Predicting the energy future
Anyone who predicts the future risks winding up with egg on their face. This is as true in energy as anything else – just look at how the rapid roll-out of renewables caught everyone by surprise.
As such, the best tactic is often to avoid predicting at all, or take a conservatively pessimist line. For medium sized UK businesses, that’s often grim resignation to ever-increasing energy prices eating away at the bottom line.
I’ll stick my neck out though and say this: the energy future for UK business could actually be very bright indeed.
Medium sized UK business – vital to the economy but more exposed than the big multinationals – can vastly reduce the impact of energy costs and insulate themselves against the risks inherent in energy price shocks. All it takes is to take three words to heart: reduce, generate, store.
Reducing energy use should be the first priority for any business. No Kw is greener or cheaper than the one unused. Investments such as LED lighting, efficient boilers and variable speed drives can save huge amounts of money and energy. Back when it was known as DECC, the department estimated 18-25% energy savings were possible for SMEs with an average payback period of less than 1.5 years.
But efficiency only takes you so far. Companies can take matters into their own hands by using on-site generation to partially cover their energy needs, reducing the amount needed to be purchased. This could be diesel generators, but is increasingly including clean power sources such as solar, wind or combined heat and power biomass systems.
For now, this is the domain of the most forward-thinking companies, but solar PV costs have declined so rapidly in recent years that it will be a feasible and attractive option for many businesses. Some might protest that the roll-back of subsidies such as the Feed-In Tariff (FIT) scheme undermine this. But that’s a setback that should quickly be overcome as panels get cheaper and finance gets smarter.
The real game changer though, has been the advent of storage. In 2016, we’ve seen commercial and domestic storage make huge strides. Look at Tesla’s Powerwall or AES Storage’s commercial-scale project in Kilroot. As with solar, battery prices are falling and companies are scrambling to develop and commercialise different business models.
Storage is the missing piece of the puzzle for UK businesses. You can reduce energy usage and create your own but there will be excess energy because of the intermittency of renewables. Storage can hold that otherwise wasted energy and discharge it when required.
The energy future for medium sized UK businesses is one that includes energy reduction, generation and storage. By diligently taking advantage of available tax incentives such as Enhanced Capital Allowances and Annual Investment Allowances, combined with intelligent financing designed to deliver savings greater than repayments, it’s possible for UK businesses to begin that transition now. Doing so means lower costs, greater resiliency and a future-proofed business.
That’s my prediction.