Energy crisis impacts business says survey from ABB

A survey of business leaders carried out by ABB has has found that 92 percent of leaders in 2,300 businesses across ten countries think that rising energy costs pose a threat to profitability and competitiveness. David Lowen, Lead Business Manager for ABB Electrification in the UK, discusses the findings.

What are the key findings of the survey?

Most media coverage of the energy crisis has rightly focused on households – but as it continues to rumble on, we thought it was worth finding out how it’s impacting industry. We found that business leaders see challenges in three areas: competitiveness, investment in the workforce and delaying decarbonisation.

Businesses are having to rethink how they operate and where they invest, with a third of respondents highlighting lower profit margins. A further third are planning budget cuts in important areas for business growth such as R&D, technology, infrastructure or marketing.

Companies are also cutting investment in the workforce. Three of the top five business areas highlighted for budget cuts are related to people. Around 40 percent of leaders plan to spend less on recruitment; salaries, overtime and bonuses; and training and development. 

Another important finding was that concern over energy pricing and energy security could delay progress on decarbonisation. Business leaders now see carbon footprint commitments as being less important that controlling energy costs. Almost three in five said that energy cost could delay their sustainability targets by up to five years. Eighty three percent are concerned about energy security and the potential for power cuts and blackouts, or energy rationing.

The survey covered ten key markets: US and Brazil in the Americas; Germany, UK, Sweden and Italy in Europe; China and India in Asia; and Australia. Broadly speaking, the findings in the UK were similar to other markets. One notable outlier was that China was the only market where business leaders see the pandemic as a bigger threat than energy prices, which is likely related to their Zero Covid policy.

What are businesses doing to mitigate high energy costs?

There is no single solution to the impact of the energy crisis. It may be possible to access advice from business networks or support from government schemes.

One of the most popular tactics is to install on-site wind turbines or solar panels. This can supplement grid energy and be used as a source of income by selling excess energy to the grid. More than 40 percent of businesses reported they are considering this or have done so. A further 36 percent have put a power purchase agreement (PPA) in place to make energy costs consistent over the long term. 

Improving industrial energy efficiency is another way to cut energy costs. It has the additional benefit of reducing greenhouse gas emissions at the same time. For example, smart building technology will provide enhanced control over lighting, shading and HVAC (heating, ventilation and air conditioning) systems. It enables businesses to conserve energy by spaces only when they are occupied and by using solar shading rather than HVAC for cooling.

This is a tactic that we are using ourselves at our Frosinone site in Lazio, central Italy. We have achieved a 30 percent energy saving by retrofitting smart hardware and using an energy management system.

Another technology solution is to install a generator – and around 35 percent of respondents are considering this, although this will increase a site’s carbon footprint. With this in mind, it was encouraging to see that 35 percent were considering installing on-site battery energy storage. A further quarter of respondents are looking at the potential to transform their site into a self-sustaining microgrid.

One example of a microgrid operator is in Greater Manchester. A local authority is deploying Phase 1 of a microgrid at its environmental services site this spring. This will integrate solar panels, EV charging points and an air source heat pump. In the long term, the council is seeking funding for a Phase 2 that will include biomass gasification units, Combined Heat and Power (CHP) and battery energy storage. This will make the site a carbon-negative microgrid that relies only on tree clippings and renewable energy and exports power to the grid – a model that could be adopted at many other small-scale sites.

Ultimately, investing in energy efficiency measures will pay for itself through reduced energy consumption – an effect that is especially helpful when energy prices are high. An energy audit can help businesses to identify areas for potential savings, as well as the cost and return of investment for making improvements.

Download the full report here.