Archive for December, 2013

Employees key to cutting energy costs

A new Carbon Trust report has found that UK businesses could save over £300 million a year by encouraging their employees to adopt behaviours that cut energy consumption.

The survey found a significant contrast between employees’ approach to energy at home and work: 92% of those asked said they were worried about energy costs at home, but only 47% had the same concern about their workplace.

Employers aren’t helping themselves, however, with over 25% failing to ask their employees to help reduce energy consumption, and only 13% rewarded for cutting usage.

So what’s the answer?

Carrot not stick: the key thing is to find out what motivates staff – merely telling people to change embedded behaviours rarely works, whereas the Carbon Trust found that 60% of staff are more likely to take action if financially rewarded and 58% more likely if their actions are recognised.

Energy champions: taking the first aider model, training energy champions in every department/floor to lead efficiency initiatives is essential, providing role models and the knowledge needed to make change – just 22% of employees were confident they knew what to do to save energy at work, and only 16% felt they had the authority to act.

Take the message home: combining workplace energy savings training/knowledge with information on how employees can cut their domestic bills can support buy-in and action.

Measure – and celebrate – the results: everyone needs feedback on their actions, so providing regular updates on energy saving progress is essential, ideally incorporating competitions, rewards and other incentives to keep staff motivated.

The key with all energy reduction efforts is to understand the workplace and the people in it, identifying how they can best be engaged and a sense of ownership developed, always remembering that energy saving is a long-term process, not a one-off campaign.

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Make sure you compare energy prices on a like-for-like basis

The growing proportion of energy costs accounted for by government levies has consequences beyond the financial burden, making it increasingly difficult to compare energy prices due to the way in which these charges are presented by suppliers and energy brokers.

When reviewing prices it can be challenging to understand whether costs such as the Renewables Obligation(RO), Feed-in-Tariff (FiT) and Climate Change Levy (CCL) have been included or not.

The risk is that signing up to an apparently cheap contract subsequently lands you with unexpected costs, causing serious problems for many organisations (and the people signing the contract).

Are charges fixed or pass-through?

When reviewing prices it’s important to understand whether the quote includes RO, FiT and CCL charges, or in other words presents a true picture of your total energy costs.

The first question to ask is whether the RO and FiT are included in the contract prices as a fixed cost. If not, they will be passed-through as additional items on your invoice. Whether the RO and FiT are fixed or pass-through, however, they should be included in your energy price quote.

CCL won’t be included as a fixed cost but passed-through, but similarly, it should be included as a cost in any price proposal.

The risk buyers face is that some suppliers (and more often) brokers will exclude one or more of these charges to make their prices look cheaper.

Another ‘trick’ used by some brokers is to base an annual energy cost on unrealistically low consumption, which obviously results in a lower price. When annual prices are presented it’s always worth checking the consumption data to ensure you’re making a true comparison. Ideally this would be from actual automated meter data for the previous 12 months rather than estimates.

5 essential questions to avoid the wrong energy contract

With Ofgem currently reviewing broker practices, and hopefully introducing measures to improve transparency, these kind of practices should become a thing of the past, but the complexity of business energy contracts means a few well directed questions could save a lot of money:

  1. Are Renewable Obligation, Feed-in-Tariff and Climate Change Levy charges included in the price quotation?
  2. Are RO and FiT costs fixed or pass-through?
  3. What unit rates were used to calculate the RO, FiT and CCL costs?
  4. What consumption figure was used to calculate the annual energy cost?
  5. How was the annual consumption figure arrived at?

Ensuring that you compare energy prices on a like-for-like basis can be tricky, but ensures you’re making the right decision for your business.

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Lord Browne, former head of BP and current chairman of the UK’s largest shale gas company Cuadrilla, said this week that fracking is unlikely to reduce gas prices. In a speech at the London School of Economics he also said that…

  • the recent strike price agreed between the government and EDF for nuclear power was “very, very expensive”
  • oil and gas currently receive more subsidies than renewable energy, which he described as “like running the heating and air conditioning at the same time”

The economic, geological, regulatory and social differences between the UK and US mean it is highly unlikely that the shale gas revolution being experienced in North America can be translated across the Atlantic, with even modest production unlikely before the mid-2020s according to most in the industry.

Despite repeated assurances from David Cameron and George Osborne that shale gas will reduce prices, Browne has recognised the unavoidable fact that the UK’s gas prices are determined by a European-wide market, meaning it would take enormous quantities of cheap new gas to shift prices downwards.

Fracking water issues

The potential contamination of water supplies from fracking has received substantial publicity (around 75,000 litres of chemicals are required for each operation).

What is only now getting wider airing is the need for huge quantities of fresh water; depending on the specific site, anywhere between 9,000 and 29,000 cubic metres of water is required for each frack.

While this might be sustainable in some areas, the increasingly parched south-east has already experienced water shortages, adding another barrier to widespread fracking in, for instance, Sussex and Kent. In light of this, the water trade body, Water UK, and the UK Onshore Operators Group signed an MoU recently agreeing to cooperate on developing fracking sites, but also recognising that fracking may be impractical in some areas due to a lack of local water resources.

As this video from the Guardian shows the, fracking-related water shortages are even becoming an issue in Texas, the original home of shale gas.

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