A report by Brendan Coyne in the Energyst earlier this year found that some UK firms were opting to shut down due to peak power energy costs during the evening winter peak, according to energy brokers and suppliers.
The brokers and suppliers warned that UK businesses may be unprepared for double digit power bill rises over the next couple of years as a result of rising wholesale prices and increasing non-commodity costs, such as environmental levies, network charges and security of supply policies.
The warning came as energy managers in the public sector expressed dismay over mounting energy costs and their impact on public service provision.
“The general outlook is one of significant rises in energy costs,” says Gavin Baker, head of pricing at Smartest Energy. “The [capacity market] policy measure is expensive,” he adds, “and I’m not sure that has necessarily been communicated at the outset”.
Baker believes the signals for demand reduction measures are now so strong that firms may consider “the outright restructuring of business opening hours across the winter. Getting everyone in earlier and shutting up shop earlier in the evening just to mitigate energy consumption at that time of the day”.
Nick Proctor, CEO at Amber Energy, holds similar views. “There is so much pressure during that 4pm-7pm winter period. For some businesses, I don’t think it will be profitable to use energy during that period,” says Proctor.
“The tax is becoming so bad that is not just a case ‘can we avoid it?’ For some firms, it is more a case of ‘we can’t physically produce and make a profit with that much risk exposure during those hours of the day’,” he says.
“So I think some businesses will try and switch away from [peak consumption] completely.”
Proctor accepts that might be the intent of policy, but feels businesses have not been properly engaged or given adequate warning.
“They are not all ready for a 20-25% hike in their energy costs and I think it will cause a number of issues and a lot of pressure on some businesses going through 2018 and 2019 in particular.”
Those trying to fix energy budgets against 2016 prices – which may have been based on soft wholesale markets and minimal capacity and CfD charges – should take note, Proctor warns.
Whilst the article paints a bleak picture, it is a reality and unfortunately many businesses seem to be either burying their head in the sand over the energy costs increases, thinking they won’t really happen or they are just completely unaware of the sharply increasing energy costs and the impact it will have on their business.
At Energy Gain UK we work with many businesses to help them lower their energy costs and to help them reduce their reliance on grid electricity. We offer a free energy audit to look at energy consumption and make recommendations on how energy consumption can be reduced using renewable technologies. We aim to get our clients’ energy costs down to as low 3p kWh and significantly reduce their reliance on the national grid.
If you would like to book a free energy survey and find out by how much your energy bills could be reduced give us a call on 0161 330 7739 or contact us.
*Baker and Proctor were interviewed for The Directors’ Report, which polls directors and managers on their approach to energy and water. It also provides a snapshot of key risks and opportunities for the year ahead.