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THE MAGAZINE FOR BUSINESSES
OCTOBER 2014
BUYING & USING UTILITIES
FUTURE ENERGY
MARKETS:
WILL IT BE TIME
FOR CHANGE?
8
MANAGEMENT
Beat pass-through charges
with a targeted strategy
18
SAVING
33
WATER
Forming the basis of water
market reform
the voice of utility users
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EDITOR’S WORD
ALL CHANGE FOR
FUTURE ENERGY
MARKETS
Peter Roper, Editor
Major Energy Users’ Council
PO Box 30, London W5 3ZT
Tel: 020 8997 3854 Fax: 020 8566 7073
Email: [email protected]
Web: www.meuc.co.uk
Twitter: @meucevents
Chairman: Andrew Bainbridge
Email: [email protected]
Director General: Andrew Buckley
Email: [email protected]
Membership Manager: Caroline Buckley
Email: [email protected]
Events Manager: Sandra Barradas
Email: [email protected]
Accounts Manager: Lyndsey James
Email: [email protected]
Events Administrator: Claire Slade
Email: [email protected]
THE MAGAZINE FOR BUSINESSES
BUYING & USING UTILITIES
Editor: Peter Roper
Tel: 020 8365 7313 Fax: 020 8365 7313
Email: [email protected]
Design: Richard Hill
Email: [email protected]
Advertising: Lyndsey James
Tel:01823 666125
Email: [email protected]
With Scotland’s independence referendum
out of the equation for the time being the
future for energy generation in ‘New
Scotland’ still hangs in the balance until
Whitehall clarifies the additional powers to
be devolved. Energy suppliers and
customers are expecting changes in energy
policy to be limited to Scotland, which
could have serious implications to major
consumers in England and Wales.
Plus with the general election in May,
and investors holding back until they know
for certain what the future holds, this winter
could see the threat of the lights going out
being closer than ever.
To help major consumers understand in
IN THIS ISSUE
4 MEUC Views
Andrew Buckley warns of a credibility gap
in the market created by political posturing
as the election approaches
6 MEUC News
Eddie Proffitt explains why winter gas prices
continue to look attractive while Hugh
Conway examines the threat of tight
capacity margins this winter
8 Energy Management
Mark Cavill suggests ways to avoid high
pass through charges
10 & 11 Energy Management
Peter Roper talks to Louise Powell about
how ISO 50001 can help prepare
businesses for an uncertain energy future
Publisher: Andrew Bainbridge
Tel: 020 8997 2561 Fax: 020 8566 7073
Email: [email protected]
12 Energy Savings
How one organisation cut 15% from its
energy bills by adopting simple measures
Subscriptions: Tel: 020 8997 3854
Fax: 020 8566 7073
Email: [email protected]
14 Competition
Roland Gribben gives an overview as
energy regulators line-up for a CMA battle
Print: Premier Print Group, London
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Web: www.premierprintgroup.com
Utilities is published five times a year by MEUC for
its members and for large utility customers. The
publishers are not responsible for any statement made
in this publication. Data, discussions and conclusions
developed by authors are for information only and not
intended for use without independent substantiating
investigation on the part of potential users. Opinions
expressed are those of the authors (or contributor to
discussion) and are not necessarily those of MEUC,
Buying and Using Utilities or its publishers.© MEUC 2014
Twitter us at @meucevents
16 Energy
Darren Lennon looks at what the upcoming
Triads season has in store
18 Energy Management
James Axtell says with the right partners
energy efficiency can drive change
more detail what this might mean the
MEUC’s Autumn Regional Energy Forums
features a line up of top industry experts to
provide much needed advice. (See pages
19-23 for the full programme)
The events – “All Change for Energy
Markets” – will explore issues including:
What benefits can you expect to derive
from the industry’s (and Government’s)
enthusiasm for demand side management?
How will the costs of EMR be paid
and what should larger customers be
budgeting for the additional burden of pass
through charges covering the cfd’s and the
capacity market?
What lies ahead for gas and electricity
buyers and the Big Six subject to CMA
scrutiny?
ESOS also figures on the agenda, as do
prospects for gas and electricity prices and
latest thoughts on risk management
forward purchasing.
Look forward to meeting you at one of
the events.
19 -23 Energy Forum Preview
MEUC focuses on the pitfalls and
opportunities awaiting business customers
in the coming year and highlights what can
be done to prevent the lights going out
24 Reducing Energy
Anthony Mayall explains how to turn savings
into a long-term energy reduction strategy
26-27 Parliamentary Insights
Geoff Davies outlines significant developments
overshadowed by the Scottish Referendum
28 Energy Brokers
Omar Rahim warns of the 7 deadly sins of
broker practices
30 Auction Prices
Latest trends in the electricity markets
32 Water
Mark Powells gives an update on progress
towards competition
34 Managing Demand
Andy Pennick offers advice on how to use
power more effectively
36 News
Greenpeace fears backroom deal over
Hinckley Point
38 News
MEUC Chairman Andrew Bainbridge
celebrates his birthday in the village that
bears his name
38 MEUC events
Key dates for your diary
This magazine is also available in electronic format. If you would prefer to download
B&UU rather than receive a print version please email: [email protected]
with your contact details.
OCTOBER 2014 B&UU 3
MEUC NEWS
MIND
THE GAP
Andrew Buckley
Director General, Major Energy Users’ Council
The energy markets regularly have a knack of
confounding the pundits and now seems no
exception. Hostilities rage in the Middle East again,
yet oil prices are below $100 a barrel and seemingly
heading south. The ceasefire in the Ukraine looks
no nearer becoming permanent, yet gas prices
remain benign. And to top it all, EDF withdraws two
nuclear stations for emergency repair and National
Grid enlists the support of industrial customers to
keep the lights on this winter, yet power prices show
hardly a flicker.
Far from making it better, things seem to be
going from bad to worse. Politicians jockeying
for sound bites for “20 month price freezes” or
for “breaking up the Big Six” may sound good at
the time but are hardly likely to bring forward the
investment we so badly need.
Have the markets gone to sleep? I think not,
it’s not in their nature. Maybe traders believe there
are other factors at work, more deep-seated and
likely to outlast these current crises. The rise of US
shale and oil with consequential release of coal onto
world markets; the growth in renewables generation;
credit concerns in China; the restart of Japanese
nuclear and the prolonged malaise in Europe all
come to mind. But markets move on sentiment and
sentiment can change in a flash. I guess it would be
a brave buyer who would want to rely solely on the
day ahead markets for this winter’s supplies.
Complexity and Credibility
Alas I&C customers in Britain have more to cope
with than the vagaries of the market just now.
I believe the political posturing as the election
approaches threatens to create a credibility gap
between announced intent and the realities of
4 B&UU OCTOBER 2014
maintaining future supplies at affordable prices.
Efforts to combat climate change, back on the world
stage again in New York, must also be factored in.
Meanwhile the civil servants press on in their
bid to complete their highly complicated Electricity
Market Reform before time is called on the
Secretary of State for Energy and Climate Change.
Complexity continues to be added to complexity.
How, for example, will the guaranteed prices in the
new generation contracts be paid for over their
many years ahead? No surprise that it will be us,
the customers, who will pick up the bill but these
surcharges may turn out to be even higher than
predicted if market trends continue as they are.
Whether politicians like it or not our energy
future is out of their direct control. No longer to be
decided through strategic national investment they
too must grapple with the privately owned giants
who inherited the energy silverware. But the market
we are told is not working and needs “resetting”. 25
years on from the first competitive power contracts
for larger customers, should we not legitimately
ask why not? Have the regulators not had sufficient
resources nor wit to deliver?
Far from making it better, things seem to be going
from bad to worse. Politicians jockeying for sound
bites for “20 month price freezes” or for “breaking
up the Big Six” may sound good at the time but are
hardly likely to bring forward the investment we so
badly need. The plant margin continues to reduce
and National Grid warns of trouble ahead if not
this winter then next. But the suppliers must await
their fate 12 or 18 months down the line before the
Competition Enquiry pronounces.
Larger customers can play their part in keeping
the lights on and we have long argued that it makes
more sense to help reduce demand than offer
big premia on market rates for more and more
intermittent renewables generation combined with
subsidies for maintaining plant back up through the
capacity market. This sounds to me like paying twice
to achieve one result, which is ok if really necessary
but if customers can deliver the equivalent emissions
reductions cheaper then surely they need to be
taken more seriously than the tortuous electricity
demand reduction auction.
Join the Energy Futures Debate
Judging from the above – all mainly voiced to me
by MEUC Members – there will be plenty of debate
and comment at our three Energy Roadshow
events we are holding in London, Bradford and
Birmingham during October. This will be our eleventh
national roadshow series with the presentations,
interviews and debates complemented as usual
with the delegate electronic voting and the travelling
networking exhibition. Attendance, lunch and
refreshments are free for business customers. You
can register on our website at www.meuc.co.uk
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MEUC NEWS
WINTER POWER
CAPACITY AND
DEMAND
Hugh Conway
Chairman of MEUC’s Electricity Group
Early in September the tabloid press went
into a frenzy with doom laden predictions of
winter power cuts. Since then its attention
has been diverted by the Scottish
referendum and international issues.
Back in June Ofgem had estimated
there would be between 2.7 GW and
5.4GW of spare operational power plants
on the system – a capacity margin of
between 5 &10 per cent over and above
peak winter demand.
The Grid said at the time it believed
emergency measures were unlikely but
notwithstanding announced two schemes,
Supplemental Balancing Reserve (to
encourage mothballed plants to make
themselves available) and Demand side
Balancing Reserve (to incentivise businesses
to reduce demand at critical times or start
up backup generation). A tender was issued
to those participants who had expressed an
interest in Demand side Balancing Reserve
(DSBR) asking for up to 300MW of capacity,
which the Grid wished to pilot.
However the situation has deteriorated
somewhat since – hence the tabloid
headlines. It is now estimated that up to
3.67GW of capacity is now in doubt as a
UK WINTER GAS
PRICES CONTINUE TO
LOOK ATTRACTIVE
Eddie Proffitt
Chairman of the MEUC’s Gas and Carbon Group
UK winter natural gas prices have recently
fallen amid forecasts for warmer-than-usual
weather and reduced risks of supply
disruptions via Ukraine.
Gas for the six months from October on
Britain’s National Balancing Point declined
to its lowest since August 4 on the ICE
Futures Europe exchange in London. NATO
said Russia embarked on a “significant”
withdrawal of its forces from Ukraine,
adding to signs that a truce is taking hold
between the government in Kiev and
separatist groups.
The winter contract has lost 5.6 per cent
since June 16, the day Russia halted gas
supplies to Ukraine in a debt and price
dispute similar to that which reduced flows
to Europe in 2006 and 2009. Ukraine, which
transports 15 per cent of Europe’s gas
6 B&UU OCTOBER 2014
demand, will seek “some volume of gas”
from Russia’s OAO Gazprom at a provisional
price until April. Meetings have taken place
between the EU, Russia and Ukraine
representatives, as the risk premium that was
previously built into the curve over potential
supply issues lessens.
Reports indicate a warm start to the
winter, pushing down the front of the curve.
European storage sites are at record
levels, according to Gas Infrastructure
Europe, a Paris-based lobby group. EU
facilities contained 75.7 billion cubic meters
of gas last month, or 91 percent of total
capacity, GIE data show. Centrica Plc said
inventories at Rough, the UK’s biggest
storage site, may pass their maximum
capacity by mid-October, calculated using
historical maximum volumes.
result of a series of incidents and much
seems unlikely to be contributing before
the winter.
As a result the Grid announced early in
September that DSBR contracts were likely
to be awarded to virtually all companies
that had put together valid tenders and
that it would also begin recruiting idle
or mothballed power plants under the
Supplemental Balancing Reserve (SBR)
scheme.
It has also now announced the outcome
of its tender for DSBR and was in the
process of finalising contracts with
participants, in total representing 319MW
across 431 sites (MPANs). Additional detail
on the contracts awarded has been
published on the Grid website.
It also announced that there would be
further opportunities to participate for winter
2015/16 and said it remained its intention to
promote and stimulate a growing demandside services sector. With this in mind, it is
worth noting it would be tendering for the
2015/16 winter requirement across two
tender events opening in October 2014
and spring 2015.
China’s per capita carbon
emissions overtake EU’s
China surpassed the European Union in
pollution levels per capita for the first time
last year, propelling to a record the
worldwide greenhouse gas emissions that
are blamed for climate change.
Each person in China produced 7.2 tons
of carbon dioxide on average compared with
6.8 tons in Europe and 1.9 tons in India in
2013, according to the study by the Tyndall
Centre and the University of Exeter’s College
of Mathematics and Physical Sciences.
China passed the USA. in terms of overall
carbon emissions seven years ago and
remains the world’s biggest fossil fuel
emissions producer; however the U.S.
remains far ahead per head at 16.5 tonnes.
Emissions grew 4.2 per cent in China,
2.9 per cent in the USA and 5.1 per cent in
India last year. The EU’s pollution level
declined 1.8 per cent because of weaker
economic growth.
While China’s pollution is mainly due to its
use of coal – the country gets about 65 per
cent of its energy from this fuel – 16 per
cent of its emissions come from exported
goods, for example to Europe.
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ENERGY MANAGEMENT
BEAT RISING PASS-THROUGH
CHARGES WITH TARGETED
ENERGY MANAGEMENT
Mark Cavill, Energy Services Manager at GDF SUEZ Energy UK, sounds
the alert for high TNUoS charges this winter and outlines how major
energy users can reap the rewards of intelligent energy management.
The pass-through charges levied by
National Grid to cover the Network costs of
electricity transmission and distribution are
set to increase once again this year.
In particular, the charges for energy
consumed during the three annual peaks
in electricity demand, known as Triads,
will continue their meteoric rise. Triads are
the three half-hour periods in each winter
season (November to February) that have
the highest demand peaks on the network.
The TNUoS (Transmission Network Use of
System) charges that appear on electricity bills
each year are based on average electricity
consumption during these periods.
Escalating charges
We have been monitoring TNUoS charges
for many years and have been alarmed by
the recent rapid increases (see Table 1). In
Northern Scotland, for example, the annual
charges have gone up by an incredible 378%
since 2009.
The good news is that, because these
charges relate directly to the amount
of energy a business consumes during
the three Triad periods, it is possible to
significantly reduce your direct costs by
reducing energy consumption at these times.
To help businesses do this, some energy
suppliers offer Triad warning services. These
provide regular forecasts each year, giving
a fair warning of the expected peaks in
demand and enabling businesses to manage
their consumption accordingly.
Triads typically occur between 4pm
and 6:30pm from Monday to Thursday.
However, just to buck the trend, last year
one of the periods did occur on a Friday (6th
December 2013) This was the first Friday
Triad in over 30 years…
Energy management
Avoiding high TNUoS charges is about
managing your demand carefully. It’s about
shifting demand away from the peak periods,
perhaps by shutting down non-essential
equipment, or running your own on-site
generators for the period of the expected
Triad. Anything you can do to reduce your
consumption of Network supplied electricity
at these times will directly reduce your annual
TNUoS charges.
Manipulating energy consumption in this
way is a useful supplement to your business’s
overall energy-efficiency efforts, but is no
substitute for long-term energy management.
It’s about shifting demand temporarily rather
than reducing it permanently. Significant sums
can be saved by avoiding high TNUoS charges.
Network balancing act
Levying high TNUoS charges is just one
tool used by National Grid to help it balance
supply and demand on the electricity
Table 1: TNUoS charges 2009-2015.
TNUoS Actual HH Values (£/kW)
Zone No.
Zone Name
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
1
Northern Scotland
3.38
5.87
6.54
10.74
11.05
16.17
2
Southern Scotland
9.07
11.22
11.73
16.00
16.79
21.24
3
Northern
12.06
14.52
15.68
19.66
22.35
26.94
4
North West
16.54
18.43
19.45
22.84
25.18
29.64
5
Yorkshire
16.30
18.34
19.58
23.18
25.49
30.25
6
N Wales & Mersey
16.89
18.89
20.20
23.64
25.63
29.72
7
East Midlands
19.13
20.93
22.21
25.45
28.21
33.10
8
Midlands
20.53
22.69
23.81
27.36
29.20
33.78
9
Eastern
20.01
21.84
22.67
25.95
29.89
34.63
10
South Wales
23.68
22.52
22.85
25.26
27.54
32.32
11
South East
23.84
24.63
26.74
28.25
32.83
37.66
12
London
25.90
26.76
27.94
31.17
34.08
38.55
13
Southern
24.47
25.49
27.57
30.61
33.75
38.79
14
South Western
25.63
26.06
28.41
31.06
33.55
38.70
Use of System Charges published by National Grid
8 B&UU OCTOBER 2014
network. The high charges are essentially a
disincentive to use energy at these times.
National Grid also offers a range of services
that offer positive incentives for businesses to
manage their loads, and assist in its network
balancing efforts.
These demand-side response services
provide a valuable way for major energy
users to earn an income from their ability to
load manage.
One of the factors that National Grid
needs to control is system frequency.
National Grid has a legal obligation to keep
the frequency of the electricity transmission
system within one per cent above or below
50Hz. If system frequency strays towards the
outer limits, it must immediately be rectified
to prevent system failure.
Frequency control
To help National Grid maintain the correct
frequency, it awards Frequency Control
contracts, which are administered by
specialist energy suppliers like ourselves
Frequency response relays are installed
on the customer’s site at agreed locations.
These relays automatically trip when
system frequency drops below an agreed
level, shutting down the area of the plant
associated with that relay. Customers agree
the times during which these relays are
‘armed’ and available for tripping, and are
paid an availability fee for those periods.
Such services are only suitable
for processes that can withstand an
instantaneous and unexpected loss of supply,
without detriment to safety or product quality.
For businesses that can’t withstand
instantaneous shutdown, but can manage
their load at short notice, other services are
available. The Short-Term Operating Reserve
(STOR) service requires businesses to either
shutdown part of their processes or start up
standby generation in response to a request
from National Grid. In return, they receive an
availability payment (£/MWh) for all periods
when load is made available, as well as a
utilisation fee (£/MWh) every time they are
called on to load manage.
Unique opportunity
Major energy users are in a unique position
to help National Grid balance the electricity
transmission network, thanks to their ability
to manage electricity consumption accurately
across often very large sites. This flexibility
also gives them the opportunity to manage
loads at times when transmission charges
are expected to be especially high, during the
Triad periods.
Manipulating energy use with the support
of an experienced supplier can therefore be
the key to unlocking significant savings or, at
the least, minimising punitive pass-through
charges for many large energy users.
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ENERGY MANAGEMENT
PREPARING FOR AN
UNCERTAIN ENERGY
FUTURE
With rising energy prices, an ever-changing policy landscape
and the looming threat of energy blackouts, organisations
should be seriously considering ways to future proof
themselves against an uncertain energy future. Peter Roper
caught up with Gemserv’s Louise Powell to discuss how ISO
50001 can help organisations to do just that.
Q
A
First of all, what exactly is ISO 50001?
ISO 50001 is the international standard for
energy management. It aims to help energy
managers develop a structured and methodical
approach to managing their energy use. The
standard was first published in June 2011 and has
seen greater uptake in its first year than ISO 14001,
the environmental management standard.
Q
A
What does ISO 50001 involve?
Organisations first have to decide on the
scope of their Energy Management System
(EnMS). They then complete an energy review and
identify their significant energy uses. An energy
baseline is established (this is usually based on
energy data from the previous twelve months), so
the organisation knows how much energy was being
used before the EnMS was put in place. Progress
potential for energy performance improvement.” It
also states that organisations can choose their own
criteria for what they deem to be significant. ISO
50001 has deliberately been designed to be flexible
and allow organisations to implement the standard
in a manner that suits them.
Q
Some organisations are already certified
to other ISO standards such as ISO
9001 and ISO14001. What additional benefits
would there be to have ISO 50001 and would
organisations not be duplicating what they
already have?
A
Not at all, in fact ISO 50001 complements
these other standards very well. It has been
designed to fit within an organisation’s integrated
management system and follows the same Plan-DoCheck-Act process as many other ISO standards.
There is some overlap, so for example, organisations
with ISO 14001 are roughly half way to achieving
ISO 50001. However, the difference between
these two is that ISO 50001 focuses solely on
energy use. It requires a more in depth review and
analysis of energy than ISO 14001, thereby helping
organisations to identify more ways to save energy,
and money.
Q
Readers may have come across ISO
50001 already through the Energy
Savings Opportunity Scheme (ESOS). What is
ESOS and who needs to comply?
A
ISO 50001 is the international standard for
energy management. It aims to help energy
managers develop a structured and methodical
approach to managing their energy use.
against objectives and reduction targets can then be
measured against this baseline. There is also a focus
on procurement and improving staff awareness.
Ultimately, organisations need to demonstrate
continuous improvement in energy efficiency by
monitoring and measuring their energy use on a
regular basis.
Q
What do you mean by “significant energy
use”? Is there a definition of what this
should be?
A
The standard defines significant energy use as
being “energy use accounting for substantial
energy consumption and/or offering considerable
10 B&UU OCTOBER 2014
ESOS is the latest piece of Government
legislation designed to help organisations
to become more energy efficient. It stems from
the EU Energy Efficiency Directive and requires
all large enterprises (that’s any organisation with
250+ employees, or an annual turnover of €50M+
and a balance sheet of €43M+) to conduct an
energy audit of their buildings, industrial processes
and transportation once every four years. The
first compliance date is 5th December 2015
and organisations will have to register with the
Environment Agency by 31st December 2014 if
they qualify.
Q
Why has ISO 50001 been chosen
as a recognised route to compliance
for ESOS?
A
ISO 50001 is internationally recognised
as the best practice standard for energy
management, and therefore any organisation that is
certified to ISO 50001 is already performing all the
tasks that ESOS requires.
Q
So, any organisation that is already ISO
50001 certified is compliant with ESOS?
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ENERGY MANAGEMENT
A
As long as the scope of their EnMS covers
at least 90 per cent of their energy use (the
de minimis value set by ESOS), then yes, they
are compliant and they simply have to inform the
Environment Agency that they are certified to ISO
50001. Where less than 90 per cent of the total
energy use is covered by their ISO 50001 certification,
the organisation would only be partly covered and
would therefore have to either update the scope of
their ISO 50001 to include 90 per cent of their energy
use, or use another ESOS compliance method for the
remainder, to ensure full compliance.
Q
Do organisations need to be certified
to ISO 50001 to improve their energy
management?
A
Not specifically. Simply following the principles
of ISO 50001 is enough to ensure that
energy is being managed in the most efficient way.
However, full certification to the standard gives
organisations that independent verification to
demonstrate that they are actually doing what they
say they’re doing. It can also look good from
a reputational perspective.
Q
How can ISO 50001 help organisations
to future proof themselves against an
uncertain energy future?
A
ISO 50001 provides organisations with
a structured approach to managing and
reducing energy consumption. This has direct
benefits, as using less energy means a reduction
in energy bills. But it also has indirect benefits. For
example, a reduction in energy leads to a reduction
in carbon emissions and therefore a reduction in the
amount of tax required to be paid under the CRC
scheme. And having a complete understanding of
how energy is being used will put organisations in
a much better position to comply with any future
Government schemes. Also, because the standard
has been developed by ISO it is not subject to any
changes to national policies.
Q
What is the best approach for readers to
adopt to convince their Board to begin
the ISO 50001 process?
A
ESOS is a good driver, if that’s applicable.
Alternatively, I would suggest gathering as much
information as possible to develop your business
case before going to the Board. One way to do this
would be to conduct a Gap Analysis, as this gives
you an understanding of how your current energy
management processes align with the standard and a
rough idea of how much time and resource it will take
to achieve certification. Organisations that implement
ISO 50001 typically see between a 10 to 20 per cent
Twitter us at @meucevents
ESOS is the latest piece of Government
legislation designed to help organisations to
become more energy efficient.
reduction in their energy bills so this can be used to
determine return on investment. As the old adage
goes, knowledge is power!
Q
Gemserv and Certification Europe are
working together to support MEUC
members to achieve ISO 50001 certification.
Could you give readers an outline of how this
might be provided and what would be involved?
A
Certainly. Firstly, we conduct a free assessment
to see whether ISO 50001 is appropriate for
their organisation. This involves Gemserv, Certification
Europe and the MEUC coming to their site to conduct
an initial review of how they currently manage their
energy use, what processes are already in place
(for example to engage with staff), how much they
spend on energy etc. They will then receive a report
explaining whether or not ISO 50001 would be of
ISO 50001 provides organisations with a
structured approach to managing and reducing
energy consumption. This has direct benefits, as
using less energy means a reduction in energy
bills. But it also has indirect benefits.
benefit to their organisation and why, and what next
steps, if any, they might like to take. If the decision
is taken to proceed, Gemserv will conduct an in
depth Gap Analysis, giving the MEUC members
a full overview of how close they are to achieving
certification and which areas they will need to focus
on. We can then provide as much support as needed
to put the correct processes and procedures in place
to meet the requirements of the standard. Finally,
Certification Europe can conduct the certification
audits and provide members with certification.
Louise Powell is Business Development
Manager for Gemserv. If you would like to find
out more about ISO 50001 or to book a free
ISO 50001 assessment, please email
[email protected] or call 020 7090 1022.
OCTOBER 2014 B&UU 11
ENERGY
PROJECT ‘BLACKOUT’
LEADS TO 15% ENERGY
SAVING FOR TOP
THEATRE GROUP
Under an internal campaign ‘Always Think
Green’, The Ambassador Theatre Group
(ATG), launched in 2012, the Project
Blackout initiative in an attempt to reduce
carbon emissions within it’s 39 UK theatre/
entertainment venues.
Through torchlight surveys, carried out
initially by the group’s safety & environmental
advisor, the project identified overnight energy
waste issues between midnight and 7am.
Working in partnership with LSI
Independent Utility Brokers Ltd., the venue
technical teams, managers and the group’s
‘green ambassadors’ ATG developed a
series of simple ‘no-cost’ solutions to the
energy waste issues which in the first year
achieved cost savings of just over 5 per
cent, based on CRC data from 2011/12.
“Another significant aim of the project
was to support a culture and behavioural
change for the group with regard to energy
management and efficiency,” explained Juliet
Hayes, Safety & Environmental Advisor.
Indeed, the initiative has been selected
to win a top prize in the Green Apple
Environment Awards – a national campaign
to find Britain’s greenest companies,
councils and communities. ATG beat off more than 500 other
nominations for Environmental Best
Practice, and will be presented with its
trophy and certificate at a ceremony in the
House of Commons in November.
Rosemary Squire OBE, ATG’s Joint
Chief Executive Officer, said: “This award is
wonderful national recognition for our Safety,
Environmental and Technical team, their
‘Always Think Green’ initiative and ‘Project
Blackout’. The scheme is proving to be a real
success across the Group and we’ve already
seen a reduction in overnight energy use by
15 per cent, despite an electricity contract
renewal cost increasing by 7.43 per cent.”
According to Juliet, “Venue managers
and their line management fully support this
on-going initiative, as the bespoke reports
help them to understand the benefits of
proactively monitoring and managing their
overnight energy use, encouraging and
prompting investigation to solve unnecessary
high energy use. Each month, venues
12 B&UU OCTOBER 2014
achieving reduction from the previous month
are awarded Green Star status, which gently
supports internal healthy competitiveness,
which already exits within the Company
between venues and divisions.”
In essence the project began by
identifying areas where change could be
easily affected, the easiest being overnight
energy use, after the theatres close.
“Through existing electricity monitoring
tools, supported by our utility broker LSI, we
identified a third of our venues were using
significantly high levels of energy during
closed periods, which prompted further
investigation,” Juliet explained.
“Each torchlight survey, carried out in
darkness, would take around 1 ½ to 2
½ hours to complete, where every area
and room were checked to identify any
equipment left switched on that didn’t need
to be, as well as equipment that should be
left switched on, such as alarms, chargers
and till systems. The survey included myth
busting with all venues; two common issues
were that if IT office equipment, such as
printers, were switched off, the link to the
company network would be severed – this
is not true.
“Also, emergency lighting had been
historically left switched on overnight in
case of emergencies – it was established
and reiterated to all venue managers that
this kind of lighting should be switched off
at night, but would need to be switched on
easily should an emergency arise during
the night. Any emergency lighting that had
to remain on as a security deterrent would
need to house low energy light bulbs.
“Following each survey, the venues
would receive a feedback form
highlighting equipment left switched on a
recommendations to reduce their overnight
electricity spend. The surveys have helped
the venues create new Capex bids and
have included installations for “last man
out” switches enabling easy operation of
emergency lighting during closing and opening
up procedures and increased requests for low
energy and LED lighting solutions.”
The initiative sets out to encourage
venues to develop their own environmental
targets and objectives, which locally
develop environmental improvements and
are audited during ATG’s internal Safety &
Environmental Audits.
“We have not only engaged venue staff,
but also have senior management support
with our Managing Director (Venues) and
our Property Director actively encouraging
the surveys and scrutinising the energy
use and cost saving benefits. This is also
discussed at the monthly ATG Board
meetings,” Juliet added.
“The project is actually fun. This simple
and easy initiative is helping us to promote
and enhance a positive culture towards
energy management and by creating a little
competitive edge, venues are also creating
a change culture.
“We are also working with members of
Safety Advisors Group for Entertainment
and Project Blackout has already been
identified as transferable to any sector
of industry, one of the main attractions
being no or little cost to the employer, full
engagement with venue staff and almost
instant environmental changes! We are now
keen to roll out the project to our US venue,
and although legislation and energy targets
differ, the basic principles will also work on
an international level.”
Visit www.meuc.co.uk
POWERED BY KNOWLEDGE
ENERGY PROCUREMENT | RISK MANAGEMENT | WATER | MARKET INTELLIGENCE
DATA SOLUTIONS | ENVIRONMENTAL MANAGEMENT
There’s not a lot we don’t know about energy. We know the best ways to buy it,
manage it, use less of it, forecast it, analyse it, you name it. That’s why we’re one of
the UK’s leading energy consultants, with over 600 industrial and commercial clients.
To find out how our expertise can empower your business, go online or give us a call.
It’ll be energy well spent.
www.eic.co.uk | 01527 511 700
PART OF THE UTILITYWISE PLC GROUP
COMPETITION
ENERGY REGULATORS
LINE–UP FOR CMA BATTLE
Roland Gribben gives an overview on the Competition and Market Authority’s
investigation into the ‘Big Six’ suppliers
Stephen Littlechild is back in the regulatory limelight. The academic
who regulated the electricity industry for nine years after privatisation
has made a typically forceful, shrewd and apposite contribution to
the Competition and Market Authority’s investigation into the Big Six
and competition in the retail market.
He welcomes the CMA inquiry (along with many others) but
lays the blame for the current lack of competition squarely on the
shoulders of Ofgem. Dramatic changes in regulation, he argues,
have undermined competition in the retail market since 2008, a view
shared by other regulators although the language is more restrained.
The significance and importance of the CMA inquiry has been
underlined by the contribution from four other energy regulators
operating before the merger of the electricity and gas authorities in
1999. Sir Callum McCarthy, former Chairman and Chief Executive
of Ofgem, Eileen Marshall, Offer and Ofgas, Stephen Smith, Senior
Executive Ofgem and Claire Spottiswoode (Ofgas).
The submission from the five is more restrained than the second
and more critical polemic from Prof Littlechild but the decision of
the five to present something akin to a united front speaks volumes
about their concern about regulatory developments since their time
at the helm rather than an anxiety to defend their records
The first generation regulators are willing to go further and meet
the CMA panel charged with providing a new competitive framework
for the Big Six and others queuing up to join the market. They have
not severed their connections with energy and Prof Littlechild will
undoubtedly want to make good any omissions in his opening shot.
Will it be relevant and worthwhile? That judgment will depend on the
attitude of the panel and the way witnesses present their evidence.
Certainly there have been significant changes since the early
days of regulation where the emphasis was on encouraging and
developing competition and fixing limits on price increases. The
regulators all had their problems, headaches and interference that
characterises today’s set-up.
Prof Littlechild did however, have considerable reservations about
whether a fully competitive market would develop because of the
dominating role played by PowerGen and National Power, then the
Big Two that have become part of the Big Six. He felt the power he
exercised as regulator and the regulations themselves were “second
best for competition.”
He was accused of failing in his regulatory responsibilities during
the ‘dash for gas’ in the early 1990s – he saw it as a helping to
stimulate competition.
The MEUC at the time criticised him for failing to prevent the Big
Two from manipulating prices in the electricity pool, then the key
pricing mechanism. It said at the time: “We nagged Prof Littlechild
to look at the gas price to see if the new gas-fired power stations
would produce cheaper electricity but he did nothing.”
Prof Littlechild maintained he did. He told the generators they
were manipulating prices and threatened them with a Monopolies
and Mergers’ Commission inquiry into their behaviour but never
went as far as putting them in the ‘dock.’
14 B&UU OCTOBER 2014
The current CMA inquiry is the first faced by the industry since
privatisation, driven by the familiar catalogue of complaints about
competition, prices, profit levels, structure and conducted against
a background of customer discontent, government interference
and a tough and expensive programme to cope with climate
change, emissions and the need for a massive investment surge
to clean the environment.
Government protests it is not guilty of interference but a letter
written by Ed Davey, Energy Secretary, to Andrew Wright, the
Ofgem acting Chief Executive back in February provides interesting
insight into preparations for CMA to intervene.
Mr Davey told him it was vital Ofgem’s work is “clearly
independent” but “I want to reiterate that I want you to feel that you
can recommend any one of a range of things from no action to a full
market investigation reference.”
Then he went on to tell Mr Wright “there are three areas which I
am particularly keen you focus on,” issues that could have significant
The significance and importance of
the CMA inquiry has been underlined
by the contribution from four other
energy regulators operating before
the merger of the electricity and gas
authorities in 1999.
benefit for the consumer. The gas supply market with average profit
margins “around three times that of electricity” and “five times for
some” headed the list. Mr Davey provided an early indication that he
favoured a break-up of Centrica by disclosing his department had
been closely monitoring British Gas prices and profits.
Mr Davey went on to say that if there was prima facie evidence
of a market issue Mr Wright should consider whether it merited
investigation “with the whole gamut of potential remedies that
could follow including a break up of any companies found to have
monopoly power to the detriment of the consumer.”
He also raised the prospect of further savings from interconnections with other power markets and making homes more
energy efficient and complained that the Big Six had been slow to
embrace the Green Deal.
Just a month after receiving the letter Ofgem announced it
wanted CMA to investigate the energy market.
Last word goes to Professor Littlechild. He hopes that the CMA
investigation will disclose the mistakes made by Ofgem “and bring
to an end one of the most misguided episodes in the modern
history of UK regulation.”
Visit www.meuc.co.uk
THE ENERGY
LANDSCAPE NEEDS
SHAKING UP
WILL YOU JOIN US?
We are DONG Energy, one of the
UK’s largest business energy suppliers.
We are Danish-owned and we know the UK market very well. We’re a
bit different to your usual supplier. We build strong partnerships with
our customers, offering a broad range of fresh energy solutions. Our
skilled, personable team will work closely with you to provide
committed support, as well as transparent products and services.
For more info visit dongenergyforbusiness.co.uk or call
0800 0568 123.
Energy for Business
ENERGY
CAPACITY,
COMPETITIVENESS
AND THE ENERGY
SECTOR
Darren Lennon, Head of Strategic Sales at npower,
looks at what the upcoming Triads season
tells us about the UK energy market
How time flies: it is incredible to think that the long days of summer
are already drawing to a close. Pretty soon we will be buttoning up
our coats against the autumn chill and this can mean only one thing
(in the energy sector at least): it’s time for energy companies to begin
predicting Triads. Triads are the top three half-hour peaks of energy
demand across the grid, separated by ten clear days, over the most
energy intensive period of the year: November to February.
Now this may not sound like the most exciting event of the
season, but for large businesses it is incredibly important as it can
have a huge impact on energy bills.
Triads typically occur when high business demand meets the
domestic tea-time period, causing an overall spike in energy use.
This is what we’ve seen with the 2013/14 Triad period, with all
Triads occurring at the 5-5:30pm peak, and the highest half-hour
demand period hitting 50,694MW.
That said Triads are not always that easy to predict. Take last year
when a Triad fell on a Friday afternoon, a time when we would expect
to see businesses winding down for the weekend rather than ramping
up their energy usage (we suspect that the reason for this peak was
down to weather conditions during a flat energy demand season. The
Friday in question, 6th December, had a half-hourly average demand
of 49,927MW, and was one of the coldest days of the Triad period).
To manage the huge demand on the network during the triad
periods, the National Grid imposes a charge: Transmission Network
Use of System (TNUoS). This is used to finance the maintenance of
the UK’s electricity grid to ensure future supply. Impacting customers
with half-hourly meters, the charge is proportional to businesses’
energy use over the Triad periods and linked to location.
The upshot of this for businesses is that if they take a strategic
approach to the Triad season, they will be able to save thousands of
pounds on their energy bills. Clearly, if energy use can be cut during
the Triads then businesses will avoid falling foul of the TNUoS charge.
For businesses that operate in the energy-intensive industries such
as manufacturing, the cost savings of moving certain processes to off
peak times cannot be overstated. Indeed, we have estimated that an
average medium to large energy user can save around £50,000.
This approach also benefits the National Grid as it gives it more
slack with which to manage demand during peak times. For both
these reasons we proactively warn customers 24 hours before a Triad
is likely to happen, enabling them to respond, either by ramping up
on-site generators to avoid using the grid, or reducing consumption
until the peak has passed. As part of this Triad warning service, we
have also created a TNUoS calculator online that allows users to
calculate potential energy savings during a Triad.
Importantly, Triads are telling us something interesting about the
UK electricity market: that our increasing requirement to manage our
Grid capacity carefully is not a barrier to business competitiveness.
16 B&UU OCTOBER 2014
This can be seen across the Government’s approach to dealing
with the supply challenge: the Electricity Market Reform (EMR). The
EMR, in common with the TNUoS, sets out to manage demand for
electricity by end users. On the surface this sounds restrictive to
businesses, but in practice it may not be. Indeed, it could well prove
hugely beneficial to some businesses.
This is in a large part down to the Capacity Market, which the
EMR will create. The Capacity Market offers all capacity providers
a ‘steady, predictable revenue stream on which they can base their
future investments’. Importantly, this not only includes businesses that
To manage the huge demand
on the network during the triad
periods, the National Grid imposes
a charge: Transmission Network
Use of System (TNUoS). This is
used to finance the maintenance of
the UK’s electricity grid to ensure
future supply.
generate their own electricity, it also includes those that voluntarily
reduce demand (as we are suggesting customers do during the Triad
periods). Through this mechanism, far from being a hindrance to
businesses, the strategic and well thought-out reduction of demand
at certain times can prove profitable.
The same can be said for the Energy Savings Opportunity
Scheme (ESOS) – a mandatory energy assessment and energy
saving identification scheme the Government is introducing. The
aim may well be to reduce energy waste (in this case by ensuring
businesses are as energy efficient as possible) but the result will also
be businesses that are more competitive and profitable (through the
cost savings associated with energy efficiency).
There can be no escaping the fact that the world has moved
on in a very short period of time. The days when businesses and
consumers could use just as much energy as they liked, when they
liked are numbered. But this should not strike fear into the hearts
of businesses. Yes, there will need to be more careful planning and
a greater oversight of energy usage, but with the right approach
and the right energy partners demand side reduction can be done
in a way that will make your business more efficient, effective and
profitable than ever.
Visit www.meuc.co.uk
WE’RE THE PEOPLE WHO
BRING POWER TO AN AREA
THAT STRETCHES FROM
NORTH NORTHUMBERLAND
TO THE HUMBER AND
NORTHERN LINCOLNSHIRE,
AND FROM THE EAST
COAST TO THE PENNINES.
We provide an essential service delivering electricity to
8 million people across 3.9 million homes and businesses,
or around 13% of the UK population.
STIMULATING THE
ECONOMY THROUGH
LOCAL EXPENDITURE
Unlike some large
businesses, we’re very
regionally focussed which
means that the benefits of
any investment we make
are closely concentrated
in our area of distribution.
As a major business, we
work with around 1,556
suppliers across the UK,
711 of which are located
within our distribution area.
59% of our total expenditure
relates to businesses in our
region which is good news
for the local economy.
INVESTING IN THE
INFRASTRUCTURE
THAT SUPPORTS
GROWTH IN
THE NORTH
Over the next decade
we’re very proud that our
investment could create an
extra £733m a year for
the north of England.
We’ll be investing
£6.75bn on large
infrastructure projects,
replacement and
development of our
network and on the
day-to-day running of
our business. This means
we’ll be providing jobs,
income and work for
people and businesses
across our region,
as well as providing
essential infrastructure
to support development
and growth.
YOU CAN FIND OUT MORE INFORMATION ABOUT US BY VISITING
WWW.NORTHERNPOWERGRID.COM OR YOU CAN CALL 0845 070 7172
KEY FACTS
• 61,000
substations
• 91,000 km of
overhead line and
underground cables
• 2,200+ employees
• £340 million
annual investment
in our assets
ENERGY MANAGEMENT
WITH THE RIGHT
PARTNERS ENERGY
EFFICIENCY CAN
DRIVE CHANGE
By James Axtell, Investment Director – Clean Energy at
Ingenious Media Investments Ltd.
In a world where uncertainly seems, more than ever,
to be screaming from the newspaper headlines
energy related issues are ironically both a constant
and deeply unpredictable. Constant in that
management of energy costs is a key issue for most
organisations but unpredictable in that the scale of
the change in the sources and supply of energy are
unprecedented.
The so-called energy trilemma is now a familiar
concept. Rising energy prices, energy security issues
and issues related to carbon emission reduction are
significant at a national level. The question for those
responsible for energy use is what can be done at an
organisational level to both protect the organisation
from unwanted negative impacts but also to play a
part in resolving issues nationally. Clearly major users
of energy have a more significant opportunity to act
than most.
The so-called energy trilemma is now a familiar
concept. Rising energy prices, energy security
issues and issues related to carbon emission
reduction are significant at a national level.
Energy efficiency is a key part of the management
of energy costs. As a topic energy efficiency inevitably
rises in prominence when energy prices are high but
sinks down the agenda when energy prices fall. Not
seen as the most exciting of areas, particularly at
board level, recent developments are changing the
way in which energy professionals can drive change
in their organisations.
Nonetheless, there is still a lot of work to do before
benefits can be enjoyed. Questions abound at this
stage: What is the opportunity across my property
estate? How do I scope the opportunity? How do
I get my FD onside? Do we have the resources
internally to dedicate to a project? How on earth
would I identify and approach potential providers of
finance? Would I qualify for that finance anyway? How
do I know the savings will actually materialise? It is
also tempting to think that one’s own organisation is
unique and that existing solutions wouldn’t apply.
18 B&UU OCTOBER 2014
Having been working in the energy efficiency arena
for a number of years and having reviewed dozens
of potential projects the experience of the Ingenious
Clean Energy team is that all these questions can be
dealt with and often more simply than at first thought.
The key as ever is to work with the right team. A
team who have experience, independence and the
willingness to work closely with you to realise the
opportunities presented.
Two key changes sit behind the new, greater
opportunity to drive value for the organisation. Firstly,
the broadening away from pure energy efficiency to
encompass the wider concept of resource efficiency.
Secondly, the availability of additional, external
sources of finance to enable organisations to realise
greater benefits than previously available.
Resource efficiency covers a broader remit than
energy efficiency by covering not only electricity
and gas but also water and demand side response.
The later has the capacity to generate revenue
and thus move the debate away from “saving” and
onto revenue generation opportunities. Inevitably
this interests the senior decision makers more than
savings. The provision of external finance makes
more comprehensive retrofit projects viable. There
is otherwise the risk that a focus on short-term
payback projects means that interventions with a
longer payback never get done as they are not crosssubsidised as part of a broader project. Providers of
external finance will understand the wider opportunity
and may well consider a longer term project than the
organisation would feel comfortable with on its own.
A key point made time and again by those
promoting resource efficiency projects within their
organisations is just how critical senior buy in is to
success. In practise this often means that the Finance
Director needs to see the value of the project when
compared with alternative investment opportunities.
Helpful, then, in getting this buy in are both the
provision of external capital to minimise the drain on
internally available resources and also the revenue
generation opportunities presented by demand
response. Another attractive characteristic for the
FD is the transfer of project risk, and the delivery
of savings, to another party – a key element of the
Energy Performance Contract approach.
Whilst energy efficiency investment has often been
focused on operational expense (i.e. annual energy
spend) there is an increasing realisation that funds
are available to upgrade major capex items, which
may be near end of life. Freeing up capex destined
for these projects into other core business activities
is also an attractive win for most organisations. Not
given enough consideration at outset is also the
opportunity to reduce maintenance costs as well as
the improved level of comfort for building users.
In summary, even with uncertainty in Ukraine,
Syria, Scotland and many other places in the world
energy managers should be confident that they can
help drive value for their organisation with a well
presented resource efficiency project supported by
the right partners.
Visit www.meuc.co.uk
ENERGY FORUM PREVIEW
ALL CHANGE FOR
FUTURE ENERGY
MARKETS?
MEUC is offering you the opportunity to make your
opinion count during its 11th series of energy forums
for industrial and commercial customers.
Taking place at the Thistle Hotel, Marble Arch, London on
7th October, Cedar Court Hotel, Bradford on 14th October
and National Motorcycle Museum, Birmingham on 15th
October you will be given the opportunity to check out the
Networking Exhibition where suppliers and leading industry
specialists will be on hand to answer your questions.
Twitter us at @meucevents
OCTOBER 2014 B&UU 19
ENERGY FORUM PREVIEW
ONE DAY
ENERGY FEASTS
FOR PUZZLED
CUSTOMERS
All Change for Future
Energy Markets?
Less than a year from the end of the Coalition and
with the Big Six subject to national scrutiny, the
winds of change are blowing through the energy
markets. The new team of Ministers at DECC
reflects concern over affordability whilst the new
Electricity Market Reform battles to underpin
supply security but only now are the cost recovery
procedures from customers surfacing.
The MEUC’s 11th series of conferences focuses on the pitfalls
and opportunities awaiting business customers. Amongst the
issues to be examined and debated will be:
• What is the likelihood of the lights going out if we have a hard
winter this year or next?
• How much extra will we have to pay for the new capacity
charges and cfd’s under EMR?
• Have forward wholesale prices for gas and power gone as
low as they are likely to?
• What opportunities and new requirements are there for
managing demand?
• How do you position your business to keep control of your
energy future?
These one-day events free for industrial and commercial
energy users:
• Explain the issues through expert presentations and interviews
• Gauge customer views through the debates and electronic
opinion poll results
• Provide opportunity to make new and renewed contacts
with other customers
• Find out from the suppliers and other exhibitors what’s
new for 2015.
The day divides into four principal forums incorporating in-sight
presentations explaining the issues, expert interviews on what
customers can expect and need to budget for and four inter-active
debates with audience voting and participation. Add in the MEUC
and other specialist briefings, the networking exhibition and the
complimentary lunch and refreshment and you have the formula that
has made these events so popular and successful over the years.
20 B&UU OCTOBER 2014
Visit www.meuc.co.uk
ENERGY FORUM PREVIEW
Programme
08:30
Registration, coffee and networking exhibition opens
09:25
Welcome and Introduction to the Day
Forum 1: Demand Side Management
09:30
Opportunities and Requirements – MEUC Briefing
09:45The New Statutory Audits – ESOS
Scheme – Insight Presentation
10:00
Benefiting from Demand Response – Expert Interview
10:15Funding Renewables and Efficiency
Investments – Insight Presentation
10:30The Demand Management Debate and Audience
Poll Results – Q&A with Audience Voting
10:55
Coffee and networking
Forum 2: Gas Purchasing
11:20
Gas Supply Prospects – Insight Presentation
11:35
Budgeting for Delivered Prices – Expert Interview
11:50The Gas Buying Debate and Audience Poll
Results – Q&A with Audience Voting
UPDATE BRIEFINGS
12:10Water Update – Supply Competition
Progress – Guest Briefing
12:25Energy Technologies Update – Fuel
Cell Progress – Guest Briefing
12:40
Lunch and networking
Forum 3: The Future Energy Market
13:25
Supplier Perspectives for the Future – Insight Presentation
13:40The Changing Energy Procurement
Landscape – Insight Presentation
13:55The Changing Energy Management
Landscape – Insight Presentation
14:10The Energy Futures Debate and Audience Poll
Results – Q&A with Audience Voting
14:35
Tea and networking
Forum 4: Power Purchasing
14:55
Power Market Perspectives – Insight Presentation
15:10
Power Supply Prospects – Insight Presentation
15:25
Budgeting for Delivered Prices – Expert Interview
15:40The Power Purchasing Debate and Audience
Poll Results – Q&A with Audience Voting
16:00
Twitter us at @meucevents
Energy Forum Ends
OCTOBER 2014 B&UU 21
ENERGY FORUM PREVIEW
MEET THE EXHIBITORS
Business Stream
Market reform in the English non-domestic
water market is gathering pace and the
blueprint for competition is being created.
Business Stream’s David Seymour, Head
of Market Development, will provide an
update at MEUC’s autumn events on what’s
happening and what companies can do
now to access early benefits.
Dong Energy
DONG Energy is one of the UK’s largest
suppliers of business energy. It builds strong
partnerships with customers, offering a
broad range of fresh energy solutions. The
company’s skilled and personable team
provide committed support and transparent
products and services. Come and visit Dong
at the Roadshow to see how it can help you.
EDF Energy
How can we help with your energy plan?
The energy market is changing fast. Electricity
Market Reform and ESOS are reality. So how should you adjust your business’
energy plan? What approaches will work in
this new energy landscape so you hit your
budget target?
Hear our views during this series of
MEUC Roadshows. See how we can help
at edfenergy.com/largebusiness.
EIC – part of Utilitywise plc
Jon Ferris, Head of Risk Management at
EIC, part of Utilitywise plc, will be focusing
on the energy procurement options available
22 B&UU OCTOBER 2014
for large energy users. He will discuss the
valuable demand response opportunities for
businesses and with Winter fast approaching,
Jon will also address the growing difficulties
in forecasting Triads.
Eneco UK
Eneco specialises in supplying renewable
energy, serving over two million customers
in the Netherlands, Belgium and the United
Kingdom. It offers tailor made supply
arrangements for business customers based
on flexible pricing, direct contact with our
trading desk, green power from our Scottish
wind parks and on-site renewable generation.
Gemserv
Gemserv works at the heart of the utilities
industries, across electricity, gas, water,
environment, telecoms and information
security.
We play a key role in the design of retail
markets, offering governance and assurance
services to government departments,
regulators and industry bodies in both the
UK and Ireland. Projects are also carried out
with individual companies when there are
industry-wide benefits which can be shared.
Our wide-ranging expertise means we
are involved in many of the major policy
developments and industry initiatives across
our various sectors.
ENER-G
ENER-G Procurement is an independent
broker and founding member of the Utilities
Intermediaries Association, the trade body
that ensures the highest standards of TPI
operation in energy procurement. Its mission
is to be the specialist partner of choice
for organisations demanding transparent,
sustainable and tailored solutions to solve their
utility procurement and associated challenges.
FuelCell Energy Solutions
Large Stationary Fuel Cell Technology – Ultra
Clean and Decentralized Power Production.
Currently Energy supply security,
European Union directives and country level
emission reduction initiatives are impacting
each other. There are some technologies
already available today to help mastering the
future and fulfilling these requirements. MCFC
(Molten Carbonate Fuel Cell) Technology
has achieved appropriate matureness levels
and sufficient reference sites globally to be a
true alternative for consideration. Technical
insight, application examples and commercial
status will be explored.
Inenco
Inenco is one of Europe’s leading energy
consultancies. Together with sister
companies NIFES and Inenco Direct, it
offers a complete energy solution.
Helping businesses to reduce
energy costs through procurement
and performance, its sector-specific
and innovative approach guarantees
customers an optimum and tailored service,
from skilled and knowledgeable specialists.
Learn more, as energy expert Matthew
Osborne speaks at the Birmingham and
London venues.
Ingenious Investments
In an era of increasing uncertainty, managing
down energy consumption makes ever
more sense. Doing so using external finance
while retaining benefit from the project is
now a real option. By working with the right
partners the most effective solution can be
developed with the client and the project
optimally managed over its life.
Visit www.meuc.co.uk
ENERGY FORUM PREVIEW
Inspired Energy
We are continually investing in the company
to ensure we remain at the forefront of energy
purchasing. We have grown and developed
the company to provide a range of essential
advisory services to the Industrial and
Commercial Sector.
We became the first and only publicly
quoted energy broker following a successful
AIM debut in November 2011, and are
proud to discover we were the only North
West based business that achieved a
successful floatation that year.
Inspired Energy’s buying team are vastly
experienced and work with some of the
UK’s leading companies to ensure they
maximise their buying opportunities in the
energy markets.
information and advice relevant to today’s
energy professionals.
Tony Slade, Head of I&C Energy Solutions
will be giving advice on ‘How to win over
the Finance Director’ at the London event
on 7th October. This will be followed be
Allan Robinson, Head of Business Energy
Services, who will be taking part on a panel
debate in Bradford on 14th October, and
finally Magali Hodgson, Product and Services
Optimisation Manager at RWE npower, will
be presenting an update on energy pricing
on 15th October in Birmingham. npower
npower’s energy solutions experts will be on
hand for advice.
The company is supporting the
Roadshows for the sixth year running, with
experts on hand to answer any questions
you may have, and talk through the latest
developments for energy intensive industries
and major energy users.
In addition, three of npower’s specialist
energy solutions experts will be delivering
Twitter us at @meucevents
Supplying over 100,000 sites, Total Gas
& Power is one of the leading gas and
electricity suppliers to business customers
within the UK. It offers a range of products
that can be tailored to suit the needs of
customers, complemented by a wide
range of energy services designed to help
customers monitor, manage and optimise
energy usage; identify opportunities for
energy efficiency and on-site generation; and
implement sustainable solutions that deliver
quantifiable energy and carbon savings.
Northern Powergrid
Northern Powergrid will be covering several
topics from the essentials of our distribution
charges to some practical learning from our
innovation programme. We will also share
a local energy network’s perspective on the
latest policy developments aimed at tackling
security of supply.
LG Energy
The Changing Energy Procurement
Landscape. A Changing Regulatory Regime.
A consultant’s view of the changing
regulatory regime across the energy
procurement markets. Taking a look
at the ongoing OFGEM proposals for
transparency, the impact this has made so
far, the changes that still need to be made,
and ultimately how this will affect end users.
Total Gas and Power
Open Energi
2014 is predicted to be the year Demand
Response takes off in Europe and it has a
massive role to play in delivering secure,
clean and affordable energy in the years to
come. Open Energi is working with large
energy users to digitally map and monetise
unused energy capacity; in order to deliver
secure, decarbonised energy supply at a
fraction of the cost of energy generation. By
providing greater flexibility and control over
energy demand we are helping National
Grid to integrate intermittent renewables
onto the grid and displace the need for
additional peaking generation capacity. We
will be sharing our experience of working
with companies such as United Utilities,
Aggregate Industries and Sainsbury’s to
monetise their energy-intensive equipment
and how this can help the UK transition from
an age of surplus to dynamic availability.
UK Power Networks
The company owns and maintains your
electricity cables and power lines if you live
or work in London, the South East or East of
England. It fixes power cuts, upgrades power
equipment and moves and connects new
electricity cables. Working on the electricity
network 24 hours a day, 365 days a year,
safety and customer service are at the heart
of everything UK Power Networks does.
WINGAS UK
WINGAS UK specialises in supplying
natural gas to large energy users. We work
in partnership with customers to ensure
they are able to make the most of the gas
market, and each receive an exceptional,
personally tailored service. Come and meet
our team of experts and enjoy the ‘Special
Energy’ of WINGAS UK.
OCTOBER 2014 B&UU 23
REDUCING ENERGY
ESOS: PLANNING
THE ROAD TO
REDUCTION
Anthony Mayall, Director at Inenco, explains how to turn
savings into a long term energy reduction strategy.
Up to 10,000 businesses are on the route to
compliance with the Energy Savings Opportunity
Scheme (ESOS), selecting a delivery partner and
scoping out the work needed to complete the audits
and meet the scheme requirements.
Whilst additional red tape is the last thing
businesses need, if approached in the right way
ESOS is a major opportunity for businesses to
go beyond their property portfolio and unlock
savings across their operations. However, like any
energy reduction scheme, the potential savings
are wholly dependent on businesses acting on
recommendations. But how do we turn ESOS into
an opportunity? Identifying savings is one thing, but
actually implementing them is another.
Despite the good intentions of ESOS, the barriers
to implementation still exist. These range from
behavioural inertia to change right the way through
to capital funding for larger expenditure projects and,
on the whole, a lack of knowledge and experience
on the plethora of energy saving technologies in
the marketplace. The market is awash with ‘energy
solutions’ and choosing the right one that supports
and delivers your business plan is key to success.
Joining the dots…
First things first: we shouldn’t consider energy in
isolation. Whilst ESOS is indeed an energy policy,
it can also help businesses to become more
operationally efficient and optimise both assets and
sites – providing we take action on the outcome
rather than allowing our ESOS recommendations to
simply gain dust on a shelf.
ESOS is the first step towards an integrated
carbon strategy because it ties together previously
disparate elements of energy to deliver a mix of
tactical quick wins and longer-term projects to
deliver overall carbon reduction. But the real win will
be aligning it to your overall business strategy, to
deliver improved performance.
When looking at ESOS recommendations and
an energy reduction plan, take a broad view of the
impact you want to achieve. Thinking in terms of
long term, strategic impact on your organisation and
its performance will make a significant difference in
your approach to implementation.
Business strategy focuses on company
performance and how to achieve it, so why should
energy be any different? Those businesses that set
24 B&UU OCTOBER 2014
themselves apart from the crowd will be the ones
that grasp and achieve the best environmental
performance, the best infrastructure performance,
and the best financial performance.
Environmental Performance
The ultimate end game is reduction in energy use.
Setting out how to achieve this in the early design
phases of any implementation project is critical. It is
possible to predict energy reduction through different
technologies, and detailed modelling and predicting
carbon savings will ensure project viability – before a
penny is spent on actual implementation.
Add to this a thorough site analysis to understand
where to focus in your portfolio, and link this back
to business strategy to ensure objectives are in line
with (and in fact delivered through) your carbon
strategy. This will ensure that all the ground work is
done before you commit.
Infrastructure Performance
The market is flooded with varying technologies,
a multitude of firms offering different options for
the same end result and huge players dominating
company strategies. The right choice of partner is
absolutely critical to achieving savings and delivering
optimum business performance. Only commercially
proven solutions with the best warranties or
performance guarantees should be considered to
deliver the highest quality outcomes for lighting,
HVAC, CHP, BMS, controls, processes and overall
optimisation – upgrading your infrastructure to drive
revenue. It’s a buyers’ market here, and whilst there
may be a myriad of technology out there, the best
solutions are proven, so taking the time and using
experience to make the right choice is crucial.
Best Financial Performance
Finance options are vast. If capital funding is
required, the influx of Energy Performance Contracts
and shared savings models have opened the
market to financial solutions for large expenditure,
minimising risk and increasing the options around
financial payment models. Repaying capital outlays
via the cost savings achieved through energy
reduction means financial risk is mitigated, giving
you the power to implement a new carbon strategy
with no capex upfront, resulting in lower operational
costs for your business. However, look out for
guaranteed savings, which again reiterates the
requirement for proven technologies and watertight
terms and conditions.
We should welcome ESOS. Whilst it is another
cost to bear, it is estimated that companies can save
13.5 times the cost of compliance – if the results are
acted upon, of course.
Take advantage of the experience in the market.
It is flooded with offerings, but choosing the right
delivery partner will mean you gain a sustainable,
long term energy reduction plan that delivers your
business objectives – and your organisation will reap
the benefits for years to come.
Visit www.meuc.co.uk
ESOS
Get ahead of
the game
Businesses can’t
afford to ignore
ESOS
ESOS
Up to 10,000
large businesses
now have 18
months to complete
a mandatory
energy audit
Act now
and identify
opportunities to
reduce carbon,
consumption
and cost
Businesses
could unlock
up to £900
million of
savings
Come and see us at the
MEUC Roadshows where we’ll be discussing
ESOS and offering a FREE scoping review to all attendees
PARLIAMENTARY INSIGHTS
WHILE
SCOTLAND
PREPARED TO
VOTE, OTHER
ISSUES
SURFACED
Geoff Davies outlines significant energy-sector
developments overshadowed by the
Scottish campaigning
With the consequences of the Scottish vote yet to be played
out, the voters, nevertheless have a clear decision against
independence. Although complex, politicians and business leaders
alike can now continue to make energy-sector decisions related to a
continuing United Kingdom.
Meanwhile, there was absolutely no shortage of other regulatory
and political energy-sector developments during July, August and
early September.
Narrowing margins
Energy regulator Ofgem set out its proposed price control
settlements for five of the six companies that run the UK’s local
electricity network. These proposals, planned to come into effect in
April 2015 and to run until 2023, would see the network companies
spend £17 billion to upgrade and maintain the network. Since last
November, when Ofgem refused to accept the plans submitted
by all but one of the networks, £2.1 billion has been cut from their
plans, with the companies identifying £700 million of these savings
and Ofgem disallowing a further £1.4 billion. Ofgem now plans to
publish its final decisions in November.
Back in July, following detailed recommendations from National
Grid, Energy Secretary Ed Davey announced that the Government
is to procure a total of 53.3 GW of electricity generating capacity
when it re-introduces a capacity market into the UK later this year.
The DECC described this energy generation as equivalent to that
of seventeen new nuclear power stations, or more than 80 per
cent of peak electricity use. The first capacity auction is to take
place this December, for delivery in 2018-19, and will be similar to
arrangements used in the decade following electricity privatisation.
Mr. Davey profiled the announcement as ‘the final piece of the jigsaw
of our detailed energy security plans’ and claimed that ‘we have
defused the ticking time bomb of electricity supply risks we inherited’.
Also in July, however, Ofgem said that although the probability
of disconnections had been reduced by measures taken alongside
National Grid and Government, its results showed electricity margins
tightening over the next two winters to ranges broadly similar to
those set out in its 2013 report. There had been some improvement
26 B&UU OCTOBER 2014
in margins expected for next winter compared with the 2013 report,
but they were still expected to drop to their lowest level in 2015-16
because of the closure of older power stations. After this, with new
power stations being introduced, they were expected to improve.
A new difficulty arose in August, when EDF closed down four
of its reactors following the discovery of a fault in a boiler spine at
its Heysham nuclear power station. It said at first that the closures
would reduce this year’s expected output from its fifteen UK
reactors from 63.9 TWh to 61 TWh, but in early September it cut
the estimate to between 57.5 and 60 TWh.
Search for savings and new investment
Speaking at the CBI conference, the Energy Secretary set out
details of the first £10 million electricity demand reduction auction
from a £20 million budget for the full pilot scheme. Businesses are
to compete for funding for projects that reduce electricity demand,
where the projects would not have happened without funding.
They should be able to deliver at least 100 kilowatts of savings
throughout the 2015-16 winter peak. Mr. Davey said that electrical
efficiency could mean savings equivalent to 9 per cent of total
demand by 2030.
On a broader front, he also announced the Government’s first
report on energy investment in the UK. He said that the energy
sector had seen £45 billion of investment between January 2010
and December 2013, with nearly $8 billion investment in renewable
technologies in 2013 alone. Energy projects apparently make up
around 60 per cent of the UK’s total infrastructure project pipeline –
worth about £200 billion in its entirety.
Criticism and tighter regulation
New proposals announced by the Energy Secretary in August
would give regulators powers to prosecute people suspected
of abusing the energy market, so that anyone found guilty of
rigging the energy market could face up to two years in jail. It
would become a criminal offence to fix the price of energy at an
artificial level or to use insider information to buy or sell energy
Since last November, when Ofgem
refused to accept the plans submitted
by all but one of the networks, £2.1
billion has been cut from their plans,
with the companies identifying £700
million of these savings and Ofgem
disallowing a further £1.4 billion.
on the wholesale market. It would also be an offence to make
misleading claims or conceal facts about wholesale energy prices to
manipulate the market, especially if it could affect competition in the
energy market. Pending consultation and Parliamentary process,
the proposed sanctions could come into force in Spring 2015.
A newspaper report said that a submission by five former energy
regulators to the Competition and Markets Authority (CMA) with
reference to the latter’s now on-going investigation of the energy
market expressed the view that interventions by Ofgem may actually
Visit www.meuc.co.uk
PARLIAMENTARY INSIGHTS
have caused higher energy prices; they also expressed concern
that the impartiality of the investigation might be impeded by some
Ofgem staff being seconded to the CMA. The CMA is required to
publish its final report by 25 December 2015.
Against this background, Shadow Energy Secretary Caroline Flint
said that if Labour won the General Election, it would create a new
(!) regulator with the power to cancel the licences of energy suppliers
found to have seriously and deliberately breached their licence
Figures from HM Revenue & Customs
showed Government revenue from
the UK oil and gas sector at its lowest
level for the last ten years.
conditions. She commented that the current practice of imposing fines
appeared to be viewed by the suppliers as simply ‘a cost of doing
business, not as a warning to get their act together’.
For the oil and gas sector, the Government announced a oneoff contribution of £15 million over five years to help to kick-start
the establishment of the new Oil & Gas Authority (OGA) as the
regulatory body for the UK’s offshore oil and gas industry. This was
in response to Sir Ian Wood’s review into improving efficiencies
in the sector, and was the only major change to the accepted
recommendations. While in the long term the OGA is to be 100 per
cent funded by industry, the aim of the Government contribution is
to ensure that it is established quickly.
largest industrial investor in the UK economy (£14 billion in 2013),
and its supply chain had a turnover of over £35 billion, of which
more than £14 billion of goods and services were exported to a
global market.
The bidding process opened for companies seeking licences
to explore for onshore oil and gas, including initial exploration for
shale reserves. The licences provide the first step towards starting
drilling, but fall short of giving absolute agreement to drill. In addition
to a licence, any further drilling application will then require planning
permission as well as permits from the Environment Agency and
sign-off from the Health and Safety Executive.
On the first day of August, Government reforms aimed at
stimulating low-carbon energy investment (and, of course, keeping
the lights on) passed into law. Energy Secretary Ed Davey confirmed
that the delivery partners – National Grid, the Low Carbon Contracts
Company and the Electricity Settlements Company – had been
given powers to implement the reforms. The first capacity market
auction is to be held in December for the winter of 2018-19, and the
first allocation of contracts for difference was described as being ‘on
track’ for this autumn.
In a new Communication published this month, the European
Commission assessed progress towards the 2020 energy efficiency
target and proposed a new energy target of 30 per cent for 2030. It
also analysed how energy efficiency can drive competitiveness and
strengthen security of supply in the European Union in the future.
The Communication noted that for every additional 1 per cent in
energy savings, EU gas imports were expected to fall by 2.6 per
cent, decreasing dependence on external suppliers.
In July the European Commission provided a funding boost of
€300 million for the White Rose carbon capture and storage (CCS)
project based at the coal-fired Drax power station.
Measures of oil, gas, and income
Figures from HM Revenue & Customs showed Government revenue
from the UK oil and gas sector at its lowest level for the last ten
years. Tax receipts for the 2013-14 year fell to £4.7 billion, 24 per
cent lower than 2012-13 – a year when it underwent a 44 per cent
fall. With inflation taken into account, the tax take for 2003-04
would, by comparison, have been £5.6 billion. Meanwhile the Office
for Budget Responsibility reduced by a quarter its expectation of
probable revenue from North Sea oil over the next quarter century.
HM Treasury published a call for evidence to explore how the
tax regime for the North Sea can continue to encourage investment
there, while also maximising the value of the UK’s oil and gas
resources and ensuring that the nation receives a fair share of the
profits. It said that there were still up to around 21 billion barrels of oil
equivalent left to recover. Private investment totalled £14.4 billion in
2013, and there are about 125 groups of companies now involved
as licensees in offshore exploration and production, though this is
becoming harder and more expensive. There are some 300 offshore
oil and gas fields in production. The sector still provides nearly 40 per
cent of the UK’s primary energy needs, and supports around 450,000
jobs directly and indirectly. Upstream taxation paid in 2013-14 was
£4.7 billion.
Oil & Gas UK welcomed the Treasury announcement of the
consultation, commenting that although rates of investment were
at record levels, exploration was ‘at an all-time low’, and there were
‘worrying signs’ that investment would halve over the next four
years. The lobby group’s view was that up to 24 billion barrels of oil
equivalent could still be recovered. It said that the industry was the
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In July the European Commission
provided a funding boost of €300
million for the White Rose carbon
capture and storage (CCS) project
based at the coal-fired Drax power
station.
Welsh First Minister Carwyn Jones formally ‘unveiled’ Wales’s
first full-scale tidal energy generator at Pembroke Port, ahead
of its installation. The generator – invented by Richard Ayre and
developed by Cardiff-based Tidal Energy Ltd. – is to be installed in
Ramsey Sound, Pembrokeshire with the support of £8 million worth
of EU funding delivered through the Welsh Government.
The DeltaStream 400kW demonstration device weighs 150 tonnes,
has a frame 16 metres long by 20 metres high, and has been
fabricated and assembled by the Mustang Marine company over
the six months preceding the ‘unveiling’. The project marks a first
step in the Welsh Government’s March 2014 plan for its low carbon
transition strategy in marine renewable generation. In cooperation
with another company, Eco2 Ltd., Tidal Energy is planning a 10MW
commercial array off St. David’s Head in Pembrokeshire, involving
up to nine DeltaStream devices.
OCTOBER 2014 B&UU 27
ENERGY BROKERS
BROKER PRACTICES
– 7 DEADLY SINS
Omar Rahim, Director of Trading & Operations at LG Energy Group,
explains some of the issues in the energy consultancy sector and
voices his frustrations at the slow pace of the implementation of
regulation.
For some time, the energy broker/
consultancy sector has been under scrutiny
and quite rightly so. The lack of regulation
has meant a wide spectrum of experiences
for the end user, which has often tarnished
the reputation of the whole industry.
Experience has shown that some of the
practices outlined below are still endemic
at all levels of the industry- and we are
in desperate need of a robust regulatory
framework.
The aim here is to lift the lid on
questionable practices, with a view to making
energy buyers aware of what to look out for
and indeed, what to avoid.
they receive remuneration for referring a
certain amount of business to the supplier.
This type of arrangement could lead to
customers being placed with suppliers with
these agreements in place, without going to
a competitive tender.
One of the most frequent complaints is
a severely lacking service delivery. What
was promised on day one has simply not
been delivered.
It is important consultants manage
expectations from the outset so customers
do not feel short changed. It is imperative
for there to be more cooperation between
sales and operational functions, as current
managers are perhaps better placed to
manage large portfolios.
Unsuitable strategies
Customers’ strategies will vary depending
on what they are trying to achieve and their
attitude to risk. Where possible, customers
should be dealt with on a bespoke basis to
ensure the strategy meets the objectives set
out pre-contract. We have seen customers
who have been in portfolios with other
customers, despite their size warranting a
bespoke individual approach. A portfolio
approach is a lot easier to administer from
the consultant’s point of view, but it may not
be the best solution.
Consultants should have one golden
rule: represent the client’s best interests.
This means finding the most appropriate
solution that meets objectives and delivers
value for money.
Anti-competitive practice
We recently took a large client to tender with
a supplier, and found out the incumbent
consultant had applied pressure on the
supplier not to deal with us; they clearly did
not want to lose the business. Unfortunately,
Undeclared commission
There’s no such thing as a free lunch –
consultancies take fees either directly from
the customer, or are paid an “uplift” (usually
expressed in p/kWh) from suppliers. Either
way, the customer is paying for a service.
One of the most common practices is
a failure to declare all remuneration the
consultant is claiming from the supplier. We
think it is reasonable for the customer to
know explicitly how much their consultant
is receiving.
Our consultants speak to countless
organisations who tell us their consultant is
paid directly by the supplier. Once we dig
a little deeper, we often find out the fees
sometimes equate to up to 18 per cent of
the customer’s annual energy spend.
Double Commissions
Consultants can get paid in two ways- but
sometimes get paid twice. Once by the
customer, via a management fee and then
again by the supplier.
We recently came across a retailer
paying approximately £15,000 in annual
management fees. We suggested there may
be a consultant commission involved too
and it transpired the consultancy was taking
£300,000 a year from the supplier.
Quote based incentives
Some consultancies often have quotas in
place with suppliers. Practically, this means
28 B&UU OCTOBER 2014
The aim here is to lift the lid on questionable
practices, with a view to making energy buyers
aware of what to look out for and indeed,
what to avoid.
remuneration structures means that
salespeople can promise the world, and
leave operations departments to worry
about delivery.
Lack of Trading expertise
for flexible contracts
When using a consultant to risk-manage
a flexible contract, what the customer is
essentially paying for is the consultants’
view of the market. The electricity and
gas markets are incredibly complex and it
is only by spending some time in trading
the markets themselves that can lead to
a successful risk management strategy.
Having a deep understanding of what
drives the markets, and what is moving the
markets will lead to a higher probability of
achieving your aims.
Too often we see the trading function
filled with account managers who have
inherited trading duties. In our experience,
the skill sets for both roles are vastly
different and specialised traders and risk
the suppliers agreed and as our competitor
was one of the largest consultants in the
UK, the deal was at a standstill. It wasn’t
until we queried how this was in the
customer’s interest the matter was resolved.
To conclude, the industry is in desperate
need of regulation; this will raise standards
and make consultancies much more
accountable to customers. In the meantime,
there is nothing to stop existing players in
this market from adopting a stance against
these practices on a voluntary basis.
This article was first written in 2012.
Following Omar’s presentation
regarding the 7 deadly sins, at last
month’s Energy Event, it is being
republished to encourage debate
around the issues.
Visit www.meuc.co.uk
ELECTRICITY TRENDS
TRENDS IN THE
DAY AHEAD
AUCTION MARKET
With support from APX, Europe’s premier provider of power
exchange, MEUC brings readers an insight into current
Market trends of the UK spot electricity markets.
APX Power UK Prices and Volume MWh
* Power UK Spot: The spot market is used for balancing and trading purposes and consists of half hourly products of electricity as well as discrete standardised blocks made up of the individual half hours.
* Power UK Prompt: APX Power UK’s base and peak load day products, weekend products and combination blocks that are listed on EuroLight for trading clearing and notification by APX Power UK.
* Power UK Day-Ahead Auction: The APX UK Power Auction is a Day-Ahead auction, where trading takes place on one day for the delivery of electricity the next day.
* UKPX Spot RPD Base Load Index: A daily volume-weighted reference price for each half hour settlement period where such data is available between 23:00 and 23:00 prevailing UK local time.
* UKPX Auction Base Index: Non-weighted arithmetic average of the matching prices of each hour instrument between 23:00 and 23:00 prevailing UK local time.
30 B&UU OCTOBER 2014
Visit www.meuc.co.uk
Your energy keeps us going
APX is one of Europe’s most experienced
and innovative energy exchanges,
operating power spot exchanges in
the UK, the Netherlands and Belgium.
We offer an efficient, transparent and
secure electronic trading environment,
providing clearing services and market
data for all parties involved.
To promote innovation and integration,
APX partners with Europe’s major players
in the energy field. At the same time we
make trading more accessible for smaller
parties. After all, it’s the energy of all
market participants that keeps us going.
WATER
TRANSPARENCY,
ACCURACY, AND
SIMPLICITY SHOULD
FORM THE BASIS
OF ENGLISH WATER
MARKET REFORM
Mark Powles, Chief Executive of Business Stream gives an
update on progress towards competition
We’re well on our way to a competitive non-domestic
water market in England. Since the Water Bill received
Royal Assent back in May this year, becoming the
Water Act in the process, it’s been a busy time for
the industry. There is much to prepare for and as
the market begins to take shape and reform gathers
momentum, a raft of announcements have been
made in the last couple of months. Some bode
well for the future market, while others have merely
resulted in further questions over its structure.
At the time of writing, the market was on the
cusp of hitting another milestone on its journey to
reform. The full set of draft determinations, for every
incumbent water company in England, were about
to be published. These should provide a great deal
of information about what the market is going to
look like, including crucial data from each company
on what their separate wholesale and retail costs
are likely to be. Why is this important? Well, it will
go some way to determining how a key piece of the
industry puzzle will take shape: the retail margin.
These should provide a great deal of information
about what the market is going to look like,
including crucial data from each company on
what their separate wholesale and retail costs
are likely to be. Why is this important? Well,
it will go some way to determining how a key
piece of the industry puzzle will take shape:
the retail margin.
The publication of the draft determinations should
represent a significant step forward in the creation of
the competitive water market in England. However,
the water industry regulator Ofwat has expressed
concern over the data provided so far by some of
the incumbent suppliers in England. In particular, it
highlighted the need for transparency and accuracy
in the information supplied, while the regulator also
32 B&UU OCTOBER 2014
queried some of the wholesale costs submitted.
If these issues are not remedied there’s a risk that
new entrants will be discouraged from entering
the market, since it could well undermine their
confidence in how the market will work.
Clearly, this would be bad news for customers.
Wholesale and retail costs are a key factor in the
creation of a market that works to customers’
benefit. The retail margin, which is based on the
retail costs, is there not just to cover the retailers’
outlay, but also to allow them to offer discounts and
other incentives to customers. If this ends up being
squeezed too hard, then it will directly affect prices.
To succeed, a non-domestic water market has to
be competitive. It’s what drives suppliers to deliver
what customers need. Without this key ingredient,
a market wouldn’t function properly. For it to be an
attractive market, water suppliers need to be able
to freely enter it and expand. That requires a viable
retail margin which will offer an incentive to potential
participants without being unfair to customers. After
all, the key ingredient of competition is the creation
of a dynamic market with multiple players, with each
aiming to deliver for customers whatever their size.
Likewise, market facilitation costs need to be
kept low. Ensuring that will avoid these expenses
being passed on to customers and is another factor
in guaranteeing the attractiveness of the market. A
report from Grant Thornton in 2010 estimated that
market facilitation costs for Scotland between 2006
and 2021 would be £45 million, with the bulk of that
being required in the market’s formative years. While
the costs are likely to be higher in England’s much
larger market, we need to make sure they are kept
low through efficient processes. That means making
switching as simple as possible and reducing the
administrative burden placed on customers and
water suppliers.
That will be a critical part of enabling customers
to exercise choice. At the same time, customers
need to be made aware of the range of offers
available to them. That requires a certain amount of
transparency from wholesalers, particularly when it
comes to data and pricing. What’s more, whether
these are discounts, services, efficiencies, or any
other kind of incentive, they have to offer value to
the business and its needs. That can only happen if
there is a practical margin in place for retailers.
Combined, all of this will create market structures
and regulation that are fair, stable, and designed to
encourage competition, to the benefit of customers.
We’ve come too far to let this opportunity slip. A
competitive market will only work for customers if it
is transparent, based on accurate data, and simple
to administer. These tenets form the basis of the
Scottish market and, as a result, it has delivered.
The market has outperformed expectations by
delivering more than £100 million in savings over six
years. That’s substantially higher than even the most
optimistic predictions.
The momentum of change that has been built up
over the last few months needs to be maintained,
and ensuring customers remain the core focus
of reform should be central to how we progress.
A market based on transparency, accuracy, and
simplicity is the only way we can make that happen.
Visit www.meuc.co.uk
How we
helped Devro
avoid £500,000
on annual
transport costs
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Like many industrial customers throughout the UK, Devro relied on our
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Then our unique, long term innovative solutions delivered long term savings
over the alternative disposal option which would have resulted in £500,000
on annual transport costs.
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business and your bottom line at
business-stream.co.uk
MANAGING DEMAND
USE POWER MORE
EFFECTIVELY
United Utilities recently became the first water company in
the country to sign-up for Dynamic Demand – an innovative
quick-fire way of switching power-hungry equipment off and
on in response to changes in electricity supply and demand
nationwide. Peter Roper spoke to Andy Pennick, Energy
Manager to find out why.
Q
A
What are the energy challenges for
a business like United Utilities?
Q
A
Why did you decide to install
Dynamic Demand?
We use in the region of about 800 GWh hours
a year, our energy costs are rising and we’ve
got regulatory targets we have to meet. We have to
use less electricity, generate more energy and work
smarter with our assets to manage that consumption.
It’s all part of a drive to use power more
efficiently. Water and wastewater treatment is
a really energy intensive process – power is one of
our biggest operating costs – so we’re looking both
inside and outside our business to see how we can
work smarter. That means using less power and
being willing to be flexible in the way we use that
power. Our assets have to treat water and waste,
but by looking at them again and using innovative
technology we can gain added value for our
customers and the UK electricity network.
Q
A
So how does it work?
Dynamic Demand fits firmly in the “use
smarter” part of our strategy. It provides a
quick-fire way of switching power-hungry equipment
off and on in response to changes in electricity
supply and demand nationwide. The system acts
like a “virtual power station”, helping National Grid to
even out temporary peaks and troughs in demand
instead of turning power stations up and down.
Q
A
How did you go about installing the
technology?
The first step was to understand the
technology and to define the equipment or
assets it could work with. That meant identifying
processes and equipment that were not timesensitive in their operation that could provide a
service to National Grid and still do the job they
are there to do.
Next we had to work with our people on site
to understand how the site works and develop an
implementation plan. Lastly came the deployment
stage which involved Open Energi installing their panels
on site to allow the equipment to “talk” to the grid.
This enables equipment to be turned on and off in
seconds in response to variations in power frequency.
34 B&UU OCTOBER 2014
Q
A
Practically on the ground, was it
difficult to put in?
The technology is simple to operate, but
quite engineering based to deploy. You have
to look at the controls on site and understand
the parameters within which your equipment can
respond. We spent a long time working very closely
with Open Energi to ensure we got this part right.
When it moves to the operational phase, it’s quite
silent; it doesn’t need anyone to interfere with it.
From an implementation programme and sticking
a physical unit in it’s no different than any of the other
control panels we’ve got; it looks invariably the same
so people are used to it, it doesn’t feel alien.
We trialled the system at three sites – our
wastewater treatment plants in Bolton and
Birkenhead and a water pumping station at Hoghton
near Blackburn – and on three different asset
classes – aeration lanes, pumps and odour control
units. At each staging it’s been successful, it falls
in line with the consent of the Environment Agency
that we operate these sites under so it is absolutely
safe to do so and it doesn’t interfere with the site
operation either.
Q
A
And are you pleased with the results?
Very; in effect, we’ve become like a virtual
power station. When everyone gets up after
watching the Great British Bake Off to switch the
kettle on, some of our pumps go off automatically
to free up the power. That might only be for a few
minutes, then they can restart again. We have a lot
of tanks and water storage within our processes,
so we can be flexible about precisely when we use
power. The lower operating costs are good news
for our customers.
Q
A
So where do you go from here?
We’re now rolling out the programme across
the whole North West region. Our aim is to
have 10MW available within the next 12 months.
Over the next five years we expect to have a total
of 50MW of flexible capacity to offer up to National
Grid – the equivalent of a conventional power station
– which should cut carbon emissions by 100,000
tonnes per year. The income this will generate is
around £5m, which will be reinvested into site assets
to reduce operating costs.
Q
A
Is this part of a wider demand
management strategy?
Yes, we are looking at other forms of demand
response such as STOR or short term
operating reserve and we already have a very
effective triad management programme in place
to help us respond to winter peak management
periods. We are also looking at time of day tariffs,
where we can use energy intensive equipment in
cheaper periods. That’s part of a wider exploration
of demand side response that we are undertaking
at the moment.
Visit www.meuc.co.uk
Q: What does a university, a water
utility, an asphalt producer and a
supermarket all have in common?
A: They have turned some of their most
energy-intensive equipment into income
by installing Dynamic Demand.
Dynamic Demand is a unique form of Demand Response which can
automatically adjust the electricity consumption of equipment to help
National Grid balance electricity supply and demand, which is vital to
maintain power supplies. The solution works with a range of equipment
from fridges to furnaces without impacting business performance.
In the process, it helps to reduce UK carbon emissions and build a more
secure energy future.
Get in touch to find out how your business could benefit.
[email protected]
www.openenergi.com
NEWS
ENER-G SHORTLISTED FOR
NATIONAL AWARD
Combined heat and power specialist ENER-G has been shortlisted for a prestigious
national award for engineering excellence.
It has been shortlisted for The Manufacturer of the Year Awards 2014.
As one of the four finalists in the Through-life Engineering Services category, ENER-G will
compete for a crown previously held by manufacturing giants such as Rolls- Royce and
Monarch Airlines.
EMR CONSULTATIONS PUBLISHED
DECC has published three consultations
on supplementary design proposals for
the Capacity Market, changes to the CFD
supplier obligation, and on the Non-Delivery
Disincentive (NDD) for the CFD. The
consultations will each run for six weeks
and close on 5th November.
The changes and supplementary design
proposals outlined in the documents
implement provisions required as part of
successfully receiving State Aid clearance,
and implement policies DECC has
committed to introducing.
Following consultation, the changes
will be reflected in amending secondary
legislation, which is expected to be laid in
Parliament early next year. OFFTAKER OF
LAST RESORT
REGULATIONS
Legislation has been laid enabling
the Offtaker of Last Resort (OLR), the
Department of Energy and Climate
Change has confirmed. The OLR is
designed to reduce the risk of market
failure at the outset of the CFD and
therefore reduce the cost of investment
in renewable electricity generation,
boost competition, and lower costs to
consumers.
At its simplest, the OLR achieves this
by providing renewable CFD generators
with a guaranteed, ‘backstop’ route-tomarket for their power: a Backstop PPA
(BPPA).
The Regulations will be in place in time
for the first CFD Auction on 14th October.
CFD COULD
EU STITCH-UP ON
INCREASE
HINKLEY NUCLEAR PLANT
BILLS BY 10%
SAYS NPOWER
“Energy policy has a bottom-line impact
for UK business but there is clearly
a strong economic case for the shift
to a low carbon economy,” declared
Wayne Mitchell, Head of Industrial and
Commercial at npower.
Commenting on the recent Cambridge
Econometrics report looking at the
bottom line impact of energy policy for
UK businesses he added: “We know for
example that Contracts for Difference,
a key element of the Government’s
Electricity Market Reform, could add an
extra 10 per cent to bills by 2020.
“The UK is on the cusp of a complete
shift in the way we plan for energy
use and we encourage UK business
customers to consider all the options
open to them. Whether you’re a major
steel manufacturer, a supermarket chain
or a single convenience store, now is
the time to start taking energy efficiency
seriously. In turn, this will free up vital
capital that can be re-invested into other
areas of the business.”
36 B&UU OCTOBER 2014
Commenting on media reports that
the Government and the European
Commission have reached an agreement
over state-aid to fund a new nuclear reactor
at Hinkley Point, Greenpeace EU legal
adviser Andrea Carta said: “If competition
commissioner Almunia has backed State
aid for Hinkley, it risks a backroom deal
prevailing over the rule of law.
“Only a year ago the Commission said
that Hinkley was “in principle incompatible
under EU State aid rules.”
Now, under pressure from the UK
Government and French nuclear operator
EDF, the Commission is preparing to
perform a U-turn.
“European Commissioners should
oppose the plan and resist rushing through
a controversial and far-reaching decision in
the dying weeks of this Commission.”
PICKLES’ CONDEMNED FOR
WIND FARM INTERVENTION
RenewableUK has condemned Secretary of State for Communities and Local Government
Eric Pickles for his ‘unprecedented interference’ in renewable energy projects in England.
The organisation argued that Mr. Pickles had intervened in 50 wind farm planning
applications since June 2013, taking decisions personally instead of allowing locally
elected councillors and planning inspectors to do so.
Of the 50, decisions were reached on 19 projects, with all but two refused.
RenewableUK’s Deputy Chief Executive Maf Smith said, “Fifty recoveries for onshore
wind means higher bills for UK consumers, goes against public demand for renewable
energy and holds back action on climate change. These sites would have meant half a
billion pounds in local investment creating over 2,000 jobs. His guiding principle seems to
be localism – as long as you do what I say.”
Visit www.meuc.co.uk
Eneco
Eneco is an independent energy company, with Dutch origins. Our ambition is
sustainable energy for everyone and therefore we are dedicated to producing
energy that is reliable, affordable and clean. In the Netherlands and Belgium
we supply over two million customers.
Our renewable asset base in the UK is growing quickly with three onshore wind
farms and one solar farm operational, two more onshore wind farms coming on
line by the end of 2015 and more in the pipeline. Our aim is to supply all of this
home-grown power directly to customers.
We offer flexible trading services, delivered using Eneco’s trade expertise
and transparent access to the power markets to enable you, the customer,
to manage your energy consumption, cost and carbon footprint.
Interested in finding out more?
Please contact Eneco:
Email: [email protected]
Telephone: 01926 331224
www.eneco.co.uk
NEWS
‘OFFSHORE
WIND WORKS’
CAMPAIGN
LAUNCHED
Andrew Bainbridge pictured with bull horn blower Stan Roocroft, Director of the
Hawes Silver Band. Relaxing with his wife Marianne, daughters and grandchildren.
BAINBRIDGE HOSTS
‘BAINBRIDGE FAMILY’
CELEBRATION
MEUC Chairman Andrew Bainbridge took his family to the village of Bainbridge in
Wensleydale as part of the celebrations for his 80th birthday.
He also revived the centuries’ old tradition of having a bull horn blown outside the Rose &
Crown public house, a ceremony which used to guide home foresters who had lost their
way home.
A multi-media campaign to build
awareness of the role offshore wind
is playing in the UK’s transition to
low carbon energy supplies has
been launched by DONG Energy.
Platform posters across the
London Underground network and
advertisements in selected national
and regional media are being used
to get the message across.
Research carried out for DONG Energy
has shown a very low awareness of
the part that offshore wind is playing
in the UK’s transformation to a low
carbon economy. According to the latest
Government figures, offshore wind powers
over two million homes and supports
around 18,300 jobs across the country.
DONG APPOINTS NEW
MANAGING DIRECTOR
Jeff Whittingham has been appointed new Managing Director of
Dong Energy. He is taking over from Mike Hogg who is retiring after
more than 41 years in the energy industry. The new appointment is
effective on 1st November.
Evert den Boer, International Sales Senior Vice President, said:
“We remain fully committed to the UK market and the strategy to be a
leading energy solutions provider through partnerships will not change”.
“It has been a privilege to work with Mike and I would like to thank
him for his valuable contribution. He has enjoyed a distinguished
career, continuously putting customers first and meeting their
evolving needs. Mike successfully led the team through the transition
from Shell to DONG Energy. We look forward to welcoming Jeff and
I’m confident that he will build on this success”
Mike Hogg added: “I have thoroughly enjoyed my 41.5 years in
the European energy industry having met and worked with some
wonderful people. I look forward to working with Jeff and the senior
management team during the transition period.”
Jeff is an experienced Senior Director from the energy services and
utilities industry. He joins from Inenco where, as COO, he has been
responsible for growth initiatives, business development, regulation
and general business management across all three divisions. In response Jeff said, “I am excited at the prospect of continuing
the great work that Mike and the team have done delivering high
levels of customer satisfaction and entry into the electricity market
which will provide the business with significant future growth
opportunities. I would like to wish Mike all the best for a happy and
well-earned retirement.” 38 B&UU OCTOBER 2014
MEUC EVENTS
October 7MEUC’s London Conference and Exhibition,
Marble Arch Thistle Hotel, London
October 14MEUC’s Northern Conference and Exhibition,
Cedar Court Hotel, Bradford
October 15MEUC Midland Conference and Exhibition,
National Motorcycle Museum, Birmingham
November 27Westminster Annual Conference & End of
Year Networking Reception, Church House,
Westminster and House of Commons
December 3Water Competition Action Group meeting,
Madjeski Stadium, Reading – hosted by
Thames Water
December 4Energy Training Academy, Imperial College,
London. Introductory and refresher training
on Buying and Managing Energy Wisely,
with Phil Osborn and Robin Welsby
December 9Behaviour Change Conference, Birmingham
University
MEUC Ltd, PO Box 30,
London W5 3ZT.
Tel: 0208 997 3854 Fax: 0208 566 7073
Email: [email protected] Web: www.meuc.co.uk
Visit www.meuc.co.uk
Talk to one of our experts today:
0844 225 2887
[email protected]
www.coronaenergy.co.uk
WHY CHOOSE ANYONE ELSE?
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energy supplier to UK businesses.
Delivering quality, simplicity and value
We challenge the status quo in everything we do, and it’s our goal to save you time,
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No matter how complex your portfolio, we supply gas solutions, billing excellence,
innovative energy management tools and NOW electricity solutions to suit your
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Integrity
One Team
Innovation
Highest Standards
Customer Focus
Inspiration
There is a
SPECIAL
ENERGY
between us.
Being a gas supplier means much more than just selling gas. It is about mutual success. It is about customised
and flexible solutions for you. And it is about a partnership that you can rely on – whatever the day may bring.
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