March 4, 2011 • Current Events, Electricity, Energy Efficiency, Energy Generation

Ever changing priorities for energy buyers

by Noreen Guy

At a recent conference in London hosted by EdF, the audience members (over 300 UK-based energy professionals) were asked to ‘vote’ on which of the four following aspects were of greatest concern now, and results (from my rough notes) were very interesting:

Supply Contracts                                     11%

Compliance to regulations                      15%

Funding for Energy Efficiency                18%

Energy Price – volatility and risk           56%

Supply contracts – This is very much a UK result and could be influenced by the season. Most framework contracts are for three years, and most fixed price contracts for 2011 will be put to bed by the end of Q1. In our international business, the ability to secure favourable, even reasonable, supply contracts across all regions is a particularly skillful aspect of managing energy cost effectively. However, in the UK, even with a very well developed product range and many suppliers (yes, many), the range of outcomes can be extremely varied. Increasing pass through of risk to the consumer and complex / opaque pricing conditions remain in store for those unable to spend the time professionally testing their contracts or analysing the absolute detail of offers made.

Compliance to regulations – The survey was at the start of the day, but this result may well have changed by the end of the day as the excellent panel of experts informed consumers about the speed and significance of the anticipated changes. It’s within most businesses’ planning cycle that mandatory carbon reporting will be applied. The onerous fines included in CRC – The Energy Efficiency Scheme are just a taste of what non-compliance can entail.

Funding for Energy Efficiency – This is the one that probably was most surprising in terms of just how low it ranked. This is perhaps explained by the audience being mostly procurement and financially biased and not directly concerned with sustainability strategy.  However, with escalating taxes, high and uncertain prices, and the increase in mandatory schemes, this is a significant area of opportunity. In recent times in the UK, whilst our main contact comes from a financial or commercial function, there is increasing cohesion between sustainability and environment colleagues.

Energy Price – Volatility and Risk – This is not at all surprising, given the significant change compared to this time last year in terms of level and outlook. This time last year, power and gas prices were rangebound, having previously fallen by about 50% from the peak in July 08. Right now, however, prices (looking at Summer and Winter 11 power) are 25% higher, and the next month looks potentially pretty treacherous.  At the beginning of the year, there were no signs of the current upheaval in North Africa and parts of the Middle East, now impacting global energy markets. Today, it dominates our thoughts as prices respond in spite of plentiful supply.

There is plenty to test the energy consumer as we look ahead to difficult and unpredictable times.

Anyone who gets to the end of this blog may notice there are no football comments. Okay, except for this one:  Well done to West Ham for their result against Liverpool. Miracles do happen.

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