Energy Industry - your opnion

The energy industry – your opinionAutumn 2013

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Energy industry – Your opinion

Water, Energy & Environment in association with BIU has conducted a survey* to assess the current state of end users opinion of the

energy industry in 2013. This report looks at how the readership views the state of the energy market. It looks towards the future and how end-users view the changes wrought by such policies as Electricity Market Reform contained within the energy Bill that is currently passing through Parliament.

There is an optimistic view of the future with the majority (63%) believing that energy prices will not rise by more than 30% in the next five years. Expertise within the readership is high and most favour energy efficiency as the way to help combat price rises. The appetite for genuinely reducing energy consumption is definitely evident along with actual action. Over the last year 92% have implemented energy efficient projects. Renewable energy is also moving up the corporate agenda with 38% planning to militate against price rises by adopting onsite renewable energy.

Barriers to implementation are changing with board level engagement, historically cited as an obstacle to investment, only being selected by one third of the readership, the biggest problem with two thirds of the vote was finance and then ability of readers to verify savings (41%). One way around finance problems is outsourcing via an Energy Performance Contract in which the upfront capital is paid by the contractor and recouped through the savings but this was not a popular choice for respondents. Only 28% said that they would consider one and that it would help get around finance problems, 66% would not even consider it at all. The demand for measurement & verification is being met by the industry with a move to standardise on the international protocol, IPMVP.

Consultants are used by a number of organisations but for specific tasks rather than handing over too much control of their energy management responsibilities. Relationships with both consultants and suppliers are very good which is in stark contrast to the loud minority that we read about in the national press or hear about anecdotally.

I hope you find this an interesting read.

If you would like a digital copy then please email me at: [email protected]

*118 readers of Water, Energy & Environment were surveyed in August 2013.

3

Energy industry – Your opinion

Water, Energy & Environment in association with BIU has conducted a survey* to assess the current state of end users opinion of the

energy industry in 2013. This report looks at how the readership views the state of the energy market. It looks towards the future and how end-users view the changes wrought by such policies as Electricity Market Reform contained within the energy Bill that is currently passing through Parliament.

There is an optimistic view of the future with the majority (63%) believing that energy prices will not rise by more than 30% in the next five years. Expertise within the readership is high and most favour energy efficiency as the way to help combat price rises. The appetite for genuinely reducing energy consumption is definitely evident along with actual action. Over the last year 92% have implemented energy efficient projects. Renewable energy is also moving up the corporate agenda with 38% planning to militate against price rises by adopting onsite renewable energy.

Barriers to implementation are changing with board level engagement, historically cited as an obstacle to investment, only being selected by one third of the readership, the biggest problem with two thirds of the vote was finance and then ability of readers to verify savings (41%). One way around finance problems is outsourcing via an Energy Performance Contract in which the upfront capital is paid by the contractor and recouped through the savings but this was not a popular choice for respondents. Only 28% said that they would consider one and that it would help get around finance problems, 66% would not even consider it at all. The demand for measurement & verification is being met by the industry with a move to standardise on the international protocol, IPMVP.

Consultants are used by a number of organisations but for specific tasks rather than handing over too much control of their energy management responsibilities. Relationships with both consultants and suppliers are very good which is in stark contrast to the loud minority that we read about in the national press or hear about anecdotally.

I hope you find this an interesting read.

If you would like a digital copy then please email me at: [email protected]

*118 readers of Water, Energy & Environment were surveyed in August 2013.

3

The majority (52%) think that prices will rise over the next 5 years by 10-30% which although it is not a good thing it is at least possible to militate against such increases. The readership shows an optimistic outlook when compared to other predictions such as research conducted with independent market analysts Waters Wye Associates by Power Efficiency. It shows that energy costs have increased by 77% since 2004 and this trend is expected to continue with a further 81% rise expected over the coming decade.

Research shows that when energy is split into gas and power many are more confident that gas has less upward pressure than power, which given the volatility of global markets and the contrasting controllability of electricity says a lot about what business consumers think about the effects of UK policy.

Over 87% are planning to mitigate against higher energy prices by implementing energy saving projects within their organisations. The desire for action to reduce consumption seems to be apparent; as ever there is the problem of getting this translated into action. However, there can be no denying the will to act.

Encouragingly for the smaller scale renewable industry 38% of respondents plan to have some form of renewable generation as a shield against further price hikes. The embracing of renewable energy technologies shows a real turnaround in attitude from a business community that was wary and skeptical of true value being achieved through these routes.

Against this backdrop of demand side action, 62% of readers will also pursue a strategy of better procurement believing that there are methods to constrain price increases through understanding and managing their position in the market.

How much higher do you predict energy prices will be in 2018?

How are you planning to mitigate against such rises?

n 0-10% ......................................................11%n 10-30% ....................................................52%n 30-60% .................................................31%n 60-90% ...................................................... 6%n 100+ % ...................................................... 0%

n Better procurement ..............................62%n Energy Saving projects ........................87%n Onsite generation ..............................38%

4

Energy efficiency is clearly popular and plans to encourage it further through schemes such as a negawatt trading market where a permanent reduction in usage can be traded are overwhelmingly supported with 76% in favour of the idea. The support for directly incentivising energy efficiency is interesting given the Government’s long term reluctance to do anything in this area. Saving energy has always been seen as its own reward but as the single most effective method of reducing carbon it is time to act. The Government is to implement demand reduction as part of the capacity mechanism but as with the negawatt market proving what is a permanent reduction and what is a failing business is difficult. It also unfairly helps those businesses that to date have done very little or nothing in the way of energy saving by putting a value on their languid approach to demand reduction.

On the question of blackouts there is not so much consensus with 38% believing that we will run out of primary fuel for generation and 62% saying that it would not be a problem.

It is heartening that even with Ofgem’s warning that generation margins will drop from around 14% in 2012 to just over 4% by 2015/2016.

A major power station tripping out could well cause a blackout in this situation but so long as we are prepared to outbid others on the world markets for gas, it may be an expensive strategy but it should be possible to retain secure supplies.

Should there be a ‘negawatt’ market that pays to reduce energy, like the schemes in place for renewable generation?

n Yes ............................................................76%n No ............................................................24%

n Yes ............................................................38%n No ............................................................62%

Do you think the UK will run short of primary fuel supply for power generation in the next 5yrs?

5

The majority (52%) think that prices will rise over the next 5 years by 10-30% which although it is not a good thing it is at least possible to militate against such increases. The readership shows an optimistic outlook when compared to other predictions such as research conducted with independent market analysts Waters Wye Associates by Power Efficiency. It shows that energy costs have increased by 77% since 2004 and this trend is expected to continue with a further 81% rise expected over the coming decade.

Research shows that when energy is split into gas and power many are more confident that gas has less upward pressure than power, which given the volatility of global markets and the contrasting controllability of electricity says a lot about what business consumers think about the effects of UK policy.

Over 87% are planning to mitigate against higher energy prices by implementing energy saving projects within their organisations. The desire for action to reduce consumption seems to be apparent; as ever there is the problem of getting this translated into action. However, there can be no denying the will to act.

Encouragingly for the smaller scale renewable industry 38% of respondents plan to have some form of renewable generation as a shield against further price hikes. The embracing of renewable energy technologies shows a real turnaround in attitude from a business community that was wary and skeptical of true value being achieved through these routes.

Against this backdrop of demand side action, 62% of readers will also pursue a strategy of better procurement believing that there are methods to constrain price increases through understanding and managing their position in the market.

How much higher do you predict energy prices will be in 2018?

How are you planning to mitigate against such rises?

n 0-10% ......................................................11%n 10-30% ....................................................52%n 30-60% .................................................31%n 60-90% ...................................................... 6%n 100+ % ...................................................... 0%

n Better procurement ..............................62%n Energy Saving projects ........................87%n Onsite generation ..............................38%

4

Energy efficiency is clearly popular and plans to encourage it further through schemes such as a negawatt trading market where a permanent reduction in usage can be traded are overwhelmingly supported with 76% in favour of the idea. The support for directly incentivising energy efficiency is interesting given the Government’s long term reluctance to do anything in this area. Saving energy has always been seen as its own reward but as the single most effective method of reducing carbon it is time to act. The Government is to implement demand reduction as part of the capacity mechanism but as with the negawatt market proving what is a permanent reduction and what is a failing business is difficult. It also unfairly helps those businesses that to date have done very little or nothing in the way of energy saving by putting a value on their languid approach to demand reduction.

On the question of blackouts there is not so much consensus with 38% believing that we will run out of primary fuel for generation and 62% saying that it would not be a problem.

It is heartening that even with Ofgem’s warning that generation margins will drop from around 14% in 2012 to just over 4% by 2015/2016.

A major power station tripping out could well cause a blackout in this situation but so long as we are prepared to outbid others on the world markets for gas, it may be an expensive strategy but it should be possible to retain secure supplies.

Should there be a ‘negawatt’ market that pays to reduce energy, like the schemes in place for renewable generation?

n Yes ............................................................76%n No ............................................................24%

n Yes ............................................................38%n No ............................................................62%

Do you think the UK will run short of primary fuel supply for power generation in the next 5yrs?

5

Finance is seen as the biggest barrier to reducing energy consumption with 64% citing this. Interestingly the second most popular choice (41%) was the problem of verifying the energy efficiency claims of projects. Robust methodology is being developed in this area of measurement & verification through the International Performance Measurement and Verification Protocol. This should be of benefit to suppliers of equipment and users wishing to put their money where their mouth is.

Board level engagement, often seen as a problem when implementing energy saving initiatives, seems to be less of a worry and is a welcome move in the right direction although at 34% there is still some work to be done.

Almost half (49%) think that saving in the region of 10-20% are possible, with a further 21% stating that 20-30% can be reached. If the price rises are in line with the earlier prediction then it should be possible for energy saving to militate such increases. 11% feel that energy savings in excess of 30% can be implemented, while 19% more modestly think that savings will be in the 0-10% range.

What do you believe you can save on energy consumption?

What are the barriers to reducing your energy consumption?

n Board level engagement ......................34%n Finance ...................................................64%n Information on suitable energy saving technologies ..............................32%n Verification of claimed savings ..........41%

n 0-10% ......................................................19%n 10-20% ....................................................49%n 20-30% .................................................22%n 30-40% ...................................................... 3%n 40-50% ...................................................... 4%n 50+% ......................................................... 3%

92%have implemented energy efficient products in the last 12 months

6

Energy efficiencyMcKinsey & Co. estimated that $170 billion

a year invested in efficiency globally would reduce global energy demand by the

equivalent of 64 million barrels a day by 2020 and have a 17% IRR at an oil price of $50 per barrel. The International Energy Agency’s ‘Efficient World’ scenario showed a boost to cumulative economic output by 2035 of $18 trillion – equivalent to the current size of the economies of the US, Canada, Mexico and Chile combined, and that growth in global energy demand would be halved relative to their ‘New Policies’ scenario, easing energy security concerns and reducing CO2 emissions. In the UK DECC’s Energy Efficiency Deployment Office has identified the potential to reduce electricity demand by 196 TWh a year by 2020, equivalent to 22 power stations.

The potential to improve efficiency significantly is clear - the issue now is how to implement that potential and thereby change our energy future from one of ever increasing supply capacity, and possible supply constraints, to one in which we significantly reduce our energy use per unit of economic output and manage overall demand.

People often ask, ‘if efficiency is so good an investment why isn’t it happening?’. It is important to be clear that improving energy efficiency is happening and efficiency in all its guises is a rapidly growing market. Over the last thirty years improved efficiency has delivered more energy services than all other energy sources combined and that has happened with us paying relatively little attention to the subject. We now have the opportunity to accelerate the rate of improvement by scaling up efficiency activities of all kinds in all sectors and that means scaling up demand for efficiency, supply of efficiency goods and services, and the flow of finance into efficiency.

Let’s examine two of these factors, increasing demand and increasing the flow of finance. The first reality is that energy efficiency is not cool and of course it is invisible – very few consumers wake up and say ‘I am going to buy some energy efficiency today’ – however much they complain about their energy bills. For business it is largely seen as a ‘defensive’ cost-

cutting issue rather than an ‘offensive’ revenue growth opportunity and therefore destined always to have lower priority. We need new business models that take energy efficiency out of the ‘dull’ and into the ‘must have’ for consumers and we need business leaders to see the strategic advantages that improved efficiency can bring.

Part of this capacity building should be around the critical area of measurement and verification of savings (M&V), part should be around awareness and behaviour change. Getting the attention of senior decision makers means reframing the energy efficiency story through techniques such as comparing energy costs and potential savings to net profits rather than total costs, and identifying energy security risks at corporate and local levels.

Many of the investments in energy efficiency will need to be funded by third party investors rather than the project hosts which means that the problems of energy efficiency financing need to be addressed. On the face of it the returns from efficiency projects should be attractive as they are low risk and can provide long-term income. The constraints on growth are; a lack of understanding and knowledge of the opportunity amongst the investor community, lack of confidence in the savings – even from investors interested in the space, lack of standardisation of approach, high transaction costs, the small scale of individual projects, the need for long-term debt, and the lack of a secondary market. Ultimately we need a global market in energy efficiency investments in which standards and processes are globally recognized. This will drive both the deal flow in the primary market and enable a secondary market.

Energy efficiency represents one of the largest business opportunities on the planet. Exploiting that opportunity will produce huge benefits in terms of productivity, improved energy security, reduced emissions and economic growth.

This article is an abridged version of Dr Steven Fawkes feature in Energy Procurement 2013. He is a leading expert in energy management, efficiency and financing. n

64%Finance is seen as the biggest barrier to reducing energy consumption

7

Finance is seen as the biggest barrier to reducing energy consumption with 64% citing this. Interestingly the second most popular choice (41%) was the problem of verifying the energy efficiency claims of projects. Robust methodology is being developed in this area of measurement & verification through the International Performance Measurement and Verification Protocol. This should be of benefit to suppliers of equipment and users wishing to put their money where their mouth is.

Board level engagement, often seen as a problem when implementing energy saving initiatives, seems to be less of a worry and is a welcome move in the right direction although at 34% there is still some work to be done.

Almost half (49%) think that saving in the region of 10-20% are possible, with a further 21% stating that 20-30% can be reached. If the price rises are in line with the earlier prediction then it should be possible for energy saving to militate such increases. 11% feel that energy savings in excess of 30% can be implemented, while 19% more modestly think that savings will be in the 0-10% range.

What do you believe you can save on energy consumption?

What are the barriers to reducing your energy consumption?

n Board level engagement ......................34%n Finance ...................................................64%n Information on suitable energy saving technologies ..............................32%n Verification of claimed savings ..........41%

n 0-10% ......................................................19%n 10-20% ....................................................49%n 20-30% .................................................22%n 30-40% ...................................................... 3%n 40-50% ...................................................... 4%n 50+% ......................................................... 3%

92%have implemented energy efficient products in the last 12 months

6

Energy efficiencyMcKinsey & Co. estimated that $170 billion

a year invested in efficiency globally would reduce global energy demand by the

equivalent of 64 million barrels a day by 2020 and have a 17% IRR at an oil price of $50 per barrel. The International Energy Agency’s ‘Efficient World’ scenario showed a boost to cumulative economic output by 2035 of $18 trillion – equivalent to the current size of the economies of the US, Canada, Mexico and Chile combined, and that growth in global energy demand would be halved relative to their ‘New Policies’ scenario, easing energy security concerns and reducing CO2 emissions. In the UK DECC’s Energy Efficiency Deployment Office has identified the potential to reduce electricity demand by 196 TWh a year by 2020, equivalent to 22 power stations.

The potential to improve efficiency significantly is clear - the issue now is how to implement that potential and thereby change our energy future from one of ever increasing supply capacity, and possible supply constraints, to one in which we significantly reduce our energy use per unit of economic output and manage overall demand.

People often ask, ‘if efficiency is so good an investment why isn’t it happening?’. It is important to be clear that improving energy efficiency is happening and efficiency in all its guises is a rapidly growing market. Over the last thirty years improved efficiency has delivered more energy services than all other energy sources combined and that has happened with us paying relatively little attention to the subject. We now have the opportunity to accelerate the rate of improvement by scaling up efficiency activities of all kinds in all sectors and that means scaling up demand for efficiency, supply of efficiency goods and services, and the flow of finance into efficiency.

Let’s examine two of these factors, increasing demand and increasing the flow of finance. The first reality is that energy efficiency is not cool and of course it is invisible – very few consumers wake up and say ‘I am going to buy some energy efficiency today’ – however much they complain about their energy bills. For business it is largely seen as a ‘defensive’ cost-

cutting issue rather than an ‘offensive’ revenue growth opportunity and therefore destined always to have lower priority. We need new business models that take energy efficiency out of the ‘dull’ and into the ‘must have’ for consumers and we need business leaders to see the strategic advantages that improved efficiency can bring.

Part of this capacity building should be around the critical area of measurement and verification of savings (M&V), part should be around awareness and behaviour change. Getting the attention of senior decision makers means reframing the energy efficiency story through techniques such as comparing energy costs and potential savings to net profits rather than total costs, and identifying energy security risks at corporate and local levels.

Many of the investments in energy efficiency will need to be funded by third party investors rather than the project hosts which means that the problems of energy efficiency financing need to be addressed. On the face of it the returns from efficiency projects should be attractive as they are low risk and can provide long-term income. The constraints on growth are; a lack of understanding and knowledge of the opportunity amongst the investor community, lack of confidence in the savings – even from investors interested in the space, lack of standardisation of approach, high transaction costs, the small scale of individual projects, the need for long-term debt, and the lack of a secondary market. Ultimately we need a global market in energy efficiency investments in which standards and processes are globally recognized. This will drive both the deal flow in the primary market and enable a secondary market.

Energy efficiency represents one of the largest business opportunities on the planet. Exploiting that opportunity will produce huge benefits in terms of productivity, improved energy security, reduced emissions and economic growth.

This article is an abridged version of Dr Steven Fawkes feature in Energy Procurement 2013. He is a leading expert in energy management, efficiency and financing. n

64%Finance is seen as the biggest barrier to reducing energy consumption

7

The goal of energy efficiency isn’t just a dream with 92% already having implemented measures within the last 12 months. 55% have installed AMR which, as data is the cornerstone of good energy management, shows that many businesses are on top of this.

Triad alerts have been utilised to a degree with 18% having saved costs through this method in the last year.

Energy alarms which are part and parcel of a comprehensive monitoring and targeting strategy have not been used very much at 15%.

Overwhelmingly the success of these cost saving measures have come through energy efficient products at 69% with AMR being rated as the most effective by 23%.

Although triad alerts have been utilised by a fairly large number of respondents their ability to save money is ranked highly only by 5%. If a consumer is sophisticated enough to be using these they are probably implementing other energy saving measures as well.

Over the last 12 months, which of the following cost saving measures have you implemented?

If so, which have been the most successful?

n Triad alerts .............................................18%n Energy alarms .......................................15%n Energy efficient products ....................92%n AMR ........................................................55%

n Triad alerts ............................................... 5%n Energy alarms ......................................... 3%n Energy efficient products ....................69%n AMR ........................................................23%

8

Obviously data is important for energy management and 75% are planning to introduce AMR to electricity within the next year and for gas it is 61%. It is great news that visibility of consumption is valued so highly, however, it also shows a lack of preparedness in not having done this already. The developments within AMR technology over the last few years may explain much of this with many companies updating systems rather than starting from scratch.

On the water side nearly half (49%) are planning to introduce AMR in the next 12 months. This is an often undervalued resource where large savings can be made by being more water efficient. It is encouraging that firms are looking to get on top of this resource and particularly in readiness for increased competition in water supply come 2017.

Energy performance contracts are a logical way to solve a company’s energy worries in that savings can be made by experts while the company concentrates on its core competencies and jointly share in the energy savings. Yet 66% would not consider such a contract, either having sufficient in-house expertise or not wishing to trust an outside agency to reduce its energy bills.

Of the 34% who would choose such a method of reducing energy 71% believe that its benefit is to get around the problem of financing capital projects upfront.

Only 10% believe that the advantage to this is a reduction in the hassle of managing energy yourself.

Would you consider EnPC? (energy performance contract)

Are you looking to introduce AMR to any of the following areas in the next 12 months?

n Electricity ...............................................75%n Gas ...........................................................61%n Water .......................................................49%

n Yes, it would reduce hassle ..................10%n Yes, it would get around finance problems ..................................24%n No .........................................................66%

9

The goal of energy efficiency isn’t just a dream with 92% already having implemented measures within the last 12 months. 55% have installed AMR which, as data is the cornerstone of good energy management, shows that many businesses are on top of this.

Triad alerts have been utilised to a degree with 18% having saved costs through this method in the last year.

Energy alarms which are part and parcel of a comprehensive monitoring and targeting strategy have not been used very much at 15%.

Overwhelmingly the success of these cost saving measures have come through energy efficient products at 69% with AMR being rated as the most effective by 23%.

Although triad alerts have been utilised by a fairly large number of respondents their ability to save money is ranked highly only by 5%. If a consumer is sophisticated enough to be using these they are probably implementing other energy saving measures as well.

Over the last 12 months, which of the following cost saving measures have you implemented?

If so, which have been the most successful?

n Triad alerts .............................................18%n Energy alarms .......................................15%n Energy efficient products ....................92%n AMR ........................................................55%

n Triad alerts ............................................... 5%n Energy alarms ......................................... 3%n Energy efficient products ....................69%n AMR ........................................................23%

8

Obviously data is important for energy management and 75% are planning to introduce AMR to electricity within the next year and for gas it is 61%. It is great news that visibility of consumption is valued so highly, however, it also shows a lack of preparedness in not having done this already. The developments within AMR technology over the last few years may explain much of this with many companies updating systems rather than starting from scratch.

On the water side nearly half (49%) are planning to introduce AMR in the next 12 months. This is an often undervalued resource where large savings can be made by being more water efficient. It is encouraging that firms are looking to get on top of this resource and particularly in readiness for increased competition in water supply come 2017.

Energy performance contracts are a logical way to solve a company’s energy worries in that savings can be made by experts while the company concentrates on its core competencies and jointly share in the energy savings. Yet 66% would not consider such a contract, either having sufficient in-house expertise or not wishing to trust an outside agency to reduce its energy bills.

Of the 34% who would choose such a method of reducing energy 71% believe that its benefit is to get around the problem of financing capital projects upfront.

Only 10% believe that the advantage to this is a reduction in the hassle of managing energy yourself.

Would you consider EnPC? (energy performance contract)

Are you looking to introduce AMR to any of the following areas in the next 12 months?

n Electricity ...............................................75%n Gas ...........................................................61%n Water .......................................................49%

n Yes, it would reduce hassle ..................10%n Yes, it would get around finance problems ..................................24%n No .........................................................66%

9

60% of the readers are affected by the CRC Energy Efficiency Scheme. Expertise within companies is high with the majority (68% of those affected) preferring to comply with the CRC in-house.

Again the preference for dealing with energy management internally is high with 62% not using an external energy consultant at all. This could be a missed opportunity to further cost savings through external procurement and demand side expertise although it may reflect a high level internal competencies.

How are you complying with CRC targets?

Do you use an external energy consultant?

n In house ..................................................41%n Through current energy consultancy ............................................15%n Employed CRC specialist ...................... 4%n Don’t qualify for CRC ..........................40%

n Yes ............................................................39%n No ............................................................61%

10

Of the 38% of the readership that uses an energy consultant the preference (42%) is for both demand side help along with procurement. Of those that only use a consultant for either procurement or energy saving, procurement at 60% is the preference for gaining outside assistance.

Of those that do use consultants over 77% favour experience of the consultant over price, illustrating that true value to the end user is about what the consultant can offer rather than just fulfilling the role and being cheapest.

The respondents actively look at energy management with only 2% having a particular consultant because they were the incumbent.

Which of the following had the biggest influence on your decision to employ your current energy consultancy?

If you do use an external energy consultant, what are they employed to do?

n Procure energy ......................................35%n Reduce energy consumption..............23%n Both .........................................................42%

n Price .........................................................21%n Experience .............................................77%n Incumbent ............................................2%

11

60% of the readers are affected by the CRC Energy Efficiency Scheme. Expertise within companies is high with the majority (68% of those affected) preferring to comply with the CRC in-house.

Again the preference for dealing with energy management internally is high with 62% not using an external energy consultant at all. This could be a missed opportunity to further cost savings through external procurement and demand side expertise although it may reflect a high level internal competencies.

How are you complying with CRC targets?

Do you use an external energy consultant?

n In house ..................................................41%n Through current energy consultancy ............................................15%n Employed CRC specialist ...................... 4%n Don’t qualify for CRC ..........................40%

n Yes ............................................................39%n No ............................................................61%

10

Of the 38% of the readership that uses an energy consultant the preference (42%) is for both demand side help along with procurement. Of those that only use a consultant for either procurement or energy saving, procurement at 60% is the preference for gaining outside assistance.

Of those that do use consultants over 77% favour experience of the consultant over price, illustrating that true value to the end user is about what the consultant can offer rather than just fulfilling the role and being cheapest.

The respondents actively look at energy management with only 2% having a particular consultant because they were the incumbent.

Which of the following had the biggest influence on your decision to employ your current energy consultancy?

If you do use an external energy consultant, what are they employed to do?

n Procure energy ......................................35%n Reduce energy consumption..............23%n Both .........................................................42%

n Price .........................................................21%n Experience .............................................77%n Incumbent ............................................2%

11

Most people who employ a consultant use them for both bill validation and procurement advice (72%) rather than a separate one for each (27%).

Contrary to the popular press and domestic users the majority of respondents rate their energy supplier average or good (71%), with 11% rating them excellent. Of those who use a consultant most (90%) believe that they are average to excellent.

How do you use consultants? On a scale of 1-5, how would you rate you relationship with your energy supplier?

n One consultant for procurement and bill validation .................................58%n Different suppliers for each ................21%n None / in-house ....................................21%

n 1 (poor) ..................................................... 5%n 2 ................................................................13%n 3 ................................................................42%n 4 ................................................................29%n 5 (excellent) ............................................11%

40%rate their energy suppliers as excellent or very good

12

Consultants fared well in general but 7% of respondents rated them as poor. However, the majority (61%) seem to be more than happy and rate them excellent or very good.

There are still savings to be had from a historical audit of utility expenditure. Around 17% have found nothing or an undercharge, while 46% have found minor savings and a sizeable (35%) significant savings.

If you have had a historical audit of your utility expenditure, what did you find?

On a scale of 1-5, how would you rate your relationship with your energy consultancy?

n 1 (poor) ..................................................... 7%n 2 .................................................................. 3%n 3 ................................................................28%n 4 ................................................................36%n 5 (excellent) ............................................26%

n Significant savings ................................25%n Minor savings ........................................33%n Undercharges .......................................2%n No findings .........................................11%n Not applicable ....................................29%

81%that have had a historical audit of utility expenditure have found savings

13

Most people who employ a consultant use them for both bill validation and procurement advice (72%) rather than a separate one for each (27%).

Contrary to the popular press and domestic users the majority of respondents rate their energy supplier average or good (71%), with 11% rating them excellent. Of those who use a consultant most (90%) believe that they are average to excellent.

How do you use consultants? On a scale of 1-5, how would you rate you relationship with your energy supplier?

n One consultant for procurement and bill validation .................................58%n Different suppliers for each ................21%n None / in-house ....................................21%

n 1 (poor) ..................................................... 5%n 2 ................................................................13%n 3 ................................................................42%n 4 ................................................................29%n 5 (excellent) ............................................11%

40%rate their energy suppliers as excellent or very good

12

Consultants fared well in general but 7% of respondents rated them as poor. However, the majority (61%) seem to be more than happy and rate them excellent or very good.

There are still savings to be had from a historical audit of utility expenditure. Around 17% have found nothing or an undercharge, while 46% have found minor savings and a sizeable (35%) significant savings.

If you have had a historical audit of your utility expenditure, what did you find?

On a scale of 1-5, how would you rate your relationship with your energy consultancy?

n 1 (poor) ..................................................... 7%n 2 .................................................................. 3%n 3 ................................................................28%n 4 ................................................................36%n 5 (excellent) ............................................26%

n Significant savings ................................25%n Minor savings ........................................33%n Undercharges .......................................2%n No findings .........................................11%n Not applicable ....................................29%

81%that have had a historical audit of utility expenditure have found savings

13

Purchasing strategyGetting the right purchasing strategy can be the

difference between being a profitable or not. “If you don’t buy right, you have no business,” so

says Alan Sugar. David Noble, chief executive of CIPS out procurement best practice

With rising prices and declining fuel stocks, complex supply chains and an equally complicated world, the UK Government is taking a serious look at what the energy sector will look like in years to come. This is something that good buyers have always had to do – looking to the future to ensure surety of supply and a competitive pricing structure. The Government’s decision in the coming decades will influence how buyers will work in the future.

Good procurement and supply management practitioners can shape the structure of the organisation they work for, work towards the organisation’s strategic goals, whether public or private and the sector they work, encouraging fair treatment of suppliers, reduction in waste, good sustainable practices or innovative and creative solutions for their company. They can influence governments and economies, as well as being restricted by both.

As there is increased need to source energy in the best way possible, there are best practice procurement principles that can help along the way.

Matching strategiesAligning procurement strategy to business strategy makes sense, and involving the whole organisation and the CEO is vital. Our recent survey of senior supply chain managers found that a third of their CEOs were disengaged with their supply chain. The Time to Take Stock report in 2011 found that there was a lack of prioritisation placed on supply chain issues compared to Corporate Social Responsibility for example.

Create positive relationships and keep them goingProcurement and supply chain management may feel like it’s all about costs, and getting goods and services on time, but best practice also requires a clear understanding of who suppliers are, their issues, challenges and how they can support a business with more than just supplying those goods and services.

Minimising riskRisk is a big issue in the energy sector as history can point out when it comes to health and safety, so is major area of development and attention. But risk in itself is not necessarily a bad thing. Risk only becomes a threat when it is unexpected and out of control, which is where risk mitigation strategies are crucial. Supply chain initiatives such as outsourcing services, or lean and just-in-time approaches have all exposed us to new risks, but with awareness, the four areas of risk management – risk recognition (identification of potential risk); risk analysis (probability of risk); risk assessment (likely impact) and risk mitigation (plans in place to reduce impact), it’s mostly covered.

Having the right skills in placeThe right expertise and experience makes all the difference, with a complete understanding of the full procurement and supply management process and having the competencies and skills in understanding tendering processes, creating and managing contracts with suppliers, commodity pricing and understanding quality and value not just cost cutting

In conclusionWhen money is tight, good buyers are worth their weight in liquid gold. A recent report – The State of Strategic Sourcing 2013, found that the best buyers were achieving cost savings for their organisations at a rate of three and a half times (11.3%), compared to ‘ordinary’ buyers offering only 3.2% in savings. Saving money as always is the top priority of most businesses as the Chief Procurement Officers of the report echo. 

For consumers and businesses faced with ever-rising energy costs, the pressure on buyers is immense, so while it’s good for business to secure constant and competitively priced energy, it improves the reputation of the buyer who can achieve this. The demand for energy is set to double by 2050, so that’s a scary scenario to be faced with.

As sources of energy become ever-more scarce, and competition to stay afloat is ever fiercer, strategic procurement and supply chain management, taking in all the elements of good practice will make all the difference. n62% believe better

procurement can constrain price increases

14

Opinion is divided on the procurement side over whether to fix or purchase flexibly, with 56% fixing their costs. Certainty is valued by the majority while those looking to implement sophisticated procurement strategies are lower but still significant in number.

As one would expect most (80%) have an energy contract and secured prices for 1 or 2 years, although almost 5% have done this for longer than 3 years in advance.

Which procurement strategy do you currently use to purchase energy?

How far in advance have you secured your prices on your current energy contracts?

n Fixed ........................................................56%n Flexible ....................................................44%

n 1 year .......................................................38%n 2 years .....................................................42%n 3 years .....................................................15%n Longer ....................................................... 5%

15

Purchasing strategyGetting the right purchasing strategy can be the

difference between being a profitable or not. “If you don’t buy right, you have no business,” so

says Alan Sugar. David Noble, chief executive of CIPS out procurement best practice

With rising prices and declining fuel stocks, complex supply chains and an equally complicated world, the UK Government is taking a serious look at what the energy sector will look like in years to come. This is something that good buyers have always had to do – looking to the future to ensure surety of supply and a competitive pricing structure. The Government’s decision in the coming decades will influence how buyers will work in the future.

Good procurement and supply management practitioners can shape the structure of the organisation they work for, work towards the organisation’s strategic goals, whether public or private and the sector they work, encouraging fair treatment of suppliers, reduction in waste, good sustainable practices or innovative and creative solutions for their company. They can influence governments and economies, as well as being restricted by both.

As there is increased need to source energy in the best way possible, there are best practice procurement principles that can help along the way.

Matching strategiesAligning procurement strategy to business strategy makes sense, and involving the whole organisation and the CEO is vital. Our recent survey of senior supply chain managers found that a third of their CEOs were disengaged with their supply chain. The Time to Take Stock report in 2011 found that there was a lack of prioritisation placed on supply chain issues compared to Corporate Social Responsibility for example.

Create positive relationships and keep them goingProcurement and supply chain management may feel like it’s all about costs, and getting goods and services on time, but best practice also requires a clear understanding of who suppliers are, their issues, challenges and how they can support a business with more than just supplying those goods and services.

Minimising riskRisk is a big issue in the energy sector as history can point out when it comes to health and safety, so is major area of development and attention. But risk in itself is not necessarily a bad thing. Risk only becomes a threat when it is unexpected and out of control, which is where risk mitigation strategies are crucial. Supply chain initiatives such as outsourcing services, or lean and just-in-time approaches have all exposed us to new risks, but with awareness, the four areas of risk management – risk recognition (identification of potential risk); risk analysis (probability of risk); risk assessment (likely impact) and risk mitigation (plans in place to reduce impact), it’s mostly covered.

Having the right skills in placeThe right expertise and experience makes all the difference, with a complete understanding of the full procurement and supply management process and having the competencies and skills in understanding tendering processes, creating and managing contracts with suppliers, commodity pricing and understanding quality and value not just cost cutting

In conclusionWhen money is tight, good buyers are worth their weight in liquid gold. A recent report – The State of Strategic Sourcing 2013, found that the best buyers were achieving cost savings for their organisations at a rate of three and a half times (11.3%), compared to ‘ordinary’ buyers offering only 3.2% in savings. Saving money as always is the top priority of most businesses as the Chief Procurement Officers of the report echo. 

For consumers and businesses faced with ever-rising energy costs, the pressure on buyers is immense, so while it’s good for business to secure constant and competitively priced energy, it improves the reputation of the buyer who can achieve this. The demand for energy is set to double by 2050, so that’s a scary scenario to be faced with.

As sources of energy become ever-more scarce, and competition to stay afloat is ever fiercer, strategic procurement and supply chain management, taking in all the elements of good practice will make all the difference. n62% believe better

procurement can constrain price increases

14

Opinion is divided on the procurement side over whether to fix or purchase flexibly, with 56% fixing their costs. Certainty is valued by the majority while those looking to implement sophisticated procurement strategies are lower but still significant in number.

As one would expect most (80%) have an energy contract and secured prices for 1 or 2 years, although almost 5% have done this for longer than 3 years in advance.

Which procurement strategy do you currently use to purchase energy?

How far in advance have you secured your prices on your current energy contracts?

n Fixed ........................................................56%n Flexible ....................................................44%

n 1 year .......................................................38%n 2 years .....................................................42%n 3 years .....................................................15%n Longer ....................................................... 5%

15