Efficiency is back in the spotlight
Apr 17 - Works Management
Thirty years after the government's first publicity campaign for saving energy, a combination of fiscal and regulatory pressures is throwing the emphasis back squarely on reducing energy consumption. Paddy Baker reports
So what's behind this rising trend? Green pressures, for one thing. To reduce
carbon dioxide emissions, we need to burn less fossil fuel, which means being
more energy efficient and developing renewable energy sources. To help fund this
activity, a number of financial measures have been put in place. The Climate
Change Levy, for instance, has already put a premium on energy from renewable
sources. From January next year, the European Emissions Trading Scheme will
start to have an effect when the most intensive users of energy - around 15,000
installations across Europe - will have a cap put on their carbon dioxide
emissions. Investment bank UBS Warburg predicted last year that, mainly as a
result of the costs of the scheme, wholesale electricity prices would rise by
over 80% by 2010.
If that wasn't enough for British businesses to deal with, the situation has
been exacerbated by the UK having unilaterally set itself a carbon reduction
quota higher than its commitment under the Kyoto agreement. This move has
attracted criticism from a number of quarters - for example, EEF director
general Martin Temple has commented: "By setting the targets for reducing
emissions higher than those in our competitor countries, government will simply
add to the cost of manufacturing in the UK and potentially drive business away
to other more competitive but less efficient parts of the world, unconstrained
by the Kyoto protocols."
Buildings
But it's not just the intensive energy users who are likely to have to deal
with regulations in the area of energy efficiency. The Energy Performance of
Buildings Directive has to be enacted into EU member state legislation by 4
January 2006; although there will then be a three-year period while the
different countries put in place the energy rating systems that the directive
requires, it's clear that buildings will have to become more energy efficient
over time.
Catherine lredale, representing the NEMEX show* (which runs this month),
comments: "Construction companies will have to build to higher standards of
energy efficiency, incorporating more technologies such as intelligent heating,
air conditioning, fuel- efficient boilers and improved insulation, thereby
boosting the sector's spend. Businesses will also benefit from reduced fuel
consumption."
Occupiers of existing buildings will be affected too, she adds.
"Inefficient buildings will be penalised and the owners may be required to
trade carbon permits, thereby increasing the cost of their energy which will,
the government hopes, act as an incentive for businesses to spend on improving
their building efficiency. The costs here are likely to be significant."
And even before the European legislation begins to bite, Part L of the
Building Regulations for England and Wales, which deal with energy efficiency of
buildings, are due for their next revision next year. Changes are likely to
encourage the use of low-carbon solutions such as solar water heating and
photovoltaics.
All of this adds up to a situation where sticking to the status quo isn't an
option - improvements in energy performance will be increasingly expected, and
the fiscal environment will reflect this. However, those who can still recall
the time of the original 'Save It' campaign can take some comfort from the fact
that the solution isn't to move to a three-day week: there is a lot of advice
and assistance available, much of it from government-backed sources. And very
few companies are so efficient that there are not more savings to be had.
"Even organisations that have already made considerable savings in
energy consumption can make further savings. We find that most can cut energy
bills by at least 10% - often by introducing a number of fairly inexpensive
measures." So says Future Energy Solutions (FES), an organisation with over
25 years' experience working with government and businesses to reduce energy
consumption. FES works with companies in all sectors to show them how to reduce
energy bills, make operations more energy efficient, and reduce carbon
emissions.
Its solutions can involve innovative use of technology to reduce energy use
and carbon emissions - and in many cases, government incentives make the
technology more financially viable. FES recently worked with a high energy-using
print company to assess the application of on-site windpower as a means of
achieving its commitment to a 12% reduction target under a Climate Change
Agreement. This option would also enable the company to sell Renewable
Obligation Certificates for additional revenue.
What if a company has no budget for energy projects? SMEs in England, Wales
and Northern Ireland can apply for interest-free Action Energy loans to pay for
more energy-efficient equipment. The loans soon pay for themselves, and savings
after that point go straight to the bottom line.
Companies that have taken up these loans have saved an average of 18,000 in
this way. And let's not forget Action Energy's other services, which include
free surveys of energy usage, and its management of the Enhanced Capital
Allowance scheme, which provides tax breaks for companies that purchase energy
equipment from an approved list of products.
But it's not only government-backed organisations that can help manufacturers
to take the risk out of energy programmes. Companies such as utilities
consultants or contract energy management companies, which identify potential
savings for clients and then realise them, offer a win-win: the client saves
money, while the company providing the advice and implementation makes its
profit from taking a share of the savings it has created.
Some utilities specialists can help companies to get the best of both worlds
- reducing energy consumption and price. Stalybridge, Cheshire-based extrusion
company Stamford Group turned to McKinnon & Clarke to highlight any
potential savings that could be made at its sites in Park Road and Bayley
Street. Through a series of negotiations, implementations and improvements, the
company was able to cut 20% off the gas bill at Bayley Street, and save 78,000
on electricity and 4,300 on water at Park Road - saving the company over 85,000
in total.
Uncomplicated
A new player in contract energy management (CEM) is facilities management
company George S Hall (GSH), which is offering customers guaranteed savings with
its new CEM service, Energyplus. As GSH's group energy managing director Chris
McLain explains, this has been designed to eliminate many of the drawbacks and
complications associated with traditional CEM arrangements - such as long-term
contracts, a change of ownership of the energy plant, and significant
termination payments. It does this by making its margin from efficiency
reductions, which have to be above 5% - the level of savings that GSH will
guarantee on its clients' bills. The company has been offering this service for
some time to its maintenance clients in various sectors (including industry),
but has now formally announced it as part of its facilities management
portfolio.
The starting points of the service are a review of the customer's last 12
months of billing data and a site survey. The billing data is important because
the structure of the tariff will affect the site's optimum pattern of energy
use. The site survey looks to find savings, either by eliminating inefficiencies
in the current pattern of use or by installing energy-saving devices such as
controls and building management systems. Sometimes, relatively simple measures
can make a difference - such as staggering the start times of motors so that the
peak power demand is flattened.
GSH also promotes energy awareness among its customers' employees, using
presentations, information boards and a high- profile awards scheme to get the
energy-saving message across. All of this is at no cost to the customer-and as
the basic 5% savings are guaranteed, the risk is minimal.
Is it too much to expect that industry will sit up and take notice of the
need to save energy? One could argue that the situation doesn't change quickly
enough to prompt action: energy bills creep up over time, and even the sudden
impact of the Climate Change Levy a couple of years ago didn't provoke a massive
surge of interest. But maybe the combination of schemes and support on the plus
side, and new regulations and financial instruments on the minus side, will spur
industry to grasp this issue. Colin McNaught, a consultant with Future Energy
Solutions, comments that there is an advantage in moving first to adopt
energy-saving measures: "For those that don't respond t\o the carrot, there
is always the stick. Legislation and regulations will ultimately force these
changes - but the rewards, and the competitive edge, will go to the companies
that take early action."
"By setting the targets for reducing emissions higher than those in our
competitor countries, government will simply add to the cost of manufacturing in
the UK, and potentially drive business away to ... parts of the world
unconstrained by the Kyoto protocols"
Martin Temple, EEF
"Legislation and regulations will ultimately force these changes - but
the rewards, and the competitive edge, will go to the companies that take early
action"
Colin McNaught, Future Energy Solutions
* NEMEX, the national energy management exhibition and conference, runs from
30 March to 1 April at the NEC, Birmingham. See www.nemexenergy.com
Copyright Findlay Publications Limited Mar 2004