How businesses can achieve an Energy Advantage

Alan Barlow, Director of UK and Ireland, Centrica Business Solutions, provides his insights on the energy industry, how it’s changing, and what that means for businesses.

At Centrica Business Solutions, we have recently carried out an extensive research survey across a broad range of business customers, and the findings have been summarised in our Energy Advantage Report. It categorises and analyses business customers’ approach to energy and identifies the key advice, service and supply elements that our customers (and potential customers) are looking for now and in the future.

The report also provides practical guidance for businesses around their energy use. Its findings recognise that energy needs to be high on their business agenda, however, my experience as Director of UK and Ireland is that some businesses still perceive energy as a cost centre and nothing more than a commodity.

Energy brings huge value to all industries

Not every business recognises the true value of energy. In fact, only 8% of businesses who completed our Energy Leadership Survey have a formal energy strategy and a dedicated energy team — but it is becoming increasingly important if companies want to maintain and improve their competitive position. In food and beverage, for example, many companies have only started recently reviewing their strategic approach to energy driven by rising prices. So far, their approach has been to address easy wins, with little investment in upgrading energy infrastructure. But now the whole sector is realising there’s much that can be done to save money, particularly with CHP (Combined Heat and Power).

The situation in healthcare is similar, but customers here are often preoccupied with funding and operational issues often caused by backlog maintenance at their facilities. This is something Centrica Business Solutions can help with, analysing their energy use and developing a suitable strategy, as well as providing the energy package to realise it. This package includes products, services, and commercial options — as well as operations and maintenance.

Customers need to have a more active relationship with energy

The first thing any business needs to do is look at energy demand on site — when and where are they using the energy? In a hospital, for example, obtaining granular data on usage can then be used to develop a plan with the customer — initially to identify and deliver quick-win savings, working up to areas where investment would be required to realise strategic goals, such as improving reliability, clearing backlog maintenance, as well as reducing costs or carbon savings.

It is important to align their company’s energy strategy with their business strategy. Advanced energy leaders who have aligned their strategies are 6.7x more likely to be operating a sustainable business model. Many businesses are already being asked to meet their customers’ environmental standards, including in food and beverage, where supermarkets often dictate green standards to suppliers based on consumer preference, including energy use.

Resilience is another issue — for some customers, such as data centres, a power outage is disastrous, but that can be avoided with the right strategy in place. 28% of organisations surveyed perceived energy security and resilience as the biggest risk.  At the other end of the scale there are major industrial users, where a huge part of the bill are their energy costs. Such customers want to avoid using power when grid supply is tight, and prices are highest. That can be done through the structure of supply contracts and onsite generating assets or asset optimisation (demand response) solutions, which allow customers to switch off during peak periods.

Data and analytics plays a critical role for energy users

A key enabler of the new approach is the use of ‘big data’ and analytics, which is becoming much cheaper to deliver. As we become more effective at capturing and analysing the granular data from remote monitoring technology, customers can go beyond energy efficiency and identify operational savings. Greater energy efficiency is strongly linked to having a range of monitoring/tracking tools: the majority (58%) of the most efficient companies use three or more different measures to track energy.

It’s part of a wider move to digitisation and automation across the economy; and makes the whole process of energy management clearer and easier to deliver.

Financing new energy solutions is becoming easier

At Centrica Business Solutions, we recognise the demand for alternative funding models when investment is required, including opex-based financing, or an Energy-as-a-Service (EaaS) approach. Many businesses don’t want to spend capex on energy solutions so look to their energy suppliers to come up with innovative ways to fund them from operational expenditure or energy budgets.

These include Discount Energy Purchase, which involves the supply and installation of CHP on-site, paid for through a fixed-term commitment to electricity purchase as a simple p/lWhr rate from the equipment. Customers, without investing Capex, get the financial, operational and environmental benefits of an onsite CHP source immediately. Another option is an Energy Services Agreement, where suppliers guarantee a level of savings benefit each year in a fixed term contract from the implementation of multiple energy saving technologies.

Energy leaders outperform their competition

Less than 1 in 10 organisations count themselves among the most advanced in their approach to energy. These companies carefully monitor energy use, have adopted new technologies and have an energy strategy in place. They also normally have specialised teams that focus on the energy side of their businesses, engaging procurement and finance teams and taking the agenda across their organisations.

Typically, they outperform companies that take energy less seriously. But if a company doesn’t have enough resources to do all of this internally, then we can do part of the job for them.

At the end of the day, businesses that focus on energy build a competitive advantage, whether it be brand value, lower energy costs or carbon emissions, or greater security of supply. That advantage is only likely to grow over time. Gas and power prices now vary through the day and seasons, and regulations are ever-changing — with an average bill already comprising 50% non-commodity charges, including carbon taxes, distribution and transmission. All of these elements can be effectively managed and the research presented in the Energy Advantage Report helps us, and our customers, do that better.

Discover how and why you should move energy further up their business’s agenda.