Hedge Against Energy Inflation

Energy Price Inflation

The inflation of energy prices, which is significantly higher than the consumer price index in the long term, the high annual annuity of renewable technologies and factors resulting from the ambitious climate targets open up new opportunities for companies looking to hedge against inflation. 

According to figures published by OFGEM, the average annual growth rate of electricity contracts is 8%, tracking noticeably higher than the Consumer Price Index (CPI). Currently, the cost of land and utilities form the largest contribution to the CPI – a worrying prospect if these two elements also form a major part of your business’ cost base.

The Economics of Solar Power

Until recently, solar energy systems were only accessible to the moderately wealthy. However, due to increased production, government subsidies, and mounting environmental concerns, the direct costs of solar has decreased dramatically. The levelised cost to generate electricity from solar panels can be as low as 3-4p per kWh (£30-£40 per MWh). Among this, solar photovoltaics provide long-term price security against volatile energy markets and important reserves to protect companies from costly power outages.

From a sustainability perspective, renewable generation can help visibly promote sustainability credentials, improve corporate image and help meet the demands in carbon reduction by the supply chain and customers, in turn, leading to further financial opportunities. 

Get an Investment Appraisal

Solar photovoltaics as an investment must be judged on a case-by-case basis. Generally speaking, they are an effective hedge against rising energy costs whilst also allowing businesses to reduce the amount of cash that leaves the business and retain a stong balance sheet position. Our approach ensures full transparency within the consultation and design process. We provide unique financial models for our clients that have the capabilities for sensitivity testing on all elements, allowing the client to become comfortable with the investment they are making. If you are curious about the potential that your site has in generating solar energy, please get in touch for a free consultation.