Archive for the ‘Energy management’ Category

New research has found that as many as 1 in 5 business energy invoices could contain errors costing around £500 million a year.

The most common mistakes are incorrect meter readings and the wrong unit rates being applied, while other mistakes can include duplicate charging, for instance on available capacity, incorrect VAT rates (particularly for schools) or wrong standing charges.

Retail and leisure businesses with complex and changing portfolios, often without automatic meter readers, are subject to the most overcharging.

Most business don’t conduct detailed energy invoice validation, yet common errors could be costing thousands.

The best means of ensuring you haven’t overpaid in the past is to conduct an historic audit, while ongoing validation is important to ensure that mistakes are spotted and rectified as soon as possible.

 

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There are a number of potentially misleading energy-related cold-calling techniques being used these days, often by offshore call centres, that businesses should be aware of to avoid signing contracts that aren’t in your best interests. Some of the more common include:

“I’m calling from your supplier – could you confirm your supply details?”

If the caller really is from your supplier they’ll have your electricity MPAN and gas MPR numbers, consumption and cost data; if they don’t treat with extreme caution as the caller is likely on a fishing expedition to gain your verbal agreement to an energy contract on which they’ll receive a hefty fee.

This only applies to smaller gas and electricity supplies (those on non-half-hourly meters), as contracts for larger gas and half-hourly electricity supplies cannot be agreed by phone.

“Our service is free”

Then ask the caller how they earn their money: if the answer is they get paid by the supplier then either they have an exclusive relationship with that supplier and you’re not getting a full market assessment (and probably paying a premium), or the commission they receive is added to your unit rates. Either way, you’re paying for the service.

“Working on behalf of…”

Beware of anyone who says they’re working on behalf of your supplier / the National Grid / distribution company or similar.

For instance, companies stating they work to support the National Grid by checking available capacity (kVa) on half-hourly electricity supplies are being economical with the truth at best.

Capacity assessments are a legitimate and useful cost saving exercise, but are completely independent of the National Grid – end users need agreement to reduce capacity from their local Distribution Network Operator (DNO) not the National Grid, who also don’t have arrangements with energy consultants to conduct this type of work.

Due diligence required

Ofgem’s initiative to introduce regulation to the energy consultancy/broker market has ended without resolution, so while there are many reputable consultants out there, Ofgem (and suppliers) have limited ability to crack down on the cowboys, putting the onus on businesses to conduct their own checks.

 

 

Solar the cheapest form of energy?

A December report by Bloomberg New Energy Finance found that unsubsidised solar is beginning to see lower costs than wind and other forms of energy, becoming one of the cheapest forms of energy. While the lowest solar costs are being seen in countries such India and Chile (where it is now about half the cost of coal), 2017 looks to be the year that solar becomes truly mainstream.

Windy up north

Not to be outdone, wind generated enough power to supply Scotland for four straight days at the end of December (including Christmas day itself), the longest period when wind supply has matched demand.

The strong end to the year resulted in wind power contributing more to the UK supply in 2016 than coal for the first time, 11.5% of total UK output compared to 9.2%.

However, the government’s withdrawal of subsidies for new onshore wind power has resulted in criticism that one of the lowest cost forms of generation is being denied the support given to far more costly technologies including offshore wind and nuclear.

2017 Christmas in the dark?

The British Infrastructure Group has warned that the National Grid’s buffer between supply and demand could fall to as little as 0.1% next winter, resulting in power failures, particularly if there’s unusually severe weather.

At the moment the supply-demand margin is 1.1%, increasing to 6.6% if emergency measures are implemented.

These measures include paying power stations that would otherwise be closed to be kept on stand-by, businesses and other large consumers using emergency generators and old coal-powered stations being put back into operation, all of which add around £30 a year to a residential energy bill.

The advent of commercial-scale energy storage is set to be a key theme in the energy world for the next few years.

Storing renewable (and other) energy generated during periods of low demand to then release during peak demand periods offers huge potential while also limiting the need for new power stations.

To put that in context, National Grid’s Future Energy Scenarios predicts that by 2040 up to 18GW of batteries could be installed at commercial and domestic sites, five times the capacity of the £18 billion Hinckley Point C Nuclear power plant (raising further questions about the need and viability of new nuclear).

Production booming

Battery efficiency is improving and costs falling, which, coupled with incentives, are making battery storage a realistic option for many businesses, meaning they can avoid using peak price electricity from the grid, while selling excess capacity.

The main factor in the increasing uptake is the dramatic fall in the cost of lithium batteries (down 80% in last five years according to some estimates), with further falls expected. Tesla is the best known battery company, while China is ramping up production as only they can. Tesla’s planned gigafactory plans to produce 35GW of batteries a year from 2017, pushing costs down by 30%.

Storage contracts and incentives

National Grid announced the first 1GW of storage projects recently, potentially saving up to £200 million by balancing the system more efficiently. As storage capacity increases so flexible demand and response schemes become more viable and generate greater benefits, along with stronger business case for businesses investing in storage.

While mass uptake of battery technology may be a little while off, storage is set to be one of the main energy themes of the next few years, creating opportunities for businesses to reduce peak energy costs while profiting from excess capacity.

The decision by Chancellor George Osborne to abolish the Carbon Reduction Commitment (CRC) from 2019 received a positive reaction from many of the large businesses who had to comply with the often bureaucratic scheme.

What wasn’t highlighted so clearly was that the £900 million raised by the CRC from businesses required to purchase carbon credits will result in an increase in the Climate Change Levy (CCL) from 2019 to leave the change fiscally neutral.

What this means is that many small and medium businesses will see their CCL costs rise to cover this the scrapping of the CRC. In its current form the CCL raises around £800 million a year, so it’s likely that CCL rates will double by 2019 – good news for those businesses no longer required to comply with the CRC, but not so good for everyone else.

With non-commodity charges, including the CCL, now accounting for over 50% of total electricity costs the recent falls in wholesale energy markets have largely been negated, so if/when the markets start to increase businesses will feel a double-impact.

By April 2019 some forecasts put non-commodity costs alone at over £90 p/MWH, up from around £60 p/MWH now and a current wholesale energy price of around £37 p/MWH. If wholesale prices move back towards the £50 p/MWH mark as anticipated, the overall cost of electricity will hit around £140 p/MWH before the end of the decade.

As ever, the only way to protect your organisation from rising energy and non-energy costs is to use less, so there’s never been a better time to identify wastage and efficiency opportunities.

 

New research indicates that landlords could have problems renting property that falls below new minimum energy efficiency standards.

The Energy Act requires new leases or lease renewals from April 2018 (and for all rented property from April 2023) to have a minimum EPC rating of ‘E’, with properties required to meet at least this threshold before landlords are able to let the space.

According to the Cushman & Wakefield report around 20% of commercial property currently has EPC ratings of F or G, making it unlawful to rent them from April next year, with 19% rated E. Owners of non-compliant property could be fined up to £150,000.

While there will undoubtedly be a cost to improving a building’s EPC rating it’s important to take the longer-term view that upgrading a facility protects, if not enhances, its value, while also making it more attractive to tenants increasingly conscious of operating and service charge costs.

There are a number of exceptions from the regulations, though owners will have to sign-up to a register opening in October 2016.

 

 

While the official Energy Savings Opportunity Scheme (ESOS) deadline remains 5 December for qualifying organisations, updated guidelines from the Environment Agency indicate the those failing to comply by then will not face penalties as long as compliance is submitted by 29 January 2016.

Although not an official extension, the EA says it “reflects the ability to exercise discretion when taking enforcement action.” In reality those companies that have made an effort to comply – appointed an ESOS Lead Assessor, begun the data collection and site audit process – will not face sanctions as long as they complete the audit by the end of January next year.

It’s important to note, however, that companies must still submit details of their ESOS process by 5 December, even if it’s just an explanation of why the 5 December deadline won’t be met and what they’re doing to complete the process.

As of mid-October only around 375 business had notified the EA of compliance out of an approximate 14,000 eligible organisations.

If you’re still to start the ESOS process (or having problems) do get in touch to see how one of Energy & Carbon Management’s Lead Assessors can help.

With the 5 December 2015 deadline fast approaching the Environment Agency has revealed that only 150 of the estimated 10,000 eligible business have confirmed their compliance.

All UK business with more than 250 employees or £40 million annual turnover and a balance of sheet of over £34 million are required to complete an energy audit. Those failing to meet the deadline could be liable for fines of up to £50,000 plus £500 per day for every day of non-compliance.

With fears that there aren’t enough certified ESOS Lead Assessors companies to meet the backlog, the first priority should be to appoint an Assessor, ideally one experienced in your specific sector who can bring value beyond merely meeting the regulatory requirements.

While there’s speculation that fines could be avoided for late compliance as long as progress is being demonstrated, that’s a risky approach that leaves open the possibility of substantial fines.

The Energy & Carbon Management team are proficient at helping businesses achieve ESOS compliance so do get in touch. In addition to achieving compliance and avoiding penalties, our lead assessors will identify opportunities to reduce energy use, cut consumption and save money.

The latest ESOS-related survey found that only a third of qualifying businesses asked were aware of the requirement to conduct an energy audit by 5 December this year.

The Verismic survey of 100 companies also found that most had low awareness of the penalties for non-compliance, both financial (£50,000 and/or £500 per day) and reputational, with qualifying companies not completing an ESOS assessment at risk of being publicly named and shamed.

With awareness of the Energy Savings Opportunity Scheme requirements just 24% in the retail, distribution and transport sectors companies are calling on the government to do more to raise knowledge of the scheme.

Depending on your organisation an audit is likely to take at least 2-3 months but quite possibly considerably longer so it’s important to select a Lead Assessor and start the data collection and verification process as soon as possible. With ESOS covering transport as well as building and process energy use it’s also quite likely that data collection could take longer than anticipated.

For more information on ESOS do get in touch: rcampbell@energyandcarbonmanagement.com

 

 

 

Government plans to improve the energy efficiency of commercial rented property could have significant implications for the commercial property market.

The proposal put before Parliament under the provisions of the 2011 Energy Act would apply to new leases or lease renewals from April 2018, and for all rented property from April 2023.

The key measure is that the minimum energy efficiency standard will be an EPC rating of ‘E’, with properties required to meet at least this threshold before landlords are able to let the space.

According to existing EPC rating data, around 18% of leased properties currently have ‘F’ or ‘G’ ratings and 20% ‘E’. With EPC efficiency standards expected to tighten in the long-term, it’s possible that properties currently rated ‘E’ may be caught by the new measures.

Implications

If the new efficiency standards are not met it’s possible that some properties may become un-letable after 2018, or that rents – and asset values – will be under heavy pressure.

Acting early by identifying which properties are rated ‘F’ or ‘G’ means that there’s time to assess your options and incorporate the implementation of energy efficiency measures into your asset management plan.

Landlords will need to weigh the costs of upgrades against those of doing nothing, which could see reduced rents and asset values. Alternatively, selecting the right efficiency measures should improve asset values while making properties more attractive to tenants.

First steps

Using the results of the current EPC advisory report, or ideally a comprehensive energy audit, the first step should be to identify at-risk properties and rank the recommended energy efficiency measures by effectiveness, cost and payback period.

For instance, lighting upgrades usually have 2-3 year payback periods and are relatively straightforward to implement, and may shift a property rating up one score, while larger investment in windows and insulation will have a longer payback but make the property easier to rent and future-proof against future efficiency regulations.

Other considerations include:

  • how will the landlord work with tenants to implement the efficiency works?
  • are any of the costs re-chargeable under the terms of the lease?
  • or will the landlord recover costs through an uplift in the service charge?

While tenants may baulk at the prospect of contributing to efficiency improvements, they will benefit in terms of reduced operating costs and an improved working environment. In these situations a thoroughly assessed and costed efficiency proposal will be vital to selling the benefits to tenants (current and future).

Cost or benefit?

While there will undoubtedly be a cost to improving a building’s EPC rating it’s important to take the longer-term view that upgrading a facility protects, if not enhances, its value, while also making it more attractive to tenants increasingly conscious of operating and service charge costs.

Exceptions

There are a number of exceptions to the regulations for properties falling below the ‘E’ rating, including:

  • lease term for less than 6 months or more than 99 years
  • required measures are not cost-effective either with a 7-year payback or under the commercial Green Deal ‘golden rule’ which states that energy savings made in a 25-year period must be equal to or more than the cost of implementing those savings
  • despite reasonable attempts, the landlord is unable to obtain the consents needed to conduct the work (eg from tenants, lenders, listed status restrictions)
  • the energy savings measures would decrease the value of the property by 5% or more or that wall insulation would damage the property

The Department of Energy and Climate Change (DECC) will operate a register of landlord notifications to seek an exemption, which will also be available to local authorities, who in turn will have responsible for enforcing the regulations.