IGA News

Surviving the energy crisis

Surviving the energy crisis

30 September 2021

It is a cliché, but the current energy crisis is the culmination of the perfect storm in the energy industry. Several factors have caused the large spikes in the market which led, at one point, to almost all energy suppliers pulling their prices off the table meaning no one could renew their supply contracts.

Even though the market has calmed a little there is general unease as to whether such spikes will happen again, and prices remain at a very high level.

What has caused the crisis?

The first thing to say is that the energy crisis is not just a UK problem, it is global, and is primarily due to the increasing demand for and lack of supply of gas.

With the global recovery from the Covid pandemic underway the demand for gas has grown at a huge rate whilst the existing supplies of gas have struggled to be replenished after a prolonged winter in 2020-21. Normally gas supplies are replenished during the summer months when there is generally lower demand, however this year demand has remained high all year.

A large part of this demand is created by the increased reliance on gas fired power stations to generate electricity, as coal fired power stations are being decommissioned to meet carbon emission targets. The idea is that should gas generated electricity fall, the slack will be taken up by renewable generation such as wind or solar. Unfortunately, the lack of wind and solar output during this crunch time has served to push electricity prices up even further.

The next factor in the making of this crisis has been Russia. They are a major supplier of gas to Europe but are currently only exporting at 20% of their pre-pandemic level despite the much-increased demand. Whether this is to help them to refill their own storage or is part of a plan to pressure European Governments in approving their Nord Stream 2 gas pipeline waits to be seen.

The final factor, and the one that sent the energy suppliers over the edge was the much -publicised fire at the National Grid site where the power cable from France comes into the UK. Even though a level of supply has been restored it is not expected to be fully operational for a number of weeks yet.

What can I do?

The two elements of your energy spend that you can influence is the price you pay for your gas or electricity and amount that you use.

If you are currently in contract, this will certainly help to protect you from the current spikes in prices, although some suppliers may look to evoke “exceptional circumstances” clauses to push through some increase in your current tariffs.

If your supplies are due to renew imminently, however, then it becomes infinitely trickier! As at any renewal it makes sense to look at what is on offer from all suppliers who wish to quote for your business, as well as your current supplier. Despite the large increases there will still be a range of different supplier options for you to consider. You will also need to think carefully about the term of the contract that you go into, again look at all options and take on board advice about how the markets may move over the coming months and years.

There is no one answer to this, as everyone’s situation is different. What we would say though is take advice, ensure you know all your options before committing to a new contract.

Away from the price you pay, the one area you can positively influence your costs is to reduce the amount of energy your business uses.

In the past you may have looked at the following solutions but felt them not worthwhile. However, with your energy prices as much as doubling you must really make sure you have looked at all the options open to you.

Five ways to minimise your energy usage

1) Invest in a detailed energy report for each of your sites. This will help you to identify waste and where you can make quick wins.

2) Look at the cost and ROI of solar panels, LED lighting, voltage optimisation, and battery storage. Get the figures, know whether it will work for you or not.

3) Review your existing maximum capacity levels and see if these can be reduced. Remember to consider future changes in your business such as the use of EV chargers.

4) Set up energy reporting so you can see exactly when and where your usage is occurring. Comparing sites can immediately show up where energy is being wasted.

5) Train your staff to improve their use of energy, you may even want to target energy reductions at each site. Create energy saving champions in your business to keep driving the initiative forward.

These are just some of the ways to reduce your energy use and all of these actions will help to lessen your carbon footprint at the same time. This in turn could help you to comply with future obligations you may have to Streamlined Energy & Carbon Reporting (SECR) and/or the Energy Savings Opportunity Scheme (ESOS). You can check if you are captured by these schemes here:

www.gov.uk/government/publications/academy-trust-financial-management-good-practice-guides/streamlined-energy-and-carbon-reporting

www.gov.uk/guidance/energy-savings-opportunity-scheme-esos

What does the future hold?

The energy market is extremely volatile and as we have seen there are many factors that can affect the prices you pay. As such, it is almost impossible to accurately predict how the future will look, but there is no doubt that we are all facing a painful winter ahead.

To summarise, our main advice going forward is to use less – and if you would like to discuss your options in that regard with Spiral Utilities, please contact the IGA Direct Member Helpline on 01788 225 908 or email enquiries@rmif.co.uk for a no obligation chat.