Combating Rising Energy Prices

With the governments energy bill published last week pushing their support of renewable energy further, it looks certain that energy bills for commercial and home use will continue to rise significantly through increases in unit costs and carbon taxes such as the climate change levy.

So what are the options for mitigating this inevitable rise?

Surprisingly few businesses have an energy strategy in place, despite gas and electricity often being a significant overhead.

I would suggest a three part programme of Energy Procurement, Energy Management and Efficiency and Renewable Energy Solutions should be put in place, wherever possible.

The first step in an energy policy is to make sure you are paying as low a price as possible per unit.

Like any business, energy suppliers are looking to make profit, and there’s nothing wrong with that as long as they’re not making too much profit out of you!

Purchasing energy for businesses is more complex than buying it for home use as fixed term-fixed price supply contracts are individually priced up on a case by case basis. Prices are calculated based on a number of factors as the usage profile, location, payment terms, length of the contract, what the wholesales markets are doing that day etc.

Whether you use a specialist energy buying advisor or not it is essential to know the terms and conditions of the supply contract so key dates such as contract termination are noted. Otherwise quite painful increases can sneak up on you.

The second part of an energy policy is to look to use less of it. Just like any other resource a business uses it should be managed. I’ve been to many places where the heating is on full blast and windows left wide open.

Energy Management is the systematic operational management and use of technology to improve (reduce) an organisations energy usage. Increasingly energy management is becoming a compliance issue and important for an organisation’s reputation.

I suggest the start point should be getting an audit that looks at:

• Types of energy used
• How much of each type is used
• How it is used
• What it is used for
• When it is used
• How it is managed
• Identify potential for cost savings

Like anything else once you start looking at a subject in a bit of detail some obvious action points become apparent. Many energy usage savings can be achieved for little or no cost. Examples include controlling temperatures more effectively, lighting management or switching off of equipment such as computers when not in use. There is plenty of low cost technology out there to assist your staff with this cultural change!

Once no or low cost measures have been exhausted it will be time to investigate medium or higher cost energy efficiency projects. What is your return on investment strategy in your business?  Why not apply the same criteria to energy?

I was asked the other day by a Finance Director if I could save them money on their £130,000 a year heating oil bill. Well it’s not easy to reduce the unit costs, shopping around when the tank needs filling up helps but oil is a fairly expensive way of producing heat relative to other fuels.

The answer is to investigate renewable options such as biomass boilers, solar panels, micro combined heat and power or small wind turbines if at all possible. Feed in tariffs, other subsidies or soft loans for carbon reduction initiatives are all part of the evaluation process.

As with any other investment, get it looked at from an independent viewpoint to ensure a wide range of options and suppliers are evaluated, so you have the right unbiased information to hand to make an informed decision.

Energy costs are going to keep on rising, so the business case for treating this cost area with the due care and attention it deserves is only going to keep on growing. There are plenty of options available to keep those bills as low as possible. What’s your strategy?