A welcome respite but energy price cuts are short term

Industry comment

Published: 16 January

Author: David Bakst

Type: Industry comment

Year: 2012

A welcome respite but energy price cuts are short term – volatility likely to continue for UK businesses, warns Sabien Technology.

  •     Recent price cuts are primarily driven by mild winter
  •     Compelling reasons to harness proven retro fit energy saving technology
  •     Becoming more energy efficient will help mitigate UK businesses exposure to volatile energy prices

UK businesses should not ‘rest easy’ following the recent energy price cut announcements, warns Sabien Technology.

The energy efficient product manufacturer said that while suppliers such as EDF, British Gas and Npower (BBC news 11/01/2012) have announced energy price reductions as a result of falling wholesale gas prices primarily triggered by the mild weather, UK businesses should not take comfort but consider the implications of longer term price volatility.

A recent hard hitting study (see note 1) carried out by a London School of Economics research team concluded thatUKfirms can expect energy costs to rise over the next 10 to 15 years whatever pathUKgovernments take on energy provision.

“Prices are going up in all scenarios – actually it was quite hard for us to find a longer term scenario where prices wouldn’t go up,” said Dr Sam Fankhauser, author of the report, (commissioned by energy firm npower).

“The LSE study has crucially looked at the longer term trends, which helps to promote the bigger picture, rather than the moves by some suppliers hoping to improve their customer image with cuts which have effectively followed persistent price increases since 2001,” said Sabien Technology chief executive Alan O’Brien.

“UK businesses should not forget the impact of energy and climate change policies on the prices. According to DECC  (Department of Energy and Climate Change – see note 2) energy bills for non-domestic users will increase by 26% by 2020 due to energy policies, these increases will happen regardless of milder weather” said O’Brien.

And, echoing the LSE research findings, a National Grid senior executive argued in a recent (January 2012) Sky News broadcast interview (see note 3) that UK firms must become more energy efficient – crucially focusing on heating and lighting and harnessing key energy efficiency initiatives to counter the inexorable rise in fuel prices.

“These are hard times for business, and although it looks like there is a temporary, modest reprieve with some suppliers dropping prices, there is evidence from a number of highly respected sources concluding that high energy prices will continue for the foreseeable the future,” said O’Brien.

“But businesses and wider institutions can mitigate these high prices by utilising proven energy saving technology,” he added.

“Just take a look at the recent study on energy costs for the region of West Yorkshire (see Note 4),” said O’Brien.

The West Yorkshire region, which includes major cities Leeds andYork, is expected to see its energy bill rise from £5.38 bln to £7.24 bln by 2022, according to a report produced byLeedsUniversityfor the Centre for Low Carbon Futures.

At the same time the report argues that the region could offset over 60% of that increase through an investment of £4.9 bln in energy efficiency improvements.

Funding is also in place for the public sector to take advantage of the commercial benefits of going ‘green.’

Salix Finance, the independent not for profit company, last month announced that it had been awarded an additional £20million by the Department of Energy and Climate Change (DECC) for its successful public sector energy efficiency loans programme.

The loans, which are available for efficiency projects inEnglandacross the public sector – from schools and universities to local authorities and NHS Trusts – before the end of March 2012, will save organisations money on energy bills and reduce carbon emissions.

Increasingly attractive to both blue chip firms and local and central government bodies, Sabien Technology’s boiler efficient product has helped many to slash their energy consumption – and bills.

Major Sabien client Lincolnshire County Council (LCC), for example, reduced reduced its gas consumption by 15% after installing Sabien’s MG2 boiler load optimisers across 23 of its properties (see Case Study section at www.sabien-tech.co.uk/case_studies)

The technology will also reduce the council’s carbon footprint with a reduction in CO2 emissions of 1,980 tonnes expected over five years.

Another major institution to benefit from Sabien technology is the Universityof Central Lancashire(UCLan – also available to view in Case Study section at www.sabien-tech.co.uk)

Sabien’s M2G intelligent boiler load optimisers are currently reducing gas consumption at UCLan by an average of 9% with the institution expecting to recover the cost on its investment in just less than 1.5 years.

In a further endorsement of its patented M2G technology, Sabien also recently received a £1 million order from BT (November 2011).

The telecommunications giant has been rolling out Sabien’s boiler technology across its 7,500-wideUKbuilding estate since 2009.

Notes:

  •     LSE: The Future Report: Demanding Times for Energy in the UK, media release, November 2011
  •     DECC: Estimated Impact of Energy and Climate Change Policies on energy prices and bills – July 2010
  •     (2), National Grid, Sky News Interview, Jan 2012
  •     The Economics of Low Carbon Cities: A mini-Stern review for the Leeds City Region,LeedsUniversityon behalf the Centre for Low Carbon Futures, January 2011
  •     Salix Finance, media release, December 2011

To find out more about the M2G boiler load optimisation please click here