The annual Npower Business Energy Index canvasses business opinions on energy-related issues. With both public and private sectors destined to play a large part in helping to achieve the government’s national target of an 80 per cent reduction in carbon emissions by 2050, businesses’ attitudes to energy procurement and management is clearly one of growing importance.
The report revealed that energy outweighs all other more traditional business risks for major energy users (MEUs) including legislation, security, and health and safety. As part of “energy risk”, security of supply and the cost of energy are also set to remain at the forefront of business concerns for the foreseeable future. Businesses predicted that supply and cost risk would still be the major energy-related concern in five years’ time – continuing to rank higher than areas such as energy sources, legislative compliance and associated carbon emissions.
Energy risk is growing in importance, with 44 per cent of MEUs saying it has gained a higher profile within their organisation in the past three years. The increased awareness of energy risk has brought about encouraging changes in how organisations manage energy. Eighty-one per cent stated that it had led to improved monitoring and reporting, and 85 per cent said it had led to improved energy efficiency results. To support this move, 63 per cent of MEUs said they now employed a person specifically responsible for energy purchasing, and 14 per cent of them were board members. With significant operational risks concerning costs and supply, we should expect to see this number increase as time goes by.
However, one in six MEUs admits to having no strategy in place to manage energy risk. While this is a relatively low figure, compared with the fact that 91 per cent say they have a health and safety strategy, it appears that for some UK businesses, energy concerns have yet to be turned into a strategically-driven response. We would encourage organisations to implement an energy risk management strategy as soon as possible to ensure they have maximum protection.
Businesses can offset some of the risks associated with long-term energy supply and cost through self-generation – for example, solar panels or combined heat and power – and by using demand management tools. This was an area the Npower survey looked at for the first time because we wanted to know how many companies were adopting these approaches and how they were using the technology as part of their energy management plans.
With 39 per cent of MEUs and 61 per cent of small and medium-sized enterprises admitting to having no self-generation capability, it is clear that such moves are not yet commonplace. Those without self-generation in place cited “it was not a business priority” and “lack of finance” as the main reasons. When asked how they thought such projects should be financed, respondents pointed squarely at the government, with 61 per cent saying help should be provided through grants. Their least preferred option was a bank loan.
Yet MEUs keen to protect themselves from energy risks will need to seriously consider investigating the options for self-generation technologies and demand management tools to shield themselves from the energy challenges of the future. There is also an opportunity to generate significant revenues by selling back to the grid during times of high demand.
Wayne Mitchell, industrial and commercial markets director at Npower
Manage and connect
Npower research reveals that businesses have lost up to 10 per cent of their revenues in the past 12 months due to interruptions. Staff sickness and annual holidays are the most common causes, but others are unpredictable, such as the UK riots last summer, which had a severe impact on the retail industry.
In today’s tough operating environment, businesses and their suppliers should be doing everything they can to prevent avoidable interruptions – such as the time taken to get new gas and power connections set up. Yet Npower’s research revealed that almost a quarter of businesses moving into new-build premises faced unnecessary delays because the connection to the power supply had not been planned early enough.
Two-thirds (66 per cent) had not factored in the new connections process at the beginning of the new-build project. This often led to an unwelcome surprise: a quarter of businesses moving premises found themselves waiting for up to five working days before they could move in because of a delay to the new connection, meaning that valuable trading time was lost.
The new connection process can often be seen as complex because it involves a number of different parties. Yet whether it is managed by the construction company or the client, factoring in new power connections should be done from the outset in any construction or refurbishment project.
Npower is working with customers to make the process as simple as possible by making sure all parties communicate with each other. We now have a dedicated new connections team that assists our customers in navigating the steps, including planning, construction, negotiating with network operators, advising on supply agreements and installing metering. This enables the process to be completed in just 20 days, from initial planning to flicking the switch on – a timescale that is recognised as outstanding in the industry.
One company benefiting from this expertise is energy management consultancy Power Efficiency, which typically manages over 15 new connections a month for its clients. Julius Brinkworth, energy projects director at Power Efficiency, says: “A project delivered in 20 days is the ideal scenario for us as we have a happy customer who has suffered no interruption to business. The key really is communication. With Npower, we are given a new connections manager and they do exactly that: manage the process from start to finish, honestly and efficiently.”
Nick Lewis, Npower’s new connections sales team manager
This article first appeared in Utility Week’s print edition of 6 April 2012.
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