Thursday September 8, 2022

We are in the midst of a dire energy crisis, due in large part to the ongoing Russian invasion of Ukraine – pushing wholesale gas prices up to astronomical levels.

As a result, energy security has never been more precarious. European nations are particularly reliant upon Russian gas supply, and Russia has just switched off the Nordstream 1 gas pipeline, sounding the alarm across Europe.

It is therefore understandable that Western nations are jittery about the state of energy security. But recent murmurings have suggested that countries are now putting green energy on the backburner, as their concerns over energy security takes precedence.

A recent survey by the World Energy Council has revealed the opinions of nearly 600 leaders working in the energy sector worldwide – and there is a marked decline in optimism regarding the pace of the energy transition. 44% of those surveyed felt that the crisis will slow the pace of the energy transition away from fossil fuels towards nuclear, hydrogen, renewables and storage. The report says that there has been a dramatic shift in policy focus, reprioritising energy security over affordability and environmental sustainability.

But what role does green energy have in navigating the current energy crisis? Is it a luxury that can’t be afforded during turbulent times? Or could it be the solution to our dependence on fossil fuels, sheltering us from geopolitical trouble?

Whilst the rise in electricity prices was due in part to lower than average wind generation, countries with a larger production of wind and solar electricity – such as the U.S. – have managed to avoid an electricity crisis. Countries such as Singapore, on the other hand, which derives only 1% of its total electricity from wind and solar, saw its wholesale electricity prices rise six times in November 2021.

It stands to reason, then, that greater investment in renewable energy can help to reduce reliance on fossil fuel energy and electricity. Unfortunately, the knee-jerk reaction is to focus on conserving as much fossil fuel reserves as possible, and to turn away from renewables. But diversified resources would ensure less reliance on fossil fuel supplies, making those countries less vulnerable to geopolitical challenges such as the current Russia-Ukraine crisis. Indeed, the current energy crisis has only served to highlight our worrying dependence on fossil fuels, and it is a shame that it has taken such unfortunate circumstances for a closer assessment of the current energy landscape.

The IEA conducted an analysis in May 2021 suggesting that greater investment in renewables, clean energy and clean technologies could help reduce demand for fossil fuels. They predict that, to reach net zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion. Much of the anticipated clean energy innovations are still at demonstration or prototype phase, and will need to be brought to market soon, to meet net zero targets.

Expansion of renewables deployment requires zero fuel cost – the costs are the installation and operation costs. With the correct market mechanisms, energy prices could be stabilised easily. Onshore and offshore wind, solar and hydropower could deliver around a third of the cost of generating electricity using gas. This could lower the UK’s electricity bill by around £8.9 billion annually.

The situation on the ground though, particularly for small and medium sized businesses, is much more immediate. With the energy crisis turning into a cost-of-living crisis in the UK, and the very real possibility of an economic recession, businesses are desperate to stay afloat and keep their energy costs down. Renewable energy is, unfortunately, less of a concern under the circumstances. But you should take into consideration the fact that energy efficiency options and carbon compliance could go some way towards minimising and controlling your costs.

How can EIC help clients with their energy contracts during the crisis?

At EIC, we understand the unprecedented pressures that businesses are facing, as the energy crisis takes hold. We know that our clients on fixed term contracts are currently looking for alternative ways to procure energy. Many who may have previously considered it too risky, are now looking to flexible procurement as an alternative. But suppliers are now being more selective regarding the type of client they take on to a flexible contract. Energy volume requirements, the number of sites and credit status all play a part in their choices.

We recommend that you have an initial chat with us, to consider your options and decide how to put an energy strategy in place – so you can ride out the volatile market.

You should also bear in mind that carbon compliance is mandatory, and there can be repercussions if you do not comply, including financial penalties and loss of reputation. So it is always a good idea to take steps towards best practice in carbon compliance, as soon as possible.

Finding the best available option is a time consuming and specialised process. We make use of our specialised skill set, and years of experience, to manage your energy procurement during this turbulent time. We can also search for the best green deals, and help you to meet your carbon compliance requirements, so you can focus on your business.

Get in touch today to find out more about our energy procurement and trusted compliance services.

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