Businesses should brace themselves for two years of volatile energy costs, says report

The latest industry insight, courtesy of the Energyst, hints uncertain electricity costs and strategies to mitigate them remain a huge challenge. Future price concerns are a risk that must be planned for in advance.

The Energyst Director’s Report shows wholesale energy costs are likely to increase significantly, driven by volatility both within short and long term markets, and by swings in Sterling.

The sense is that while the next few years may not deliver price shocks of the magnitude of the 1970s, the political and economic climate is far from certain.

Energy reduction is the most robust way of protecting yourself from price shocks

‘The volatility we have seen within power markets in 2016 was unprecedented,’ explains the report.

It suggests that risks often bring opportunities, for efficient energy technology and new, responsive solutions. But either way, a very firm risk management policy, strategy and plan is required, immediately.

Advice within the report urgently recommends firms appreciate the magnitude of the changes taking place. Corporates need to work with experts to understand what they can do to mitigate electricity costs before the dangers truly kick in.

‘The volatility we have seen within power markets in 2016 was unprecedented’

Among the varied options for dealing with the challenges, directors are investing in energy efficiency in general. Equally, demand side response is a popular measure, with 53% of respondents considering demand side response activities as key.

Options and solutions on energy

Clearly then, the story remains that it’s not just about how much energy you use, but when, how and under which circumstances and charging bands you use it, leveraging these elements to control costs.

Roughly half of respondents surveyed said they have budgeted for energy bill increases relating to government policy, while a similar percentage said they were at least considering demand-side response combined with battery storage as a solution.

It might seem astonishing, but at the extreme end, some market actors predict power bill hikes, due to environmental levies, security of supply policies, network charge and wholesale market increases of up to 25% over the next two years.

Yet despite those warnings, facilities management companies say energy cost increases are simply not an agenda item for far too many of the UK’s corporates.

Further fears

The International Energy Agency (IEA) is also predicting uncertainty on oil pricing. “We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go,” said Dr Fatih Birol, the IEA’s Executive Director.

“But this is no time for complacency. We don’t see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.”

Such volatility will only feed the concerns over where electricity costs are going. It all adds up to a sense that making the most of demand response and energy efficiency now, as part of overall energy strategy, is vital for UK businesses.

Aimteq offers a suite of energy efficient, responsive technologies, including building management systems (BMS) and responsive solutions for avoiding DUOS and TRIAD costs.

More and more UK firms are considering how intelligent energy usage can insulate them against coming costs. Contact Aimteq for market leading advice on the options.

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