It’s always possible to say “we’ve been here before” and that is very much the case with the current oil price. What is different each time is that everything else has changed!
Energy efficiency is massively important to the UK economy. It is almost an indicator of wider efficiency and attractiveness for investment. It can determine relocation strategy for production facilities and is equally important to those considering investment in renewable technologies but it must always be the case that efficiency is the priority.
So what do you do when energy prices, certainly from a market perspective, look like they’re collapsing? How long will these low prices last? How can you lock into them at their nadir?
OK, we’ve been here before – and not that long ago. In the early noughties there was virtually no interest in energy or indeed energy efficiency when baseload prices hovered at around £20/MWh. Not that we’re likely to hit these levels again because of taxation, subsidies and EU directives.
And what happened? Mega shocks to the market in 2008/09 thrust the prices upwards spectacularly, bursting through ceilings of most of those vaunted risk management plans, for those who had them at least and…
The returns on investment for energy efficiency/reduction schemes became massively attractive overnight!
Will it happen again?
We are probably in a similar situation. Those who invested in energy efficiency when prices were low have subsequently made significant financial gains. This was particularly so when energy prices rose rapidly.
Surely the parallel is with our current situation. Like it or not, ESOS has uncovered a raft of energy-saving opportunities which probably look quite attractive at current low prices, certainly those involving developed technologies like LED lighting and control systems.
It has to be said that should energy prices escalate in future years, as they certainly will if only resulting from government subsidies already in place and EMR, the returns on investment will be spectacular. Viewed from a life cycle perspective they will be a complete “no-brainer”! And this is especially so for larger capital items like boilers and chillers.
So as a CFO of a sizeable company, what do you do?
Take independent advice from qualified sources and act now on every possible means of improving your energy efficiency and less obvious but probably an even greater opportunity, your transport efficiency. Energy costs may seem high to consumers now, they always do but examining the potential forward rises provides sufficient evidence of threats and risks to core business and supply chains to make it a boardroom priority.
Why wait until prices start to rise unexpectedly before carrying out your energy-saving opportunities? Every day you’ll be missing an opportunity – try explaining that to your stakeholders…
Mervyn Bowden is the Managing Director of Intuitive Energy Solutions Ltd.