Energy remains a hot topic for manufacturers

Posted on 18 Jul 2013 by Tim Brown
Muntons implemented energy monitoring and targeting at a cost of £100,000 and re-cooped the investment in six months.
Muntons implemented energy monitoring and targeting at a cost of £100,000 and re-couped the investment in six months.

Power was firmly on the agenda at the Future Factory: Energy Conference, hosted by The Manufacturer in Birmingham in July. Speakers at the event offered attendee manufacturers advice on the latest techniques and technologies available to help reduce energy consumption and also provided information on how to negotiate the best deals from energy suppliers.

Generally speaking manufacturers agreed that continual increases in energy prices rather than taxation or regulation were the driving factors for wanting to reduce energy consumption.

David Topping, director of corporates at E.ON helped explain the reason for the continued price rises and said that much of it was due to levies being introduced to cover the predicted £190bn in infrastructure investment required to maintain and improve the transmission, generation and distribution of energy in the UK.

Current contribution of non-energy costs to energy bills - image courtesy of E.On

The ‘green’ element of these non-energy costs – such as the Feed-in Tariff (FiT) and Renewables Obligation (RO) – now makes up 13% of energy bills (up from 6% in 2010). “The key thing for customers,” said David Topping, “is that they understand the terms and conditions of their contracts so they know exactly what elements of these non-energy costs can be ‘passed through’ to their bills in line with their contractual terms.”

He said that there were many wholesale market reports and ‘trader updates’ but far less focus on the regulated charges that go into energy prices.

A report released after the event by RWE npower and unrelated to the Energy Conference reiterated these remarks and claimed that the main factor behind rising costs was government policy to fund the UK’s transition to a more efficient economy, with modern infrastructure and warm, insulated homes for all.

Greg Barker, minister for energy and climate change, rejected parts of the report claiming government action had helped reduce the costs from spiralling fossil fuel prices. “Global gas prices, not green policies, have been primarily pushing up energy bills.”

So what can you do to manage these costs effectively?

  • Make sure you get the right deal for your business
  • Ensure you understand suppliers terms and conditions, not just their marketing literature
  • Look at their past behaviour and historic approaches to recovering these charges
  • Ask for quote transparency – make sure you or your broker are comparing prices on a like-for-like basis
  • Ask for information about what’s driving these charges so you can make informed decisions

Gary Law, Strategic Buyer  MCIPS for Allied Glass recommends companies implement the following to ensure they have a solid energy procurement strategy.

  • Make Sure you have a Strategy in place
  • Look at historical seasonal data
  • Ensure that you are on a Flexible Contract
  • Lock and unlock blocks of energy when the price is moving
  • Track the market against your forecast and budget
  • Report including fixed and pass through costs
  • STICK to your strategy – don’t second guess the market
  • Consider engaging an Energy Consultant
“You can not manipulate the market but you can be ready to react to it.” – Gary Law, Strategic Buyer MCIPS, Allied Glass

Energy monitoring

Of course, while implementing the right purchasing strategy is important, reducing unnecessary was touted as even more vital. Consistently throughout the day, energy monitoring and targeting was lauded as the best place for businesses to start when looking to reducing their energy use.

Estimated breakdown of industrial energy use
Estimated breakdown of industrial energy use.

Currently, according to Joe Cockin of EDF,  industry uses 1/3 of electricity in the UK and over 1/2 of all energy used is for heat processes. These astounding figures made the need for manufacturers to pay attention to where energy savings can be made all too obvious.

The average length of time required to achieve a return on investment for monitoring equipment was said to be approximately eight weeks. However, Nigel Davies from malt producer Muntons said that his company’s first investment of £20,000 in energy monitoring identified so many energy saving opportunities that the ROI was achieved in a single week.