent when it comes to checking your business energy bills, either.
Our research has found that companies can be overcharged by as much as three to five percent by energy suppliers.
Energy bills can be quite complex, especially if you are a multi-site organisation with multiple contracts starting at different dates and on different tariffs.
Not only will the tariffs be different, but the way also that information is displayed on the invoice can vary, which can easily lead to mistakes from the suppliers’ end going undetected.
Add in the government discounts that are available to some, but not others, and it is not unusual for the energy supplier to get their numbers wrong.
Extra time and attention should be out into checking the price you are being charged is correct, otherwise you could be paying out for energy that you haven’t used and undoing any hard work that has gone into becoming more energy efficient.
Invoice validation, therefore, is a vital part of any energy management solution and can save thousands of pounds.
The software used in invoice validation can detect such errors but it is also only as good as the person analysing the data because it takes a trained and experienced energy management consultant to spot the more technical anomalies.
As experienced practitioners in this field, we will ensure all discrepancies are flagged up and dealt with.
Eligible energy-intensive industries will receive a discount on what they pay for their gas and electricity.
The U.K. government’s decision to slash its level of energy bill support for businesses has been labelled “out-of-touch” by the Chair of the Federation of Small Businesses, Martin McTague.
However, other industry leaders and business owners have been more favourable in their reaction – but with caveats.
“The decision to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses,” said McTague.
“For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.”
What does the support now look like?
From April onwards, help will drop from its current level of £18 billion to £5.5 billion, to limit taxpayers’ exposure to volatile energy markets, the government said.
Businesses, charities and other non-domestic energy users will receive a discount on high energy bills until 31st March 2024.
For eligible non-domestic customers who have a contract with an energy supplier, the new scheme will mean that they will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
The discount will be applied from 1st April to 31st March 2024.
The Treasury explained that this will be subject to a wholesale price threshold of £107/MWh for gas and £302/MWh for electricity, meaning that businesses facing energy costs below this level will not receive support.
Eligible energy-intensive industries will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
The government said this discount will only apply to 70% of energy volumes and will be subject to a “maximum discount” of £40/MWh for gas and £89.1/MWh for electricity.
Chancellor Jeremy Hunt said “Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead.”
“All help is very welcome”
Food and Drink Federation Chief Executive Karen Betts told foodmanifacture.co.uk that it was a step in the right direction.
“Manufacturers are under a great deal of pressure as they try to keep their heads above water while absorbing very high and volatile energy costs in order to keep the cost of everyday food and drink as low as possible for shoppers,” she said.
“This support recognises the criticality of the food and drink supply chain and that our businesses use constant levels of energy year-round and it should help to slow record levels of food and drink inflation.”
Meanwhile, Adrian Hanrahan, managing director of Robinson Brothers, a chemicals producer in West Bromwich, said, “all help is very, very welcome.”
But he added: “We’re a small company, our energy is tripling this year which means that being a small company we have one pot of money.”
Greg Pilley, managing director of Stroud Brewery, says their energy bill will triple and feels the government have been too reactive in their handling of the business energy crisis.
“Overall increasing energy prices are affecting the cost of everything – our cleaning caustic chemicals have gone up threefold, our aluminium cans have gone up, malt has gone up by 20%. It’s not just our energy that’s gone up, all our supplies have correspondingly gone up, part of which is the cost of energy to them and so it’s a cumulative thing,” he pointed out.
“Prior to things going bad, our energy was about £33,000 a year – it is now looking like about £100,000 a year without any subsidy or support. With prices being held till March that kept things fairly in line with our former costs.
“They’re extending some support ’til the following March so that’s got to be welcomed but in a way, it’s a bit late because everybody’s already put their prices up and they’re not going to come down in a hurry.
“What we would have liked to have seen would have been an announcement much sooner before people had put their annual prices out. Electricity is not the only rising cost, it’s indicative of everything else that’s going up.”
In the four years it has been fully operational, Energy Management’s bespoke energy management portal, EM-Powered has become an invaluable tool for companies with regard to their energy procurement strategy.
With the business energy markets as high as they currently are forming a sound energy procurement strategy is more challenging than ever but one thing companies can do is ensure they know exactly how much energy they are consuming and when are the peak times.
EM-Powered collects and aggregates live data to allow end-users to monitor and analyse their business energy consumption to a very high degree of accuracy, which in turn is massively beneficial when it comes to budgeting.
Put simply, EM-Powered gives control back to its users at a time when energy markets are extremely bullish in their behaviour.
Focusing on consumption rather than energy procurement at such times is crucial because, as the time-worn phrase goes, the cheapest unit of energy is the one that is never used. Knowing how much energy is being consumed, and when and where, is key to that energy procurement strategy.
Amongst the many add-on benefits listed here, an alarm system has been built into EM-Powered to help customers avoid exceeding their Excess Capacity Allowance and potentially fall foul of punitive penalty charges.
As well as energy reporting, EM-Powered speeds up the reporting process in other areas such as the Carbon Reduction Commitment (CRC), where the savings being made can be monitored regularly rather than waiting for the traditional annual report.
For further information on EM-Powered and how it may help your business, please get in touch with Ian Scattergood is@energymanagementltd.com or call: 01225-867722.
Our Market Intelligence bulletin for January breaks down the reasons why it is costing us so much to power our homes and businesses.
Gas
The tension between Russia and Ukraine is likely to have significant consequences for the UK and the rest of Europe in terms of gas supply, as severe market volatility and price spikes continued towards the end of January.
UK annual gas demand currently stands at 74 billion cubic metres, with 47% of this demand met domestically, 22% from LNG imports and 31% from European imports (via Norway, Netherlands, and Belgium).
A halt in gas flow from Ukraine would impact nations like Germany which sources over 40% of their gas from Russia. Sweden and Finland source an even higher percentage, while Norway is at its limit in terms of the amount of gas it can export.
This means there would be less surplus supply in mainland Europe, ultimately resulting in reduced exports to the UK, therefore, the difference would have to be made up domestically, or by additional LNG deliveries.
This possible supply crisis is expected to result in a surge in prices, with consumers already expecting a large increase from April when the energy price cap will be lifted by Ofgem.
Electricity
Electricity prices are likely to mirror gas prices, with gas-fired power generation still vital to the energy mix, especially on days when renewable energy production is not sufficient.
Both domestic and commercial consumers should prepare for prices to soar even further in the coming months, as the geopolitical situation involving Russia, the lifting of the UK energy price cap and economic uncertainty caused by the Omicron variant has all combined to create an extremely bullish outlook. Meanwhile, expectations of a prolonged winter is another factor that has added to the current situation.
Oil
Oil prices have already increased by 10% in 2022, rising to around $85/b, with analysts predicting that prices could climb above the $100/b level for the first time in eight years.
However, there is one country that could have a major say on whether prices reach triple digits… Iran.
Iran has reopened negotiations in regard to its nuclear power programme which was blocked by sanctions imposed by the West. Talks are currently taking place in Vienna between Iranian officials and China, Russia, the EU, the UK, and other major economic nations, with direct negotiation with the US rumoured to be in the pipeline.
The sanctions are in place to prevent Iran from developing nuclear weapons – in order to do this Uranium would need to be enriched to 90% to achieve ‘weapons-grade’ levels. Instead, Iran is requesting to increase Uranium levels to above 60%, if approved, the country may be able to increase Crude oil exports to help balance the global oil market.
Market Info
Economic confidence is at its lowest point since the winter lockdown imposed by the Government one year ago.
This pessimism has been further fuelled by Ofgem’s decision to lift the energy price cap in April 2022 which is expected to result in a sharp rise in wholesale prices from the 1st of April.
The likely consequence of this is that the annual energy bill for each household in the UK will rise by hundreds of pounds, at a time when inflation is already pushing up the costs of things like food, broadband and TV subscriptions, while Council Tax is also open to a 2% increase.
The current price cap is set at £1,277, but this could rise to almost £2,000 in April.
This extra financial strain on the general public and businesses will doubt be felt in almost every sector and organisations of all types are advised to budget accordingly.
IAN SCATTERGOOD, BUSINESS DEVELOPMENT MANAGER – HEALTHCARE FOR THE ZENERGI GROUP, GIVES AN INSIGHT INTO THE ENERGY CRISIS AND THE IMPACT ON THE NHS
Energy procurement within the NHS is complex, with many different risk strategies. The majority of NHS sites in England will be covered by the requirements of the Public Contracts Regulations, meaning they have to conduct an open tender or become part of a procurement framework – the latter being the more likely.
The relatively low wholesale cost over the last 4-5 years (with the occasional blip) hit multi-year lows in the spring of 2020 and from the autumn of 2020 wholesale costs began to rise.
From the start of April 2021 to today the wholesale cost of gas has increased by 241% and power 184% (year ahead prices) so regardless of the procurement strategy employed by each NHS Trust in England the impact will be felt, either now as they forward hedge or as they look to renew a fixed-term contract.
The majority of the invoiced cost of gas is the gas itself, whilst power has many other non-energy charges applied. At the beginning of 2021, the non-energy charges equated to about 60% of the overall cost (environmental levies, transmission, distribution charges etc.) but that balance has now swung the other way.
Carbon Costs – whether EU ETS or since last year UK ETS has also seen the carbon cost rocket, and this cost will be passed on to the end-user.
Weather can play a big part in the energy requirements and the long cold winter of 2020/21 will have seen an increase in comfort heating requirements. A long hot summer switches that demand to comfort cooling.
With an estimated spend of over £630 million for the 2020/21 financial year, it’s easy to see how much of an impact even a small change to the wholesale cost will have.
However, the increased invoice price of power now makes the cost-benefit analysis of installing renewable generation much more attractive. Power Purchase Agreements are becoming more commonplace across sites within NHS England, and it is likely we will see this accelerating over the next few years.
NHS has committed to being Net-Zero by 2040 and has spent over £50 million installing LED lighting, which when expanded over the entire NHS would save over £3 billion over the next 30 years.”
Taking hospitals in England into consideration alone, that figure is now calculated to have more than doubled when today’s sky-high energy prices are applied to the last set of figures published by NHS Digital.
The NHS Estates Return Information Collection (ERIC) 2020/21 reveals the true extent of hospital operating costs, with energy accounting for a large percentage of the overall spend.
In the period from 1 April 2020 to 31 March 2021, over £630 million was spent on gas and electricity.
Since the end of March, wholesale gas prices have more than doubled (240%) and electricity has gone up by an equally staggering 184%.
Those soaring energy costs will only add to the pressure the NHS is under in the current COVID-19 pandemic but, unfortunately, there is still no light at the end of the tunnel.
Assuming energy consumption has remained consistent since April, based on today’s prices overall energy costs will have rocketed to £1.2 billion when the next ERIC report is published.
Hospitals with the biggest bills are in the East and West of England
Out of the 1,200+ hospitals that make up the NHS Estate, three hospitals had an annual electricity spend of over £5 million.
Addenbrooke Hospital, part of the Cambridge University Hospitals NHS Foundation Trust, was top with £6.8 million spent on lighting buildings and powering equipment, followed by the Queen Elizabeth University Hospital, Birmingham (£5.9 million) and Southmead in North Bristol (£5.1 million).
St James’ Hospital in Leeds and St George’s Hospital in South London spent most on gas (£3.5 million) with the Royal Victoria in Newcastle-upon-Tyne the other hospital to go over the £3 million mark.
As many hospitals are based on different sites, there may be multiple energy supplier contracts involved with different start and end dates and keeping track of energy costs can be problematic as a result.
Also, the NHS estate is a real mish-mash of state-of-the-art modern facilities and Victorian hospitals that are no longer fit for purpose, and the energy efficiency of some buildings will vary drastically to others.
Energy Management’s portal, EM-Powered, helps to tackle such issues and give a proper overview of how much energy is being consumed and where, to a high degree of accuracy.
If you would like to discuss the full range of benefits of EM-Powered or would like to talk to one of our consultants about energy procurement or the other uk energy management services we offer, please get in touch on 01225-867722.
Recently there have been calls for the government to introduce measures to alleviate the problems faced by industry in the face of the current energy crisis.
Hit by four-fold increases in the cost of electricity and natural gas over the course of the past year, it goes without saying these are difficult times for businesses so any help is welcome.
Capping business energy bills, the temporary removal of VAT and the short-term suspension of non-commodity costs (in particular green taxes) have all been mentioned as possible options.
Another option is to open up eligibility for the EII Compensation Scheme, which awards exemptions to eligible Energy Intensive Businesses for up to 85% of the costs in their electricity bills due to the Contracts for Difference, Renewables Obligation and small-scale Feed-in Tariffs.
At present, a business must pass a 20 per cent electricity intensity test to be considered for the scheme. Eligible sectors are defined by a four-digit NACE (Nomenclature des Activites Economiques dans la communaute Europeenne) Code.
As things stand, however, the Department for Business, Energy and Industrial Strategy (BEIS) have rejected proposals to reduce this threshold and ‘capture’ more companies, which makes a mockery of wild claims by some unscrupulous energy brokers that your company could be set to save anything up to £200,000.
The reality is that very few EII companies qualify for the scheme – based on the latest figures published by BEIS – so it is prudent not to be drawn in by the headline figures, and risk giving your energy data away without due diligence says Energy Management National Account Development Manager Ian Scattergood.
“Don’t be scammed into providing contract or energy supply information without sense checking the details with us first,” he advised
“From the applications we have processed so far, it would appear that those businesses that are run profitably and efficiently are less likely to be successful.”
Cold calls could land you in hot water
You may also be approached about other schemes introduced by the government to encourage the decarbonisation of the economy.
One is the Industrial Energy Transformation Fund (IETF) which is now in Phase 2 and provides around £220 million in funding between Autumn 2021 and 2025. It is designed to support the development and deployment of technologies that enable businesses with high energy use to transition to a low carbon future.
Meanwhile, certain companies operating mineralogical and metallurgical processes (MinMet) will be exempt from the Climate Change Levy (CCL). This measure was introduced in April 2014 to ensure a competitive playing field exists across the European Union for manufacturers of glass and concrete, for example.
But it is important to note that this scheme is run through HMRC, who must be notified of your participation and require annual assessments. Any misclaims are treated as fraud and it would be you, the business, not the consultant who signed you up to the scheme claiming eligibility, that would have to pay all money back plus interest and run the risk of a wider HMRC audit.
“We have heard of some cold calls of this nature where businesses have been signed up to schemes they aren’t eligible for. It is the responsibility of the business to ensure they are happy the claim is appropriate,” added Mr Scattergood.
Energy Management provides you with independent, unbiased advice on all aspects of energy procurement and energy cost control including any exemption claims you may be eligible for.
For further information please email Ian Scattergood (is@energymanagementled.com) or call on 01225 867722’
With industry experts warning that the recent surge in energy prices might be a sign of things to come, it is more important than ever for businesses to manage their energy costs more effectively.
Proactive energy procurement and the introduction of energy efficiency measures are two ways of tackling the problem of rising energy costs but, first, companies need to fully understand their energy consumption behaviour.
A reliable way of doing this is through the use of an energy management portal, such as our own bespoke software, EM-Powered.
With its ability to collect and aggregate live energy data, EM-Powered enables users to quickly put an estimated cost against energy consumption, making it an invaluable asset at times when the market is shifting so quickly.
Also, EM-Powered enables facilities managers and business owners a better understanding of which times and which areas of the operational side of their business use the most energy, enabling them to identify potential savings areas.
Reporting these findings to a wider audience could not be easier, either, as PDF documents with all the necessary information can be downloaded in PDF format and tailored to the user’s needs.
Given a five-star rating by one of our long-established clients, Restore, EM-Powered is available to all Energy Management customers.
With colder weather now arriving it’s easy to think that the energy crisis will get worse before it gets any better.
The demand for more heating in homes and offices will only put supply under more pressure and continue to push prices in an upward trajectory.
Gas prices in the UK have more than quadrupled over the last year to highs of 180 pence per therm, from around 40p/therm this time last year. In the last month alone, prices have climbed by 70 per cent.
But how did we get into this position in the first place?
Low storage volumes, disappointing Russian flows, North Sea glitches and limited LNG deliveries in the face of still-rising Asian prices alongside tightening coal markets, have all been contributory factors.
Rough decision
The decision to permanently close the U.K’s largest offshore storage facility, Rough, in the summer of 2017 deprived the country of 70 per cent of its total gas storage capacity and increased the dependence on imported gas by pipeline from Norway and Russia, or by LNG from the US and Qatar.
The slow boat to China
With China’s economy bouncing back as the country emerges from the after-effects of COVID-19, there has been record demand for gas to keep machinery running and the lights on.
To satisfy this, China’s imports of gas via super-chilled tankers were expected to surge by almost a fifth, meaning fewer shipments travelling to Europe from countries such as Qatar.
Russian gas roulette
Russia’s state-backed gas company, Gazprom, has refused to increase its exports to Europe, to help meet the high demand – despite record-high prices across the continent – in what is seen as a strategic move by Vladimir Putin.
Adding fuel to the fire
A large fire at the interconnector site, near Ashford in Kent, has severely impacted on electricity imports from the sub-sea cable that runs between France and Britain.
The IFA1 interconnector has been used to import electricity from France, to support the UK grid, since 1986. It was only operating at half capacity at the time of the fire because of planned maintenance work and is expected to continue to run at reduced capacity until the end of March due to this latest incident.
The energy mix
A more diversified energy mix mitigates against supply issues because there are more options to get around the problem. Countries that have prioritised domestic low-carbon energy are less prone to risk and able to ride out the storm easier.
But low wind output and a lack of investment in other forms of renewable energy, as some see it, means there isn’t enough green energy being produced in the U.K to meet demand without firing up environmentally damaging, fossil fuel-burning power stations or importing energy from abroad.
… but it’s not all bad news.
On 1 October, commercial electricity will start to flow on the 450-mile North Sea Link, the world’s longest sub-sea power cable, connecting British and Nordic power markets for the first time.
Supply will initially be limited to about half of its 1,400-megawatt capacity, with plans to gradually increase to full output by the start of next year.
With fears over an energy crisis making headline news and more people returning to the office, there has never been a more pressing time for businesses to implement an energy efficiency strategy.
Today energy is climbing up the corporate agenda, triggered by rising costs as well as sweeping environmental and social trends, including climate change and ambitious net-zero carbon targets
Business owners have no control over the price of gas or electricity, as these are dictated by market forces and geopolitical issues, but what they can do is manage consumption more effectively. As the old saying goes, ‘the cheapest unit of electricity is the one you never use’.
To be able to reduce consumption, first businesses need to understand when and where they are using energy. Energy Management, for example, has bespoke software that enables us to assess the energy performance of a business across its asset base.
Once the data has been gathered and analysed, informed decisions can then be made about where savings can be made.
This may result in equipment upgrades or relatively low-scale investment in timer switches for lights or the installation of longer-lasting LED lightbulbs.
Encouraging behavioural change amongst employees is key to the success of an energy efficiency strategy.
Most money-conscious employees wouldn’t leave lights on unnecessarily or not properly shut down their electrical devices but gentle reminders from an appointed, in-house ‘energy champion’ never do any harm.
Alternatively, you could turn to an external energy agency or energy managers to conduct an energy audit and determine how you can use less power without compromising business throughput, output or thermal comfort and wellbeing of staff.
Here’s a summary of the steps you can take:
Get an energy audit
Air leaks and issues around boilers and insulation will be identified along with any energy-saving opportunities.
Purchase energy-efficient equipment
Check the energy star rating of appliances and, where applicable, replace with more energy efficient models
Reduce peak demand
Try to stagger working hours to spread the load and bring energy consumption down during periods when it is typically at its highest.
Lighting
LED lightbulbs and timer switches that turn off the lights when not in use are simple measures that don’t have to break the budget
Heating
Check to see if the boiler that supplies heating to the building is serviced and well-maintained.
Install thermostats so that rooms are only being heated when they need to be.
Switch off idle devices
A great office energy-saving tip is to have your computer add-ons (printers, monitors, etc.) connected to power strips so that the flip of a single switch can shut down several devices at a time.
Office redesign
A simple redesign of the layout of your office may result in more natural sunlight entering the building and, therefore, reduce the need for artificial light. Greater exposure to natural sunlight is also known to improve the well-being of staff.
Natural protection
Planting trees in strategic places around the outside of the building will provide shade from the sun and act as windbreaks during the winter months and can help reduce demand for air conditioning and heating
Cultural change
Get buy-in from employees so that they personally invest in energy-saving measures.
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