Do more with your demand

Ian Preston, head of direct and technical sales at npower asks manufacturers to embrace energy optimisation instead of focusing on cost alone.

“Yes energy policy is changing, there are still lots of uncertainties. Yes energy in the UK is expensive compared to elsewhere in the world. But there are still lots of opportunities to engage with people to save money, to use energy more effectively.”

Ian Preston’s words are good sense, but some might call them bold at a time when energy suppliers are being labelled ‘the new bankers’.

UK energy costs are high compared to the rest of the world – including Europe – and in recent years rising pressure has been put on government to acknowledge that this is uncompetitive.

Lobbyists have called for reductions or exemptions to environmental taxation which pushes the price of energy up and have also complained that the UK’s energy security is poor, requiring immediate infrastructure and technology investment.

Mr Preston does not question the validity of these campaigns. Indeed he welcomes the recent measures outlined in the Budget to compensate energy intensive users, cap the carbon price floor and push forward with Electricity Market Reform.

Energy Management

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The event aims to explain the impact of UK energy policy and showcase best practice in managing energy use and optimising energy assets.

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He is also passionate about the need to create a level playing field with Europe in order to increase the region’s global competitiveness as a whole.

“We have to remember that, industrially, we are competition with the world, not just with Europe and indeed if we can create parity across Europe then we all have a better chance,” he says.

For this reason, Preston is a strong supporter of the movement for a common European energy market.

“We need to take advantage of the fact that Europe is a region we can influence,” continues Preston. “We can’t influence the rest of the world and we need to act. My fear is that, with so many governments acting in their own national industrial interests and the UK trying to be whiter than white, industry will suffer.”

Brief combats grief

It’s to mitigate this negative impact on industry that npower has recently launched a quarterly energy briefing which explains key energy policy or market developments and clarifies what the bottom line impact of these is for business – the first briefing focusses on the Carbon Price Floor cap.

The briefing also delivers top level advice and opinion from npower professionals as to what manufacturers can do to protect themselves from the negative elements of these developments or how they can put themselves in a position to benefit from policy decisions.

For example, in the first briefing, Preston advises manufacturers who have flexibility in their production to investigate whether they can move energy hungry processes to off-peak hours. In the light of forthcoming Electricity Market Reform measures, he says, manufacturer who do so are likely to enjoy cost benefits in the near future.

It’s all part of his philosophy of “demand-side discipline”.

“Manufacturers don’t have to feel like this is happening to them,” Preston emphasizes. “You can work with your energy supplier to minimise the impact of rising energy costs and of energy security challenges on your business.”

Cynics might say this is the marketing spiel of the 21st century where everyone seems to want a partner rather than a customer and no one wants to sell products, only ‘holistic solutions’.

But Preston is serious about his belief in collaboration as the route to competitiveness.

Some may recall that in February this year, national press leaped on a story about heavy industrial firm Sheffield Forgemeasters anticipating 30 shutdowns over winter due to untenable energy costs and unpredictable capacity from suppliers.

Such stories build on widespread fears about energy blackouts becoming commonplace in the UK in the next few years thanks to aging infrastructure and uncertainty about the best bets to low carbon energy generation investments. They also embody a common feeling in industry that the UK is set up to prioritise domestic energy use over industrial use – unlike our perpetual comparator, Germany.

Preston heaves a sigh. “We need to invest in new infrastructure that is suited to the economy of tomorrow.”

It’s a practised line which is true, but clearly unsatisfactory for both energy suppliers and users in the here and now.

The Preston continues, “My personal view is that this [capacity] will become more of a problem. We’re moving a from an energy industry which draws on large, centralised coal plant to one which draws from a dispersed mix of gas plant and renewables.

“I believe that the opportunity to deal with this transition effectively lies in getting large demand-side to play a more pro-active role in managing the system.”

He explains, “This would mean you could avoid large industrial users being forced out of supply at peak times by paying them to turn down demand or rewarding them for using energy at off peak times.

“This kind of proactive demand management is something we [npower] are working on very actively at the moment.”

Npower’s quarterly briefing will be circulated to key stakeholders and large commercial customers. The briefings will also be made available on npower’s website in due course.

Key points from npower’s first quarterly energy briefing

  • Industry is responsible for 25% of the UK’s total CO2 emissions –125MtCO2. Energy use in industry can be broadly divided into heat from direct combustion and electricity
  • £4bn cuts to be achieved by 2019 by freezing the Carbon Price Floor at £18 per ton of CO2 from 2016-17 to end of the decade.
  • Compensation scheme for Energy Intensive Industries extended and will result in energy cost savings of c.£1bn.
  • Manufacturers operating Combined Heat & Power plants to benefit from Carbon Price Floor exemption on power (in addition to existing exemptions on heat) resulting in c.£300m savings
  • npower recommends businesses check to see if they qualify for compensation. As of 9th April the EC recognises 68 Energy Intensive Industries, eligibility criteria can be checked here
  • For manufacturers not classified as energy-intensive, the Carbon Price Floor freeze is good news and recognises the impact Government policy has had on corporate energy bills.

In his first editorial for npower’s quarterly energy briefing Ian Preston said:

“My experience in the sector has made one thing clear: in the volatile and unpredictable world of Electricity Market Reform, demand-side discipline will be the best way for businesses to keep their costs down.”