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Our 5-point plan to tackle energy costs
Sep 02, 2022
Can your business afford a x5 increase in utility bills?
UK businesses are about to feel the impact of unprecedented energy price rises. At a national level this equates to a £230bn annual increase. This is split into:
- £34bn increase in diesel/petroleum
- £85bn increase in gas
- £110bn increase in electricity (driven by gas)
Unfortunately, at a business level there is no protection from a price cap. An average FTSE250 firm using 16GWh of electricity will see over £7m per annum on-cost at the April 2023 annual contract price of £550/MWh. This is a x5 increase in cost compared to 12 months ago. Gas, diesel and supply chain will all make this exposure significantly worse for many organisations.
How does this impact your business?
- Buying Restrictions: The wholesale energy markets are no longer functioning properly, with buying options greatly restricted. Contract switching and forward price locking are very hard to do
- Credit Rating Exposure: This is becoming a huge focus for suppliers as concerns on bad debt increase. Collateral and PCGs will need to be widely considered in the future
- Business Risk: Huge cost increases combined with inflation = massive financial pressure. Many businesses will run up debts and possibly collapse
- Employee Welfare: Pressure on household finances will lead to stress, debt, long-term sickness and staff shortages
Our 5-point plan to act fast and prepare now
COVID-19 has shown that even in unprecedented conditions, businesses can adapt incredibly rapidly. With winter fast approaching, and no purchasing solutions available, a targeted strategy is required to reduce your exposure to these extreme cost rises.
To help you prepare for the worst-case scenario, we have put together a 5-point plan to tackle energy cost inflation:
1. Governance and decision-making
As a business leader you need to immediately create a team to manage this exposure—otherwise you might sleepwalk into cost increases. It must include senior key stakeholders who have the authority to make quick decisions, and also SMEs who know about day-to-day operations. This governance team should have weekly calls. If it is not working, change up the team.
TIMESCALE: Quick implementation will create energy savings within a few months.
2. Measurement and data
Without data you don’t know how to prioritise your actions or measure their effectiveness. Your data doesn’t have to be perfect from the beginning: use what you have and then try to improve the quality over time. Being able to budget accurately—to understand where and when you are using your energy —is essential to navigating through this energy crisis.
TIMESCALE: Data analysis can bring identifiable savings within weeks.
3. Optimise
Energy wastage is significant in almost all businesses. By combining clear data with quick decision-making, optimisation will give you the greatest short-term (non CapEx) benefits. Listen to employees, as they often come up with the best ideas. Ask yourself: do your systems need to run all day? Are all your buildings at full capacity? By optimising day-to-day operations, you can make savings of at least 20% per annum.
TIMESCALE: Some optimisation measures can be implemented within one month.
4. Employee Engagement
More than ever, your employees are your most important asset. Communicate the exposure you have to energy price inflation and the swift action you are taking. Also be aware how price rises are affecting their living standards and mental health. How will a change to working patterns impact their wellbeing? Do people still want to work from home? What can you do to help? Employees always vote with their feet. If you want to retain staff, go the extra mile.
TIMESCALE: Can be implemented within one month
5. Supply Chain Collaboration
Your immediate pain points will come from utility bills. But the costs from your supply chain will be at least x4 this amount—as costs of manufacture and transport increase. Switching supplier to find a better deal is a long drawn-out process, which will not have any impact this winter. We recommend pulling your key suppliers together to workshop what can be done in the short-term. This is a highly effective way of creating quick and immediate momentum. Restructuring contracts with FM or energy providers to incentivise cost reduction is a great example of how this collaboration can work.
TIMESCALE: Can be implemented within one month.
Our Tactical Instruction Plan (TIP) service
Our team of experts have real experience in rapid strategy development, procurement, supply change management, data structure creation, energy optimisation and project management. We also know energy, with decades of experience across the team. We know how to implement reduction plans for the lowest cost and the greatest impact.
We believe a Tactical Instruction Plan (TIP) is essential to create a clear and realistic short-term strategy to realise immediate cost benefits and reduce inflationary exposure.
A TIP includes:
- Stakeholder Engagement: Bring together the key decision makers to assess current ‘as is’ position at a financial and operational level
- Data Evaluation: Assessment of the current available data and immediate identification of areas of focus
- Plan Creation: Who does what, when it will get done, and what is the expected outcome. Repeat at intervals.
If you would like to learn more about how we can help your business to mitigate energy cost inflation, please get in contact with the edenseven team.
April was a record-breaking month for electricity generation in Britain, with the National Grid reporting that carbon emissions from electricity generation fell to 19gCO2/kWh for a period on April 15th, surpassing the previous record. Electricity sourced from fossil fuels dropped to 2.4% over the same period. Wind energy was the main contributing source to Britain’s electricity in April 2024, accounting for over a third (35%) of the mix, almost 10% more than in April 2023, and its highest contribution for April in the last four-years. Gas contributions fell dramatically compared to April 2023, representing only 17% of Britain’s electricity mix in April 2024, half of its April 2023 value. This is the lowest proportion of Britain’s monthly electricity it has made up since at least 2020. Solar contributions remained consistent with April for previous years, contributing 6% of the electricity mix in April 2024. Imports rose by 2%, comprising 15% of the mix, it’s highest proportion for April since at least 2020. Nuclear’s contribution rose by 2% from April 2023, to deliver 16% of Britain’s electricity mix in April 2024. Contributions from biomass, and coal increased by 1%, making up 7% and 1% of Britain’s electricity mix in April 2024, respectively. Both Hydro and Storage contributions remained consistent with April 2023. Almost 60% of the electricity generation in April 2024 came from zero-carbon sources, representing a 13% increase from April 2023, and the highest for April in the previous 4 years. The rolling 12-month average for May 2023 to April 2024 remains substantially lower than the previous three 12-month periods, at 143 gCO₂/kWh, and approximately a fifth lower (19%) than the previous 12-month period. Increasing the electricity generation delivered by renewable sources can help us achieve our Net-Zero ambitions, ensure energy security, and decrease reliance on imports.
Wind energy was the main contributing source to Britain’s electricity in March 2024, accounting for 33% of the mix, a 4% increase compared to March 2023, and its highest contribution for March in the last 4 years. Solar contributed 4% of the electricity mix in March 2024, a 1% increase compared with March 2023. Gas contributed 24% of Britain’s electricity mix in March 2024, the second lowest proportion of Britain’s electricity it has made up since at least 2020 and a 10% decrease compared with March 2023. Imports saw a 3% increase, comprising 17% of the mix, its second highest proportion since at least 2020. Coal, Nuclear, Biomass, Hydro & Storage contributions remained consistent with March 2023. More than half (51%) of the electricity generation in March 2024 came from zero-carbon sources, representing a 4% increase from March 2023, and the highest for March in the previous 4 years. The rolling 12-month average for April 2023 to March 2024 remains substantially lower than the previous three 12-month periods, at 148 gCO₂/kWh, and 17% lower than the previous 12-month period. Increasing the electricity generation delivered by renewable sources can help us achieve our Net-Zero ambitions, ensure energy security, and decrease reliance on imports.
26/03/2024 – edenseven is excited to announce that they have, within a consortium led by Peterborough City Council (PCC), been awarded a £2.75m grant by Innovate UK, part of a total £3.2m project, to boost the local authority’s ability to achieve net zero. This success is testament to PCC’s ambition to deliver a Net Zero City, the essential role that local authorities play in delivering carbon reductions nationwide, and the goal shared by edenseven and the rest of the consortium to support this journey. Working alongside edenseven and PCC, this consortium includes Cambridgeshire County Council, Nordic Energy, Energy Systems Catapult, and PECT. The shared aim of this team is to deliver ‘Peterborough Accelerated Net Zero (PANZ)’ over the next 18 months. This venture is designed to encourage healthier living, reduce costs, and develop a sustainable green skills market. Peterborough was one of the first cities in the UK to adopt a Local Area Energy Plan, which considered the current and future energy demands of heating, electricity, and transport, and laid out its pathway to reach Net Zero. PANZ will pioneer an approach to build on this Local Area Energy Plan, tailoring solutions to the needs of community and place. The project will support the Council in selecting projects that deliver on both carbon reduction and the Council’s many other aspirations for the city. It will encourage financial bundling of projects to create portfolios that can attract private investment, including district heating, and it will enable the Council to track the progress and impact of city-scale projects, making sure investment is directed toward the biggest environmental, social, demographic, and economic impact. edenseven aims to transform the way Local Authorities navigate the complex transition to Net Zero by developing an intuitive, tailor-made, carbon accounting and management platform that can provide a complete view of city-wide emissions and decarbonisation plans. It will give the Council a clear understanding of its current position against Net Zero targets, create insight to identify areas where action is required, and uses the reporting functionality to measure progress. Pete Nisbet, Managing Partner for edenseven, said: “In these pivotal years for decarbonisation in the UK, edenseven is thrilled to be collaborating with Peterborough City Council and the consortium on their Net Zero strategy. We recognise the critical role local authorities play in decarbonising the UK economy and are delighted to partner with forward-looking councils such as Peterborough and Cambridgeshire. This partnership creates a cross functional team equipped to deliver immediate actions for the local economy, as well as supporting the efficient future management of Net Zero projects. It marks the inception of a unique partnership across the public. private and third sectors and showcases our commitment to pioneering sustainable solutions that create social impact.” For more information about the Innovate UK funding, visit Innovate UK invests over £25m in net zero projects – UKRI About edenseven edenseven is a sustainability consultancy and technology provider that uses data and market experience to enable companies and their supply chains to play their part in tackling climate change while achieving sustainable growth. edenseven uses the combined power of data, advanced analytics, and pragmatic project management to help companies baseline their status, identify improvement opportunities in the short, medium, and long terms, and plan and implement those opportunities. For more information, visit our website: www.edenseven.co.uk
In February 2024, wind energy was the main contributing source to Britain’s electricity, accounting for 35% of the mix, a 4% increase compared to February 2023, but lower than the contribution in February 2022 (40%). Gas accounted for 27% of Britain’s electricity mix in February 2024, a 6% decrease compared with February 2023. Solar contributed 2% of the electricity mix in February 2024, a 1% decrease compared with February 2023. Coal and Nuclear contributions remained consistent with February 2023, delivering 1% & 11% of the mix, respectively. Imports and hydro saw a 1% increase in their contributions, comprising 14% and 3% of the mix. Biomass increased by 2% to the 7% of the mix compared with February 2023. More than half (51%) of the electricity generation in February 2024 came from zero-carbon sources, representing a 4% increase from February 2023, but lower than February 2022 (60%). The carbon intensity for Britain's electricity generation in February 2024 was 19% lower than for February 2023. The rolling 12-month average for March 2023 to February 2024 remains substantially lower than the previous two 12-month periods, at 151 gCO₂/kWh. Increasing the electricity generation delivered by renewable sources can help us achieve our Net-Zero ambitions, ensure energy security, and decrease reliance on imports.
edenseven are following trends in the renewable energy sector closely, as decarbonising the energy sector is vital for ensuring a sustainable future and achieving Net Zero. Considering the recent DESNZ quarterly update of the renewable energy planning database, we have produced a consolidated summary of projects in the United Kingdom that have received planning permission. We will continue to release updates each quarter. INSIGHT In the past 12 months, the highest number of solar PV projects were granted planning permission in the UK compared to any other 12-month period (out of the period included in analysis). This number is 54% higher than the second-highest 12-month period. As a result, the electricity capacity of solar PV projects granted planning permission is at its highest of any 12-month period (out of the period included in analysis). Although fewer onshore wind projects received planning permission, they are expected to produce 46% more electricity than projects granted planning permission in the previous 12 months.
Gas was the primary contributor to Britain’s electricity in January 2024, accounting for 36% of the mix. This was an 8% increase compared with January 2023, although this was lower than the contribution in January 2022 (37%). Wind energy was the second-largest contributor, accounting for 33% of Britain’s electricity mix in January 2024. This is a 3% decrease compared with January 2023. Solar delivered 2% of the electricity mix in January 2024, which is a 1% increase compared with January 2023 and its highest contribution for January in the previous three years. Coal’s contribution remained consistent with January 2023. Nuclear contributed 9% in January 2024, a decrease of 5% compared to January 2023, and the lowest level in the previous three years. Imports and hydro contributed 9% and 2%, which is a decrease of 2% and 1 % compared with January 2023. Biomass contributed 6% to the mix, representing a 2% increase compared with January 2023. Almost half (47%) of the electricity generation in January 2024 came from zero-carbon sources, matching January 2022 but significantly lower than January 2023, which had approximately 10% more from zero-carbon sources. Despite this, the rolling 12-average for February 2023 to January 2024 remains substantially lower than the previous two 12-month periods, at 154 gCO₂/kWh. Increasing the electricity generation delivered by renewable sources can help us achieve our Net-Zero ambitions, ensure energy security, and decrease reliance on imports.
What is it? The International Financial Reporting Standards (IFRS) announced two international sustainability standards in 2023, IFRS S1 & S2. IFRS S1 is for sustainability-related financial disclosures and IFRS S2 is for climate-related disclosures. The two standards are designed to be applied together. The standards fully incorporate the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). This means that organisations that comply with the requirements of IFRS S1 and S2 will also be meeting the requirements of TCFD. The standards are voluntary unless adopted into national legislation. The UK is strongly considering adopting the standards into the UK Sustainability Disclosure Standards (UK SDS), currently being developed and due to be announced in July 2024. Who does it apply to?
What is it? The Corporate Sustainability Reporting Directive (CSRD) is an EU directive announced in 2021 to improve corporate transparency, data accuracy, and comparability of their sustainability performance and their associated sustainability risks for investors and stakeholders. CSRD replaces the Non-Financial Reporting Directive (NFRD) and seeks to address its shortcomings by increasing the number of companies in-scope from around 12,000 to 50,000, requiring third party assurance, ensuring a machine-readable format, and requiring additional disclosures covering a broader range of sustainability topics. Additionally, CSRD was developed to align with other frameworks and standards, such as the EU Taxonomy and TCFD, creating harmonised reporting. Who does it apply to?
What is it? The Task- Force on Climate-Related Financial Disclosures (TCFD) was created in 2015 by the Financial Stability Board (FSB), to increase the number of company’s reporting climate information and improve the quality of disclosures. In 2023, TCFD was disbanded as it was deemed to have fulfilled its role. However, in-scope companies are still required to disclose TCFD information. The International Financial Reporting Standards (IFRS) has taken over the monitoring of disclosures. Companies that comply with IFRS sustainability standards, S1 and S2 will also meet TCFD recommendations because these recommendations have been incorporated into the standards. The UK is considering implementing the IFRS S1 and S2 requirements into the UK Sustainability Disclosure Standards (UK SDS), which are expected be announced in July 2024. Businesses should prepare to be compliant with IFRS standards in preparation for upcoming regulation. Who does TCFD apply to?
Well, kind of. In October 2023, TCFD was disbanded after fulfilling its purpose of enhancing corporate climate reporting by creating a widely utilised climate reporting framework. The International Financial Reporting Standards (IFRS) Foundation has taken responsibility for monitoring corporate TCFD disclosures. So, what does this mean for UK businesses? UK businesses within the scope of TCFD reporting are still required to report. IFRS has developed sustainability standards which fully incorporate the TCFD recommendations, known as IFRS S1 and S2. IFRS S1 is for sustainability-related financial disclosures and IFRS S2 is for climate-related disclosures. This means that organisations that comply with the requirements of IFRS S1 and S2 will also be meeting the requirements of TCFD. Does this mean UK businesses will be required to comply with IFRS S1 & 2? Presently, IFRS S1 and S2 remain voluntary disclosures as they have not been adopted into UK legislation. However, this is expected to change. The UK government has expressed interest in adopting IFRS S1 & S2 into its UK Sustainability Disclosure Standards (UK SDS), currently being developed by the Department for Business and Trade. These standards are expected to be released in July 2024 and are likely to then be adopted into UK legislation. When this happens, businesses will need to disclose more information than currently under TCFD. This is likely to include sustainability disclosures that go beyond climate change, such as for water, pollution, biodiversity, resource use and management, whilst also focusing on the social and governance of the business, including the internal and external workforce, and business conduct. What businesses need to do With the increasing regulatory landscape, businesses must focus on data and accelerate their sustainability journeys. Businesses will need to identify, collect and analyse sustainability-related data to ensure they are prepared for upcoming regulations. This includes understanding the environmental impact from their operations and their supply chain. It is also essential to formulate an actionable pathway to Net Zero. cero.earth, our carbon accounting and management platform, provides a seamless solution to ensuring compliance. Capturing and analysing your data, giving you a comprehensive picture of your carbon emissions across scopes 1, 2 and 3, the ability to map carbon scenarios, input business defined targets, create action plans and track performance. The ‘Managed’ solution means all the data capture and reporting is done for you by our expert team, and with the ‘Strategic’ option so is all your compliance reporting – taking the problem away from you entirely.
