When price rises show no signs of abating, it’s vital to understand what’s creating the increase across each element of your invoice and to find techniques to cushion the impact. Doing so will ensure you can keep your competitive edge – and provide your business with an important dose of certainty in an increasingly uncertain world.

Energy costs vs. non-energy costs

The total cost of your energy supply is influenced by a range of factors, and accounting for each factor is the key to a truly effective energy strategy. 

On the one hand, wholesale prices are at their highest since before the oil collapse 10 years ago, affected by a range of fundamental drivers including high demand in emerging markets and low gas storage. On the other, non-energy costs (which typically represent at least 50% of the overall bill) are expected to increase electricity charges by around 9%, affected by changes to network charges as well as policy costs. April 2019 will see the Climate Change Levy (CCL) rise 41%, as charges associated with the CRC Energy Efficiency scheme are absorbed into CCL instead. 

Such significant change is pushing energy onto the board-room agenda for many manufacturers; as businesses find themselves necessarily reviewing not only their daily processes but also their future investments and ongoing culture. There are many benefits associated with an energy strategy that is aligned to broader business goals.

Timing and flexibility

Network charges vary depending upon time of consumption, with peak periods attracting a higher premium than periods where demand is lower. While the difference is less marked than it used to be, savings remain available for businesses able to shift operation times for their most energy-hungry assets. 

Similarly, Triad season is just around the corner (November – February), representing an important cost-saving opportunity for businesses to lower transmission charges, by turning down consumption during peak periods. Introduction of Capacity Market charges has made consumption management during these times even more important, as this is charged on a similar basis. 

Going a step further, it’s worthwhile reviewing the timing of maintenance schedules and outages. This year’s surge in wholesale costs, coupled with heightened network costs during winter, mean consumption during the colder months will incur far more operational cost than running during the summer period.  So, it might be time to consider shifting traditional summer outages to the winter months.

Consumption and efficiency

While reducing consumption is an obvious way to make energy savings, identifying and implementing techniques that deliver ongoing improvements can prove a challenge. The second phase of the Energy Savings Opportunity Scheme (ESOS) represents a genuine opportunity. ESOS is mandatory for all businesses with more than 250 employees and a turnover of more than €50m or annual balance sheet of more than €43m. While compliance can feel like a challenge, ESOS provides a valuable chance to yield practical recommendations. Appointing the right Lead Assessor is important – specialists in your sector are likely to produce a more actionable audit report.

Help with the details

When we spoke to our customers about their obstacles to better energy management, they frequently mentioned the availability of resources and expertise. For larger projects this often came down to the availability of CAPEX, while for other projects the missing resource was time.

In an effort to reduce these obstacles, we created Energy as a Service. This takes account of individual business needs, ambitions and assets to optimise a business’ entire energy usage. This includes providing upfront investments in energy projects so that the payments can come out of OPEX spend for periods of up to 20 years. It also includes taking a more collaborative approach to energy management; helping businesses to interpret market changes, review risk strategies, understand policy and regulatory developments, minimise the impact of third-party costs, and ultimately find practical ways to protect against rising energy costs. 

This type of collaborative approach is one we hope to see more suppliers taking as we move towards a better energy future. It’s our own way of creating more certainty for businesses during uncertain times – and helping to keep those winter chills at bay.