Ongoing threat to businesses

npower's latest annual energy report of businesses sees energy risk highlighted as their primary business threat. So,how do those in industry protect themselves against the anticipated risks posed by energy supply and costs? Wayne Mitchell, interim industrial and commercial markets director at npower, looks at what the index unearthed and how selfgeneration and demand management technologies can play a central role in energy risk management strategies

The annual npower Business Energy Index (nBEI) canvasses the opinions of businesses on energy-related issues.

With industry destined to play a big part in helping to achieve the Government's national target of an 80% reduction in carbon emissions by 2050, approaches to energy procurement and management are of growing importance.

The number one risk highlighted by respondents from major energy users (MEUs) was 'energy risk' and, in particular, the risks associated with supply and costs. Energy outweighed all other more traditional 'business' risks including legislation, security and health & safety. With such importance being attached to energy, it is clear it needs to be taken seriously at every level of an organisation.

Security of supply and the cost of energy are also set to remain at the forefront of business concerns for the foreseeable future. Businesses predicted that supply and cost risk would still be the major energy-related concern in five years time - continuing to rank higher than areas such as energy sources, legislative compliance and associated CO2 emissions.

Energy risk is growing in importance, with 44% of MEUs saying it has gained a higher profile within their organisation over the past three years. The increased awareness of energy risk has prompted changes in how organisations are managing energy. Improved monitoring and reporting ws cited by 81%, and 85% said it had led to improved energy efficiency results. To support this move, 63% of MEUs questioned said they now employed a person specifically responsible for energy purchasing and, of these, 14% are board members.With significant operational risks concerning costs and supply, we should expect to see this number increase as time goes by.

However, one in six MEUs admits to having no strategy to manage energy risk at all. It appears that for some UK businesses, energy concerns have yet to be turned into a strategically-driven response. We would encourage organisations to implement an energy risk management strategy as soon as possible to ensure they have maximum protection.

Self-generation technology Businesses can offset some of the risks associated with long-term energy supply and cost by implementing self generation technology, for example, solar panels or combined heat and power (CHP) and utilising demand management tools. The nBEI looked at this area for the first time this year as we wanted to understand how businesses were using the technology available as part of their energy management plans.

For those who said they did not have self generation technologies in place, the respondents looked to the Government to fund them, with 61% saying help should be provided by way of Government grants.

Their least preferred option was a bank loan.

With 39% of MEUs and 61% of SMEs admitting to having no current self generation capability, it is clear that such moves to protect the future position of the organisation are not yet common place. It will be interesting to see how this figure changes over the coming years, especially as security and cost of energy supply are set to remain at the top of the tree.

With a degree of reticence, it seems that for some organisations, taking the step to ensure their own future security of supply via self generation is proving a difficult one to take.

MEUs keen to protect themselves from the energy risks outlined in this year's nBEI, will need to seriously consider investigating the options for self generation technologies and demand management tools - to shield themselves from the energy challenges of the future.