60 seconds with John Palmer
In this interview, we ask EIC flexible procurement director John Palmer about the energy crisis, the impact of Covid-19, and why the future is all about sustainability.
What do you think has been the impact of the Covid pandemic on the energy sector?
There’s been quite a few changes as a result. The biggest thing in the pandemic was the way that consumption changed, particularly early on with businesses closing down or reducing what they were doing significantly. One of the big things we had to do was to react to that and reach out to customers, to reforecast their consumptions.
Because we were pro-active with EIC customers, none of our flex customers were penalised for going outside of their forecast consumptions – as we were able to mitigate that.
“This year we’ve seen the bounce in energy prices, from long-term lows to record highs. This will drive people to look at how efficient they are being with their energy, and how flexible they can be with their demand”
We are going to see a lasting shift in the way people work so, for a lot of organisations, people aren’t returning to the office full time. Some businesses are moving entirely to remote working. So that will be a change in the way we use energy.
This year we’ve seen the bounce in energy prices, from long-term lows to record highs. This will drive people to look at how efficient they are being with their energy and how flexible they can be with their demand.
Generally, customers are going to be looking at how they can reduce their energy consumption or generate their own. The cheapest kilowatt hour is the one you don’t use.
“The cheapest kilowatt hour is the one you don’t use.”
If you can generate your own energy onsite, you will be avoiding a lot of the non-commodity charges.
What are your predictions for the energy markets over the next year?
That’s a loaded question! At the moment the big thing is obviously wholesale prices and what they might do. I think we are going to be very much driven by weather over the winter, and how much gas becomes available. I think with Nord Stream 2 coming online, and sending gas from Russia, that might well bring prices down. Certainly if we have a mild winter, prices could come down.
More generally, it certainly looks like there’s going to be a tightening of what is considered to be a green energy contract. At the moment, a Rego [Renewable Energy Guarantees of Origin] backed electricity contract may not be linked to your electricity in any way. Accusations of greenwashing suggest that there might be a tightening of those regulations. There will definitely be a push towards green contracts. Hopefully green gas will become more established or an alternative option – perhaps hydrogen in the longer-term – which is being looked at as a cleaner way of doing things.
If you were in your clients’ shoes, what would you be thinking about when considering an energy purchase?
I would definitely go for a flexible contract, if I was big enough for one. If I was signing a fixed contract, I would sign a shorter contract at the moment and be ready to sign another one if the markets went against me. I’d take a short term position.
For a flex contract, I’d be looking to get things set up and look for a strategy that protected me against the market rising but also gives me flexibility to make some savings if prices fall.
From a flexible procurement point of view, our trading team is really good. They get really good results for clients. Since 2014, we’ve saved £79m for clients on flex contracts. Ben Sherbrooke and John Dawson have done a fantastic job.
“Since 2014, we’ve saved £79m for clients on flex contracts. Ben Sherbrooke and John Dawson have done a fantastic job.”
What do you think is the biggest misconception or myth in energy?
The myth that’s been exploded this year is that prices always come down in the summer. That’s been a general assumption, and this year has certainly changed that.
In terms of sustainability, what do you think clients should be focusing on?
The first thing any business should be looking at is reducing the amount of energy they use. That is going to deliver the biggest savings. Projects to replace old lighting or upgrade out-of-date equipment will bring savings on energy contracts.
For companies with the opportunity, onsite generation is something to look at. Solar is becoming more financially viable for a lot of clients and payback times are less now than they were three or four years ago. Alongside solar I suggest battery storage too.
What was the one thing you missed during the lockdown?
Cycling with other people was one of the things I missed most. I’m a member of a cycling club called ‘Chapter 2’, although we haven’t been out since the pandemic.
You can read our full interview with John Palmer here.
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