UK Companies Are Anxious about Energy Risks, Apathetic about Addressing Them

Energy now presents a higher level of risk to UK-based businesses—in terms of a brand’s reputation for sustainability, financial exposure, and compliance with carbon-reduction regulatory targets—than health and safety, or credit and security, according to new research findings.

What’s more, fully 61 percent of respondents stated that their government should help pay for conversion to self-generated or clean energy.

A new white paper, Energy Risk Management for UK Business—commissioned by Swindon-based npower, a leading integrated energy company, and conducted by the London School of Economics—has found  that the host of regulatory measures put in place to promote the decarbonization of the electricity sector have put further pressure on energy prices, and have forever “changed the once comfortable role of energy professionals and energy suppliers, alike.”

Based on the npower Business Energy Index, an annual poll of 300 businesses, when asked what was of most concern in relation to energy within their business, supply costs came top with a risk ranking of 6.6 out of 10; followed by security of supply with a ranking of 6.1.

Despite the fear of consequences, one in six major business energy users still does not have a policy in place to manage energy risk. Compare that to the 91 percent that report they do have a policy in place for health & safety, a more ‘traditional” business risk.

David Cockshott, director of Industrial and Commercial Markets at npower comment, “It is worrying that, while businesses have identified that risks associated with energy … pose a real threat to their immediate and future operations, many have admitted to not having a strategy in place to manage it.”

“This could be,” he deduced, “because they don’t believe the two main areas of concern – cost and supply - are something within their control. However, there are ways businesses can mitigate their risk, including investing in self-generation or demand-management technology.”

However businesses seem disengaged when it comes to investing in self generation as a means of shoring up security of supply. Nearly two thirds (62 percent) say that investing in self-generation and demand-management technology is not a business priority. In addition, 51 percent cite lack of finance as a barrier, and 38 percent say they simply do not have the resource to manage the project.

When asked who should finance investment in self generation, 61 percent of businesses of all sizes felt that the government should be responsible – only 18 percent believe it should be self-funded. While the government’s proposed ‘Green Deal’ should go some way to assisting SMEs, it would not provide the same help for larger energy consumers.

David Cockshott concluded, “What is clear… is that businesses believe that investment in these areas should come from government. While the government is keen to support smaller companies through initiatives such as the Green Deal, the report shows that larger businesses believe the government should also look at ways to help them. For instance, to mitigate risk and reduce instability through incentivizing self-generation and demand management tools.”

Still, none of the above suggests there will be less management attention on energy purchasing; in fact, it may well receive more attention, according to the paper. After all, expenditure on energy has been rising over the last decade, even while consumption has been steady or falling,

To control the rising costs, the researchers suggest:

1. Assign clear responsibility and targets for energy management, energy consumption, and energy efficiency.

2. Make energy and carbon an issue for senior management through regular reporting.

3. Take advantage of energy management services and products offered by the market.

4. Conduct an energy audit to gain a head-start on energy efficiency.

5. Explore the possibility of, and any available government incentives for, renewable energy production on-site.

For more information on the white paper, visit the npower website.