At a dinner hosted by British Gas Business and The Manufacturer magazine, several representatives of manufacturing firms across the UK met with Jeff Whittingham and Tim Hooper of British Gas Business to discuss the most pressing issues affecting manufacturers today – and how a new way of managing energy usage could deliver significant cost savings. Becky Done reports
In the current economic climate, the world of energy has changed as we know it, with wholesale prices becoming increasingly volatile and financial pressures on both domestic and commercial energy customers growing. Clearly the manufacturing industry, though resilient and robust, is no exception to the challenges of conducting business under the growing threat of global recession.
“We’re seeing something that is quite unprecedented in terms of the credit crunch and what that really means to business,” explained Jeff Whittingham of British Gas Business, who has been monitoring the situation closely. “In fact, the world is completely different. In addition, the UK energy market is now much more heavily influenced by world energy prices than it has ever been before.”
Whittingham was keen to hear what specific pressures manufacturers are coming under in order to understand how best British Gas Business can assist firms in their drive to manage their energy costs.
David Mansfield, operations director at Martek, explained that in the current climate, manufacturers are finding it increasingly difficult to predict what the next big commercial concern will be: “Three months ago we were worried about the price of diesel, with our fuel bill for sixteen vans going through the roof. Now, we’re worried about how much it’s going to cost to re-finance them.” Martek, for its part, has been proactive in its approach to the problem. This year, with a waste disposal bill rising by around 40 per cent and a gas bill by 30 per cent, Mansfield has taken the initiative, investing £85,000 in a wood burner that will burn site waste down to harmless potash. As well as minimising the company’s waste disposal bill, it is hoped that the heat from the wood burner will go some way towards mitigating energy bills. Payback for the project was estimated at around 18 months, but in reality Mansfield expects it to be much sooner, due to having received a grant from the Carbon Trust to fund the project.
This last point is crucial. With uncertainty in the financial markets having such a profound impact on manufacturers’ businesses, can anybody currently afford to invest in a project with a payback period of 18 months – let alone several years? Bryan Toye, chairman of Toye, Kenning and Spencer commented: “The issue is around affordability and prioritising. I can only afford to do so much, depending on achieving budget. There are many priorities and some projects just cannot be achieved within one’s disposable income, since cashflow is paramount.”
Being eligible to receive a grant for the wood burner means that Martek should realise almost immediate financial benefits from the project. However, for larger manufacturers, funds are far less accessible, as Alan Jones, managing director of Beatson Clark discovered: “We had the Carbon Trust in two years ago. They did a wonderful – and free – survey; however, we’re not an SME. When it comes to implementing a £400k investment here, and a £600k investment there, with a three- to four-year payback, then it doesn’t work. Major manufacturing doesn’t have the same funding available; we need support. Why stop with a SME? If it’s energy efficient, carbon neutral and sustainable, why not support us all?”
Gareth Stace, head of environmental affairs at EEF, outlined the predicament that many manufacturers face: “You’re pulled very different ways because Pollution, Prevention and Control asks you to do one thing; the Climate Change Agreement asks you to do another; and EU ETS another. And then you have to make a profit as well, so it can be a real overlap and conflict of policies.” With such diverse issues to tackle, it is vital that manufacturers can find a comprehensive solution to assist them in managing their energy costs. British Gas Business is able to offer a complete package – from conducting on-site energy audits and installing smart metering, to implementing other technologies such as remote assistance for manufacturers to further aid reduction of energy consumption. “We believe that all SME customers and all large customers should have smart metering, which is the ability to get reads from your supply on a half-hourly or daily basis,” explained Whittingham. “So when you get your bill, it will be very accurate.”
Advances in metering technology can also deliver significant benefits to the customer through facilitating greater clarity of information and energy awareness. Stace agreed: “I recently went to see a company – a fairly large energy user – and they were really excited because they had access to the internet link showing their usage peaks. But it was showing usage peaks on weekends – despite them not operating on weekends! And it was only then that they noticed it.” “Ultimately,” continued Whittingham, “what we want to do is to really help manufacturers to manage their energy assets on-site. We want to create a situation where we can guarantee to take ten per cent off firms’ energy consumption by getting actively involved – moving from just providing advice to actively helping manufacturers to reduce their energy usage.”
Martin Bragg, business development manager for the manufacturing sector at law firm Pinsent Masons, agreed with the proposed model, pointing out that clarity of cost is key in any business relationship: “The greatest opportunity we have to persuade our clients that we’re working for their benefit is to help them manage their costs beforehand. We work hard with clients to accurately scope work up front and let them know how much an invoice will be before billing.”
Tim Hooper of British Gas Business agreed. “We’d certainly be very clear about what the project is, what it’s going to deliver and how much,” he emphasised.
“The basic principle of what we’re looking to do is to get more actively involved,” Whittingham reiterated. “We have the Carbon Trust’s reports; but there isn’t anybody out there that can deliver the requirement end-to-end. We have looked for that silver bullet company; what we found instead was a series of very small companies who need bonding together and scale bringing to them.” British Gas Business intends to do just that, seeking funding from potential investors to support the implementation of providing an end-to-end service.
“Customers are starting to bring energy consultants in on these issues; so as a business, we can either stand back and watch, or we can get involved,” explained Whittingham. “The benefit to British Gas Business will be to switch from being an energy supplier to providing energy services. We’re moving towards a world where customers can incentivise their energy supplier not only to supply the commodity, but also reduce consumption of it. “At the moment, people see us as an energy supplier. We want them to see us as an energy service company,” he concluded.