Energy saving actions from the boardroom speak louder than audits

by Search Gate staff. Published Wed 18 Mar 2015 18:55, Last updated: 2015-03-18
Big business should invest low oil price savings in long-term opportunities.
Big business should invest low oil price savings in long-term opportunities.

Jamie Pitcairn, director at leading sustainability consultants Ricardo-AEA, here discusses the business advantages of energy efficiency and how the Energy Saving Opportunity Scheme is one piece in the jigsaw that will help companies save on both carbon and cash.

The UK’s Energy Saving Opportunity Scheme (ESOS) requires companies with 250+ employees or annual turnovers exceeding €50 million to undertake regular energy audits to identify cost saving opportunities.

This is an important step that will help businesses become more competitive and energy secure. But in order to reap these benefits companies need to actually implement the cost-savings solutions identified in their audits. Over the last decade, Ricardo-AEA has helped clients identify savings worth over £10 million per year. So why aren’t more businesses cashing in on these opportunities?

The reality – energy efficiency needs a higher profile

There are many barriers to implementation. The usual suspects are: lack of time and money, associated risks and a lack of confidence in the solution. These are all legitimate barriers but not ones that are insurmountable when presented with a strong business case.

Having worked with many businesses it is apparent that the commonly cited barriers are not always genuine. For example, even savings which require no capital investment are still not implemented. So there is something else effecting a business’ decision to implement.

Constrained by limited resources, businesses will naturally focus on core activities such as production processes and cash generating elements. The result is that energy efficiency becomes a peripheral issue and is only reviewed when it becomes a strategic issue – health & safety or breach of regulation. So the profile and benefits of energy efficiency needs to be raised.

ESOS can help

ESOS does present part of the solution. The scheme will not require businesses to implement cost-savings but it will require ‘sign-off’ from a senior manager – thereby raising the profile of the opportunity.

In my view it will help to focus senior management attention on projects which would not otherwise pass across a director’s table. It will also help to shine a light on these opportunities, providing investor pressure to implement the opportunities identified in an audit. A point shared by Miles Alexander of the Green Investment Bank:

“The Energy Savings Opportunity Scheme is a great chance for shareholders to engage more with energy efficiency. Companies will have to identify energy savings opportunities by the end of this year. Shareholders will then be able to see the value of implementing energy efficiency to reduce company costs, to increase profits and to raise dividends.” Miles Alexander, Director Energy Efficiency, GIB

Added value – supporting implementation

Simply conducting an ESOS audit is not going to increase the level of implementation per se but it will help.

Pushing the decision up to boardroom level will make more companies realise the scale of savings that can be made and assess the implications of not taking advantage of energy savings that are available to their competitors. Smart companies will incorporate ESOS into their 5-year plans, maximising the cost savings, which will not only reduce overheads but put them at a competitive advantage.

Impartial advice can play an important role here, explaining the benefits of different technology and providing clear decision-making support to executives and decision-makers. The chances are senior managers and boards will not have made a large investment decision on energy efficiency before and so instilling confidence and trust is paramount. Support must be provided to guide senior managers through the investment process and technology choices. For example, providing sources of funding, technology option appraisals and an ability to support the procurement process.

Energy costs will rise
The first round of ESOS energy audits need to be complete by December this year. Businesses should not look at this scheme solely as a compliance issue buFor example, this might be through the provision of sources of funding, technology option appraisals and an ability to support the procurement process.t recognise the opportunity in ESOS.

One final thought to leave you with – the benefits of implementing energy saving measures only look set to increase. From 2004 to 2013, average industrial prices for electricity supplied through the grid rose from 3.3p/kWh to 8.1 p/kWh in nominal terms (i.e. by 142%, compared to general price inflation of 23%).

While the oil price is currently relatively low, this is unlikely to last in the medium/long term. The industrial and commercial sectors could see a 30-45% increase on energy bills to 2030, according to latest projections from the independent Committee on Climate Change (CCC). Businesses should take the savings they are currently receiving from the low oil price and invest in long-term opportunities.

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