Energy management: From survival to security via net-zero
By Andrew Grover, CEO, Advantage Utilities
There have been a lot of net-zero announcements lately – in October China announced it plans to become net-zero by 2060 while big firms such as Facebook and Google are doubling down on their carbon commitments. With so many businesses signing up to net-zero initiatives, there’s little doubt that the edge you get from being a net-zero first mover may soon begin to erode away.
At the same time, COVID-19 has put many businesses through the wringer, putting pressure on costs and resources. With a new wave of local lockdowns upon us, there is little sign of it abating. Business as we knew it is a thing of the past, it’s time to act differently. However, many businesses are faced with a new problem in securing their supply – suppliers are becoming much more risk-averse.
Uncompetitive contracts
While Brent crude has struggled to break back through the $45 price level, gas and power prices have recovered steadily. Despite prices rebounding, in an unusual twist, even well-established large limited companies are affected by new methods of risk mitigation when it comes to their energy supply. Utility suppliers have significantly reduced acquisitions and, in some cases, completely eliminated services to companies who fall within certain SIC codes. Seemingly, the utility payment holidays that were a blessing for many companies earlier on in the year have come back to bite, with a swathe of credit ratings being hit unexpectedly.
Supplier cautiousness is understandable, but the need for up to six-months’ security deposit to obtain a one- or two-year contract for energy supply is problematic. For many businesses, holding cash in the bank is the only way to ensure liquidity in the current climate. And it’s not just an issue for new business, it’s also increasingly applied to the renewals of existing clients – even those with a spotless payment record. The knock-on effect is a loss of competitiveness within the market and an even greater need for companies to shop around to get the best deal and consider alternative contracting arrangements such as flexible procurement.
This pressure on contracts underlines the importance of remembering the phrase “Procure, Reduce, Manage” because even with a fantastic deal, wasting energy is a luxury few businesses can afford. While getting to grips with your energy data may seem like a non-core business activity, gaining access to and making decisions based on your energy data can have just as much of a positive impact on the bottom line as hiring additional salesmen. Simply put, for most businesses it leads to significant savings with the added bonus of taking you closer to your net-zero goals too.
Sustainability is more important than ever
Despite the challenging market conditions, new research from the Carbon Trust[1] reveals that nearly 60 percent of UK companies surveyed expect sustainability priorities to become more important as a result of COVID-19. This resonated particularly strongly with companies in wholesale and retail, construction, engineering and mining, manufacturing, and healthcare – some of the sectors that have been hit hardest during the pandemic.
It’s striking that even in the depths of an economic crisis businesses recognise the need to act on climate change. Yet that depth of commitment has been a long time coming, spurred on by a new generation of thinkers and heightened by demand from consumers, employees and the supply chain alike.
But what about those businesses that are really having to fight to stay afloat and stave off redundancies? Well, for most businesses, energy spend is one of the biggest overheads, so the option to reduce costs, protect jobs and improve sustainability all at once has never looked more appealing.
Any business that can take a few moments to optimise their energy management will come out leaner, meaner and greener than ever before. Alongside energy savings, those few moments could even help businesses avoid thousands of pounds in fines from missed compliance with ESOS – a mandatory energy assessment scheme for certain businesses.
What’s more, it’s a commitment to their own future – a stake in the ground that says “we’re still striving for net-zero because we plan to be here in 2030” – a compelling message in such difficult times. Equally, no business can ever truly know what the future holds – we could be in for a tougher time yet. Right now, it pays for businesses to be looking at every bill they receive and every option for revenue diversification too. This is where working with a consultant who can create a bespoke solution tailored to your company’s unique priorities can pay dividends. A great consultant will be hands-on and consultative in their approach and creative in their solution.
Security in sustainability
With a plethora of funding and finance options available, a consultant will be able to illuminate what sustainable energy options might be best for your business. There are many options that come without the associated upfront risks or costs, for example, power purchase agreements – a long-term contract between sellers and buyers of electricity – are becoming increasingly popular as a way for businesses to meet their renewable energy needs without the capital outlay. With this type of arrangement, businesses become more resilient to electricity price shocks while making progress towards net-zero, and it can even be a source of revenue diversification.
So, whether your motivation is straight-up survival, or striving for net-zero, it pays to take a more detailed look at your energy arrangements. From installing solar to generate your own power, installing electric vehicle charging points to diversify revenue or straightforward recommendations to cut consumption, there has never been a better time for businesses to support their bottom line – both financially and sustainably.
[1] https://www.carbontrust.com/resources/corporate-attitudes-towards-sustainability-2020