Making cleaner energy use comparable in price to traditional generation aims to stimulate investment in new technologies and encourage a move to green tariffs. Julia Pierce reports
With a rise in environmental awareness and changes in legislation that favour low-emissions companies, many businesses are trying to reduce their carbon footprints.
This process of ‘greening industry’ is taking a carrot-and-stick approach. while cleaner, greener companies can differentiate themselves and become more attractive to customers through moving towards carbon neutrality, the government is driving them with legislation such as the Climate Change Levy.
Introduced in 2001, this tax on the use of energy in industry and commerce aims to reduce carbon dioxide emissions by at least 2.5 million tonnes a year by 2010, and help the UK meet its targets for reducing greenhouse gas output.
By making cleaner energy use comparable in price to traditional generation, the reforms aim to promote efficiency, stimulate investment in new technologies and encourage business to move to providers’ green tariffs, which use energy from sustainable sources.
But demand for clean energy is far outstripping supply. A study by Datamonitor found customers want to buy 34TWh of electricity from renewable sources in 2007, three times the 12.2TWh of accredited renewable electricity produced in the UK in 2006.
‘The green and sustainability agenda has galloped on in the last 12 months,’ said Steve Fitzsimons, npower’s middle markets manager. ‘However, pure green energy is in very short supply. This is by design, as the government is trying to develop an incentive for power producers to meet higher demand. Having said that, there is a planning lag so it is difficult to bring new technologies on line, meaning it will be hard to close the gap between demand and delivery.’
British Gas said it wants to offer tariffs that use energy from renewable sources, yet conflicts between demand and the amount available mean it is instead offering tariffs from CCL-exempt sources, such as combined heat and power (CHP) and landfill gas, that are more efficient and environmentally friendly than traditional power.
‘We would like to offer a 100 per cent green energy tariff but are not able to at the moment,’ said a spokesman. ‘However, we make sure not to label the tariff as such, so people know what they are getting.’
Even so, critics are concerned that some green tariffs may not be as clean as users think.
‘There is concern that people may not know what they are buying,’ said Ian Byrne, deputy director of the National Energy Foundation. ‘Also, if they buy a green tariff from a supplier, they are getting the energy rather than this going into the National Grid. It means the country’s overall CO2 output is not reducing. People must instead make their choice by looking at whether the supplier is committed to developing new supplies. Generating electricity themselves on site is another good option.’
E.ON is investigating microgeneration, as this process is otherwise known, and can offer it to suitable businesses. Last year it was named as an official supplier in the government’s drive to increase the adoption of the technology.
Meanwhile, encouraging users to produce their own energy using CHP is being heavily promoted. Traditional coal-fired power generation in the UK has an average efficiency of about 34 per cent. Even modern, combined-cycle gas turbine stations only achieve a delivered efficiency of 50–55 per cent. By contrast, CHP plants are up to 80 per cent efficient, producing useful energy at the point of generation, in the form of both electricity and heat.
When installing CHP, though grants to offset some of the set-up costs are available through the government’s Enhanced Capital Allowances scheme, the cost of maintenance, price of the extra gas on which it runs, and the cost of connecting the system to the National Grid must also be considered.
British Gas recommends CHP for consumers who use light and heat simultaneously for more than 4,500 hours a year. But it says the system is also suitable for those who require refrigeration or cooling as part of their operations, as they can save money by switching to using absorption chillers that are driven by heat rather than electricity.
‘The changes you can make or may be prepared to make depend on the importance of energy to the business,’ said npower’s Fitzsimons. ‘Is it fundamental or a necessary evil? Whereas someone like Corus would have a huge incentive to invest heavily to optimise value, a small engineering firm would have interests in an entirely different arena. CHP requires a demand for heat for a substantial period of time to make it worthwhile. Electricity is really only a by-product.’
Do companies need so much energy? ‘It may be a cliché but the greenest energy is the stuff you don’t use,’ said Doug Stewart, chief executive of Green Energy UK, which supplies renewable energy through buying from generators and selling this on to customers.
‘There is full integration of supply through the National Grid using the existing infrastructure, meaning there is not risk to supply.’
Regulations mean these suppliers must buy as much as they take out to supply customers, and pay strict penalties if this practice is not observed. ‘It means customers can be assured that we are doing what we say,’ said Stewart. ‘We have a certificate of origin for the energy we buy.’
While many firms may be jaded about advice concerning energy-saving measures, Stewart urges them to think again. ‘People think they have heard it all before, but cutting energy consumption is very important; little things such as turning off the PC monitor rather than relying on a screensaver, or unplugging phone chargers.’
Keen to spread the supplies they have as widely as possible, large suppliers such as British Gas and E.ON are setting up their own consultants to advise users on reducing consumption. E.ON’s Sustainable Energy Solutions team offers energy efficiency surveys which can take up to three days to carry out. Advisers assess how the business is run then make recommendations on how to lower its consumption, with any changes also being monitored.
Energys, the consultant arm of British Gas, also audits customers’ energy use using tools such as active tracking, measuring energy use trends over time and relating this to production levels to see where waste occurs. ‘There is a lot of waste on most premises which can quite easily be eliminated by good housekeeping,’ said npower’s Fitzsimons. ‘You can’t eliminate waste until you know where it is. Getting a bill a month to six weeks after the event is too late — you need to install real-time measurement systems.’
His company also has a consultant arm called rwnpower solutions. ‘People are looking for support and education. They are very time-poor,’ he added. ‘Change is fine for big businesses with a corporate social responsibility agenda but smaller companies are finding it hard. They are getting beaten with the regulatory stick rather than seeing it as a way to differentiate themselves from their competitors.’
According to British Gas, many companies fail to put an energy efficiency plan into place, regardless of the impact of this on their bottom line, as they do not see energy as a variable cost that can benefit from changes in their behaviour. The company estimates that by measuring output and how changes in behaviour and policy affect this, firms may be able to cut energy bills by 20 per cent. Other energy-saving measures include changing older fluorescent lighting tubes for new versions with lower energy needs, and using timer switches for displays.
‘Volatile prices can encourage consumers to think about the way energy is generated and used and this can encourage them to improve efficiency,’ said Juliet Davenport, chief executive of renewable energy provider Good Energy. ‘This means more customers can be supplied from the same amount of generation using less resource, which is better for the environment.’
Good Energy sources its electricity from more than 300 independent renewable generators including solar, wind and small-scale hydro firms. Supplies are about 15 per cent more expensive than brown electricity. It also runs a microgeneration scheme, Smartgen, that pays businesses to create their own electricity.
While power suppliers are making it easier for industry to reduce its emissions footprint by offering green tariffs, this is not enough to combat climate change.
By considering their energy use, monitoring changes within this and altering their business practices — often in minimal ways — companies can make a drastic impact on their energy use. With power suppliers themselves offering consultant services, and customers responding positively to them, few excuses remain for those waiting for government to force them into action.
‘From a personal perspective, it would seem that legislation only comes when people don’t do enough of their own volition,’ said Fitzsimons. ‘People must grasp the opportunities offered by the new sustainability market. Those that do will do better than the firms who are waiting for legislation to drive them.’