The only way is up (for energy costs).

October 18, 2010

I attended the very informative Autumn Roadshow of the Major Energy Users Council last week.  As its name suggests the Council is there to represent and lobby on behalf of those organisations that consume substantial amounts of energy.

Speakers included Jo Butlin, VP – Retail from Smartest Energy; Mike Hogg, General Manager of Shell Gas Direct, Magali Hodgson, Optimisation Desk Manager at npower alongside representatives from the MEUC.

There were several key points that came out of the various sessions but the overriding message was that energy costs for business will continue to rise significantly over the next 5 -10 years.

It was summed up most clearly by Jo Butlin who talked about energy bills being made up of direct, indirect and administration costs.  Direct costs relate solely to the wholesale price of energy which is clearly on an upward trajectory with no signs of levelling off at this time.  Administration costs are as the name implies and are also on the increase.  The interesting part was in respect of the indirect costs.  These include areas such as distribution costs (projected to increase by 40% over the next 5 years), transmission costs (up 18% over the same period) and then the costs of the plethora of ‘initiatives’ designed to raise revenue to fund projects aimed at meeting our environmental commitments.  Initiatives such as Climate Change Levy, Carbon Capture Storage, CRC are all pushing energy costs skywards.  The Government has pledged a £200bn investment over the next 10-15 years and with spending cutbacks being announced on an almost daily basis it doesn’t take a genius to work out where the majority of that £200bn willprobably come from – energy consumers.

In addition to price rises it is clear from the feedback of attendees that energy management and compliance is becoming a core task within organisations.  Reducing consumption is a clear priority and businesses are starting to use MI to proactively manage their energy requirements.  Smart meters and AMR (Automatic Meter Reading) systems are being used by customers to save up to 20% on their bills by using the data to review what they do.

Another proactive means of reducing costs is through feed-in-tariffs now available.  Certain renewable energy schemes, PV solar panels for example, enable you to generate your own energy any of which consumed on site avoids distribution and transmission costs.  In addition surplus energy can be ‘sold back’ to the grid to generate revenue.

The final presentation by Don McGarrigle, Energy Pricing Advisor for the MEUC advised that by 2020 there was the likelihood of a 43% increase on non-domestic retail energy prices due to the low carbon impact.  It is also worth noting that the Climate Change Levy (CCL) is being reviewed in Autumn 2010.

Essentially the message almost uniformly from all the speakers was that energy costs will rise significantly over the coming few years.  From my perspective it clearly highlights the need for expert assistance in this increasingly complex area of spend.  Not only to ensure you are achieving ‘best value’ from the tariff you are on but also to review all options available to you to assist in reducing your consumption.

If any of these areas are of concern or you wish to have a no obligation discussion on any of the points raised then please do get in touch.

Posted by Lorraine | Filed Under Uncategorized | Comments Off 

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