Making energy work for you - Business Works

Making energy work for you

Alan Aldridge, Executive Director ESTA

G iven the difficult economic times we face, being efficient and cutting out waste is a vitally important task for all businesses. Energy is an excellent place to start, argues Alan Aldridge, Executive Director of the Energy Services and Technology Association (ESTA).

Most of the country’s economic productivity is driven by SMEs. However, the sheer diversity of enterprises covered by this term makes them very difficult to deal with as a single, neat ‘group’ – and this is especially true for policymakers. There is no such thing as a typical SME, but they do have certain things in common. Whatever they produce, whatever service they offer, the more efficiently they can deliver it, the higher the profitability is likely to be. The more they can cut out wastage, the more resources remain accessible to the business. And in today’s trading climate, the twin goals of efficiency and wastereduction are essential for maintaining profitability and business viability.

Policymakers often find it difficult to understand why some efficiency programmes do not get the attention they deserve. Take energy saving for example. A study by the Carbon Trust a couple of years ago, focussed on the difficulties facing SMEs in reducing their energy consumption (and emissions), despite grants and copious amounts of advice and information being available. The reasons for the lack of take-up were not surprising though, especially for those actually engaged in these enterprises. Energy is a relatively small part of a firm’s overheads and so SMEs tend not to have dedicated energy managers who focus solely on that task. It can easily get lost in the effort to develop a market position and turn a profit.

However, times are changing. Energy is becoming more expensive and not just because of geopolitical events like the annual dispute between Russia and its neighbours which can disrupt winter gas supplies to Europe. Electricity produced from coal and oil – and to a certain extent from gas – results in carbon dioxide emissions to the atmosphere. Although the debates continue about the scientific basis of human-induced climate change, most scientists and governments are agreed on the broad conclusions that it is happening and that we have to act to limit its impact. That means encouraging people – by carrot or stick – to stop using so much fossil-fuel based energy.

Businesses already have to pay the Climate Change Levy (CCL) as part of their energy bills and larger organisations are being included in carbon trading schemes like the EU Emissions Trading Scheme and the UK CRC Energy Efficiency Scheme. With targets for CO2 reductions now enshrined in law, this country must reduce its emissions by over 30% within 10 years – and more than 80% by 2050. So the Government is forcing energy companies to invest in low carbon renewables, or pay a price penalty – which of course feeds through ultimately to the consumer in higher overall prices. At the same time, increasing global demand for energy – primarily by the rapidly expanding economies of Asia – is also driving prices inexorably higher. That process does not look like it will stop any time soon.

Why focus on energy efficiency?

Yet even if energy prices rise significantly, they will probably remain a relatively small component of most SMEs’ overall operating costs. So why focus on them when so many other things are demanding attention? Well there are several reasons.

First, energy costs are controllable as hundreds of thousands of businesses have found to their benefit. Not only that, many of the ways in which energy consumption can be reduced require little or no financial outlay.

Secondly, in these economic times, any unnecessary expenditure is harming your business and its viability. The image of burning five pound notes is a good one because energy wastage goes literally ‘up the chimney’ (either yours or the power station’s) – and comes straight off your bottom line!

All businesses aim to cut out wastage and deliver their products and services at a competitive price that maximises profitability. And the search for efficiency should be a core management discipline. Why then should energy be any exception?

There is also a ‘green benefit’ to business. Being resource-efficient is good for the environment. Many SMEs operate in a supply chain with major corporations who are very conscious of their green credentials and will place environmental demands on downstream suppliers. So, being energy-efficient and reducing carbon emissions could be an important selling point to major customers.

Finally, as mentioned above, energy prices are going up and there is no obvious reason for that trend to change. Getting a grip on energy consumption now will place you on a better trajectory than your competitors.

So, how to cut consumption, improve efficiency and reduce carbon emissions? The first priority is to determine how much energy is being used and where. For that you need meters. Now the utility meters will be able to tell you a certain amount of information, provided of course you can get access to them (they are often rather difficult to find and read, especially water meters). But even these should be able to tell you if there is any unexpected usage – at night, over weekends, during holidays or shutdowns for example.

Monitoring & Targeting

Figure 1
Figure 1

But to really get a grip on energy, you need to consider installing Monitoring & Targeting (M&T) systems that can take regular readings with a good amount of detail – say every hour. Such systems, including the meter, are not expensive and can be expected to make a return on investment within months – less if it pinpoints a major problem! The costs of electronics are coming down all the time and the development of wireless and Ethernet communications are reducing the costs of hardwiring as well, so such systems can often be less expensive than they were a few years ago.

And just as the physical components of these systems are improving all the time, so is the software. In fact, Monitoring & Targeting as a technique has been going through a revolution similar to that experienced by office administration systems in the 1990s when so many tasks were automated. Today’s automatic Monitoring & Targeting (aM&T) systems will do the data collection and analysis themselves, presenting managers with reports in just the same way as most other business administration systems will. That is ideal for SMEs where a single manager will have a number of roles including energy management. It is also a particular benefit for organisations with more than one site or building as it eliminates the tedious and timeconsuming collection of data. aM&T is not expensive; Figure 1 shows the typical viability of investment depending on the number of sites and energy expenditure.

Figure 2
Figure 2

The finer the detail the more it is possible to bear down on costs. For example, aM&T will indicate both breakdown (leading to unexpected and sudden increases in consumption) and ‘drift’ away from default settings over time, see Figure 2. Early action to either of these types of problems will cut out waste and reduce bills. It will also highlight where settings are incorrect in the first place (lights and boilers running overnight or at weekends, air conditioning and heating systems being on at the same time and ‘fighting’ against each other, for example).

Once the existing systems are operating efficiently, improvements can then be considered. But justifying new equipment can only realistically be done against a background of historic performance. If a new lighting system uses only 30% of the existing load, the actual pattern of use must also be known if the payback period is to be calculated.

The term ‘utilities’ covers more than just electricity. For most businesses it will involve also gas and water. These are normally less complicated for SMEs, because they are not generally offered a range of tariffs. However, the principles of using gas and water efficiently, as well as detecting and eliminating waste, are the same. Indeed, a single aM&T system should be able to manage all three.

Smart and advanced meters

The Government is committed to installing smart or advanced energy metering in both households and non-domestic premises over the coming years. That, in conjunction with an adequate M&T system, should help businesses to save money and reduce consumption. Unfortunately, the details of the programme have been less than clear. First of all, what is the difference between ‘smart’ and ‘advanced’? In our view, as an association of more than 100 specialist energy management companies, not much. And surprisingly, ‘advanced’ meters are – at least for businesses – more flexible and smarter than ‘smart’ meters. Things like remote disconnection on smart meters will not apply to business customers.

All large energy users will receive advanced metering from their supplier by the end of 2014. All households will receive smart meters with a visual realtime display by 2020. But those in between, ie. all SMEs, have a choice. By default, they will receive smart meters. However, they can elect to have advanced metering. The benefits are that advanced metering can integrate with customer- owned M&T systems (smart meters will not have this functionality) and that advanced metering has a shorter installation timeframe (to be completed six years earlier!). So contact your utility supplier today to register your interest in ‘advanced’ meters!

The CRC Energy Efficiency Scheme

Most businesses will have heard of the introduction of the Government’s CRC Energy Efficiency Scheme (it used to be called the Carbon Reduction Commitment – the programme retains the ‘CRC’ in the title – but the focus has changed to energy efficiency). This introduces carbon trading to a whole new range of large organisations beyond just the energy-intensive ones already in the EU Emissions Trading Scheme. However, the emphasis is on ‘large’ energy users. Only those organisations with half-hourly electricity metering and an annual electricity demand of more than 6,000MWh are included (although those with this kind of metering but using between 3,000-6,000MWh have to confirm by the end of September that they do not qualify). So, few SMEs will be ‘captured’ by the scheme although many large companies do have many small sites. If you are, though, you need to register with the Environment Agency, the scheme administrator, before the end of September.

The advance of technology

Technology is continually moving forward. Today’s latest advance becomes yesterday’s outdated model very quickly. Computer capacities seem to increase exponentially, while completely new avenues of research revolutionise our ways of doing business (mobile communications, the internet, for example).

Paradoxically, SMEs are in a better position to take advantage of many of these advances than large, corporate organisations or public sector bodies. An SME’s success often relies on adapting quickly to new demands and taking on board changing market conditions. Most of ESTA’s members fall into the SME category and have been successful by adapting to new situations and pursuing opportunities in the energy efficiency market over several decades.

Rapid change can also be confusing, though. Senior managers have to decide what is best for the specific circumstances of their business and much of the advice available is rather generic. That is why industry associations exist – not just to protect the interests of their members but also to explain to the wider marketplace how to take advantage of the latest advances in particular fields.

So, in a difficult economic situation, where investment has to be justified in terms of business growth and viability, why not contact ESTA for advice on how to improve your energy and environmental performance? Or come along to one of our free, one-day conferences this autumn, held at a number of locations around the country. We will look forward to meeting you.

For more details visit the website at:

The Energy Services and Technology Association (ESTA) represents over 100 major providers of energy management equipment and services across the UK.

Tweet article
BW on TwitterBW RSS feed