"Energy - Security of Supply, Security of Pricing - What can we do today?" asks Darren Walsh, energy partner at DLA Piper.
These days most companies have energy security of supply and pricing at the top of their business agendas. The cost of energy will inevitably rise - linked to further subsidies and tariffs aimed at promoting green or low carbon energy - and high energy users will be faced with ever-increasing reporting and compliance obligations associated with carbon monitoring and carbon credits. In a recent client poll, virtually all confirmed that energy was now a regular item at performance management meetings and was considered as a significant risk when analysing what external factors could adversely affect business going forward.
A number of these businesses are considering their energy consumption and seeking to establish an energy policy to address the external forces of the wholesale energy market. Whilst an obvious point, many will first seek to establish what mitigants they can introduce to manage price increases in the market place - whether that is to look at forward purchasing of energy or longer-term price fixes with their energy suppliers. This obviously plays a part in an energy management strategy. Other, more direct factors, can (and should) include looking at the demand side of the business.
Energy management through behavioural change can play a significant part in managing consumption, so looking at the manner in which building management systems are running - heating, air conditioning, lighting, etc. - are essential in developing an energy policy that seeks to drive down the cost of energy supply. By way of example, we have a client who offers remote monitoring for heating large manufacturing spaces. Their technology has, in many cases, reduced energy costs by up to 1/3 from introduction. Other clients offer more complex heat, energy and refrigeration technologies that can provide embedded generation capacity at sites which serve to provide a significant contribution to power, heat and refrigeration requirements.
Alternatively, some of our clients are taking organic waste that would otherwise be sent to landfill (at significant cost per tonne) and converting this (via anaerobic digestion) to bio gas for use in combined heat and power units. Others with land adjacent to their sites to develop are installing on-shore wind turbines to feed their own sites and to sell low carbon electricity to the grid; others are developing ground-mounted solar farms and installing biomass boilers to replace their ageing gas-fired boiler units. Many of these low-carbon developments benefit from Government subsidies which assist with the initial capital expenditure', as well as providing long-term additional revenue based upon the amount of eligible electricity or heat produced.
The role of an energy manager within any organisation has become ever more important and we predict that the importance of this role will continue to increase. If your business does not have an energy management policy and a person identified with responsibility for driving this forward, there is a fair chance that you will be missing out on a number of opportunities to reduce overall energy bills, as well as missing the chance to develop embedded low carbon energy generation for your business.
It is worth considering the role of energy service companies (or ESCOs) in your energy strategy. ESCOs aim to provide energy management solutions for customers, including advice on energy demand management and providing energy efficient generation technologies. We have supported ESCOs in their financing and installation of combined heat and power plants (CHPs) which offer electrical and heat energy. Many ESCOs will offer fully funded options to allow end-users the benefit of this technology, without the need to finance the equipment themselves. This type of arrangement can provide end-users with long-term, low cost energy which is, from our experience, always sold at significantly less than the wholesale price of electricity. Typically, end-users are seeing a 20% reduction in their energy bills from the use of embedded energy from CHP technology.
