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Facing up to energy costs and shortfalls07 June 2011 ABB's third annual survey into the energy conservation policies of manufacturers up and down the land has revealed once more that most would prefer to tinker around the edges of this issue rather than face it head on. Carried out on behalf of the electrical giant by Benchmark Research, the survey continues to reveal UK manufacturers' preference for changing energy supplier and turning out lights, ahead of far more lucrative ways to save energy.
ABB's energy spokesman, Steve Ruddell might be able regale his customers with countless stories about the fantastic savings that can be achieved in the most mundane of applications by the simple expedient of installing a variable speed drive, but these stories seemingly fall on deaf ears; or, at least, on the ears of those who perhaps don't have the resources or the decision making power to act on his very sound recommendations.
As Mr Ruddell reminds his industrial audience, while any attempt at reducing energy consumption, no matter how small, is commendable, the reality is that the real savings accrue from reducing energy use within the manufacturing processes themselves. Most companies can save thousands of pounds worth of electricity and some can even save hundreds of thousands of pounds by upgrading existing industrial processes, often at comparatively low cost.
Kevin Melville, M&C Energy Group's energy analyst would, I think, agree wholeheartedly with Mr Ruddell that the impact of reducing energy costs lies at the bottom line for energy-intensive manufacturers.
The UK is now heavily reliant on oil and gas imports for its energy supplies, leaving it fully exposed to fluctuations in the increasingly volatile global markets. For decades, Britain benefitted from relatively cheap, fossil-fuelled energy to drive economic growth, Mr Melville reminds us. Our existing power stations continued to provide affordable electricity, while we merrily consumed abundant oil and gas from our own backyard, the UK continental shelf.
Electricity and gas prices stayed low, and everyone was happy. It was too good to last. Our power infrastructure is crumbling, and more than 40% of power plants will close within the next ten years. Oil and gas production from the North Sea has been in steady decline since 1999 and in 2007 the UK returned to its former status as a net oil importer.
And then there's global climate change, forging the belief that developed economies must decarbonise – and fast.
Mr Melville says we must face up to the fact that the age of cheap energy has passed. For policymakers, there exists the challenge of how to make energy affordable, sustainable, and secure. The energy regulator OFGEM estimates that the cost of upgrading and replacing our ageing network in order meet environmental obligations and, in essence, keep the lights on, stands at £200bn. Needless to say, it will be the consumer who pays.
Over the last six years, the raw cost of power has doubled and halved twice, causing havoc with consumers' budgetary forecasting and impacting the bottom line of many businesses. Many have chosen to accept massive fluctuations in energy budgets as a necessary and unpreventable overhead; however this need not be the case. Where Mr Melville might possibly depart from Mr Ruddell's more conservationist view is on the question of switching supplier in order to control energy costs.
With a wider range of purchasing options available than ever before, Mr Melville says that any business can save money by finding smarter ways to buy their energy. Fixed electricity and gas buying as well as varying degrees of flexible energy purchasing mean that there are a wide range of options to suit, and making the right choice can save your business a significant amount of money.
The standard – fixed electricity and gas purchasing - will offer budget security but in such complex and volatile markets, there are a number of variables to consider. When placing a fixed contract, market timing will heavily influence prices and careful market analysis can be used to help identify opportunities to improve cost or to protect against future cost inflation.
With so many suppliers, each with different pricing strategies, an opportunity to further control costs exists by simply shopping around. This sounds straightforward but can in fact be complicated by the need to compare the varying pricing structures and terms and conditions of multiple suppliers, often within a small window of ‘single day’ price validity.
Clearly, the expertise available fom companies such as M&C Energy Group, which can trawl through this tarrif minefield on behalf of clients in order to get them a good deal, must figure prominently in any energy budget consideration. However, despite his interest in such strategies, Mr Melville concedes that controlling and optimising energy expenditure is not restricted to smart procurement. In any process requiring significant amounts of energy there is an opportunity to make savings and increase profits, he says. The most effective way to reduce energy costs is to never use it in the first place, so simply finding efficiency savings is always a consideration.
Les Hunt
Editor
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