Tag: energy bills

ESOS Phase 3 – Qualification Date has Passed and Compliance is Critical

Posted on by george hunt

The qualification date for Phase 3 of the ‘Energy Savings Opportunity Scheme’ (ESOS) was 31 December 2022, meaning if your business is in scope for Phase 3, you must comply with the reporting criteria. Your business will be in scope of ESOS from that date if it has either or both:

  • 250 or more employees
  • An annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million.

What is ESOS?

Large UK firms are required to report on their energy consumption and find potential methods to consume less energy under the ‘Energy Savings Opportunity Scheme’, which is a mandated programme. We are now in Phase 3 of its four-year cycle. If your company falls inside the scope of the plan, you must abide by the rules or risk fines.

What happens if you don’t comply?

Organisations who fail to comply with ESOS regulations or meet the required criteria risk facing financial penalties from the Environmental Agency (EA). The changes to legislation in 2022 have also increased the reporting requirements for Significant Energy Use (SEU) from 90% to 95%.

Additionally, with limited ESOS Lead Assessors available for ESOS Phase 3 compliance, it’s crucial for companies to act now to ensure compliance and avoid potential fines and penalties.

All non-compliance will be made public by the EA on their website, with the amount you were fined. There are different types of non-compliance all with separate breaches and various penalty amounts. These include:

  • Failure to Notify

Any organisations who do not declare they have met with their ESOS responsibilities will be punished since it will compromise the integrity of the programme. Whether or not the organisation has conducted an energy audit, they might still be fined up to £5,000 as well as a daily fee of £500 for each working day they are in violation (for a maximum of 80 days). This amount would be added to any additional penalties as well.

  • Failure to maintain records

Maintaining your records is essential so that you can carry out an energy audit and provide proof of your ESOS compliance. In the event that this is not done, there will be a £5,000 punishment as well as an “amount representing the cost to the compliance body of establishing that the responsible undertaking has complied with the plan,” which must be settled. To correct this violation, the compliance body will provide measures, which must be followed.

  • Failure to undertake an energy audit

The greatest punishment is assessed when an energy audit is not performed because it is a crucial ESOS obligation. It is worth making sure you comply if required since the fine is £50,000 as well as £500 for each working day an organisation is in violation (up to a maximum of 80 days). With a decreased fine of £5,000, new entrants are treated more leniently. Keep in mind that organisation is no longer regarded as a new participant in the ESOS program’s second phase. Additionally, corrective measures (such as doing an energy audit) must still be taken.

  • Failure to comply with an enforcement/penalty notice

Any organisation that disregards a compliance, enforcement, or penalty notice will be subject to this fine. An organisation will be subject to an initial punishment of £5,000 followed by £500 for each day that it is in breach, up to a maximum of 80 days.

  • False or misleading statement

Your ESOS evaluation and report must be factually correct and accurate. The largest penalties, again £50,000, might be expected from an organisation if the EA finds that you made a false or misleading statement.

What should you do now?

The final deadline to complete and submit your ESOS reporting for Phase 3 is 5 December 2023. Your data should be based on a 12-month period that includes the qualification date (December 31, 2022) and ends before the compliance date for ESOS Phase 3 reporting (5 December 2023). It might begin as early as 1 January 2022 and it could finish as late as 4 December 2023. Within that timeframe, any consecutive 12 months are acceptable. This is referred to as your reference period. During then, you need to:

  1. Calculate the overall energy usage of your business

You will need to calculate the total energy consumption of your business, which includes energy needed for industrial operations, building heating and lighting, and transportation fuel. These should be reported in a standard unit, such as pounds sterling or an energy unit like the kWh.

  1. Locate places with high energy consumption

You can classify up to 5% of your organisation’s energy use as “de minimis” under the ESOS regulations for Phase 3. You might decide to exclude a location, an activity, or the use of a certain fuel. You must still have a “significant energy consumption” of 95% or higher.

  1. Review the data

Your report should examine how much energy your business uses and how energy-efficient it is. It should include suggestions for potential improvements to your company’s energy efficiency and include information on their costs and advantages. For more information, please visit EIC Route Zero.

  1. Request that a lead assessor review the report

According to the ESOS regulations, a certified lead assessor is required to review your report. Several situations constitute an exception to this rule:

  • If ISO 50001 certification already covers 100% of your energy use
  • If the company uses less than 40,000 kWh of energy annually

If you have no energy supply (although you will still need to notify the Environment Agency and get a director to confirm this). Before approving it, the corporate directors and the lead assessor should both evaluate your report.

How can EIC help with your compliance needs?

Our carbon team have extensive experience with complex compliance legislation and are dedicated to helping you reach deadlines efficiently. Our Lead Assessors and highly trained Auditors are on hand to assist you throughout your compliance process.

We have assisted over 550 clients with their ESOS journey, and in doing so have identified 4.65 million tonnes worth of CO2 savings. This has meant that our clients have avoided approximately £80 million worth of fines over phase 1 and 2.

Whilst balancing other jobs and responsibilities, schemes may seem like a hassle. Fortunately, EIC can help turn that obligation into an opportunity for your organisation.

Get in touch or call us on 01527 511757 to find out how we can help you start your compliance journey.

Targeted Charging Review (TCR) Guide

Posted on by Evelyn Chapman

The Targeted Charging Review (TCR) changes will continue coming into effect, with transmission charges in April 2023.

We look at how these changes will impact consumers and how we can help businesses to prepare.

What does the review include?

Changes to TNUoS

Transmission Network Use of System (TNUoS) charges cover the costs of maintaining the electricity networks that supply your energy. Ofgem is implementing changes to these charges to ensure that costs are distributed fairly across all consumers.

Subject to Ofgem consultation, from April 2023 a proportion of your TNUoS charges will be based on a series of fixed charging bands.

The band you are placed into will depend on your average annual consumption for non-half hourly (NHH) sites or average capacity for half-hourly (HH) sites, calculated over the two year period from October 2018 to September 2020.

TNUoS charges for non-domestic consumers will be based on a series of fixed charging bands set for the whole country, as seen in the table below.

Ofgem will review and may revise these charging bands and their boundaries so that they can be implemented alongside new electricity price controls, with the next (RIIO-3) starting in April 2026.

TCR Fixed Charging Bands with latest TNUoS forecast
Table 1. TCR Fixed Charging Bands with latest TNUoS forecast (National Grid, May 2021)

Changes to Triads

The largest component of Triad charges is called the Transmission Demand Residual (TDR), and this is the charge that will change from April 2023, becoming a fixed charge rather than being determined through Triads. Triad charges will continue to apply to the forward-looking components of TNUoS charges, which are known as the Transmission Demand Locational charges, although these represent less than 10% of the total TNUoS charge.

Triad periods are the three highest winter peak periods. They are retrospectively calculated in March each year and form the basis of the transmission network component (TNUoS) of large companies’ energy bills. By reducing consumption or switching to onsite generation during forecast Triad periods, some firms can save large amounts of money on their bills.

The removal of the TDR leaves one Triad season left currently occurring this winter, continuing until the end of February 2023. Beyond that, the incentive for Triad avoidance will be greatly reduced. And companies that are taking action to reduce costs during Triad periods could see an increase in their electricity bills.

What impact will this have on consumers?

The TCR changes are set to benefit larger consumers with half-hourly (HH) meters, whilst domestic and NHH sites will see a small rise in costs. Consumers outside of London currently experience a rise in Distribution Use of System (DUoS) fixed costs. This is partially offset by a decrease in DUoS unit costs. Most HH sites will also benefit from a drop in TNUoS costs. Whereas domestic and NHH sites face a potential rise in TNUoS costs.

Average TCR change for a HH customer

The graph below shows that southern areas are more likely to see a larger decrease in costs than northern areas. HH sites in London, for example, will see TNUoS and DUoS costs decrease by an average of 36%. Whereas HH sites in Scotland will only see an average decrease of 7%. Incidentally, London is also the only area where domestic and NHH sites will see a net benefit from the TCR changes.

Consumers currently taking Triad avoidance action will not see the cost reductions shown below, as that benefit ends in April 2023. Similarly, sites that have a capacity level which is set too high are likely to face an increase in costs, as they could be placed into a higher charging band. Extra-high voltage sites are not included in the graph below, as they are subject to site-specific tariffs and need more detailed analysis.

Average % change in costs due to TCR

How EIC can help

The figures calculated above are based on an average consumer in each charging band. The analysis covers a wide range of consumers with varying demand profiles and cannot easily be applied to individual consumer costs.

The best way to determine exactly how the TCR will affect your business is with our Long Term Forecast Report. This provides your business with a specific breakdown of electricity costs over a 5, 10, 15 or 20 year period. This valuable report will allow you to confidently plan your long-term budget and avoid any nasty surprises.

To learn more read about our Long Term Forecast Report service or contact us today.

Government energy support scheme announced for businesses

Posted on by Leila Zerai

Update: The government released an update for the Energy Bill Relief Scheme on the 10th of October.

The following  are some of the newly introduced changes that are being made to the scheme:

  • The government has expanded the Energy Bill Relief Scheme. Expansion of the scheme means that customers who signed contracts at the end of last year or the first quarter of this year are now covered.
  • Relief can be claimed on selected dates where wholesale energy prices were extremely high for fixed contracts signed between December 1st, 2021, and 31st March 2022. Previously, this was only applicable to contracts signed on or after April 1st, 2022.
  • There’s a new requirement on suppliers to ensure the price customers pay does not fall below the government-supported price of 21.1p per kWh for electricity and 7.5p per kWh for gas. This means when wholesale costs, network costs, environmental levies, and supplier margins are all factored in, the price customers pay (known as the ‘effective retail unit price’) cannot fall below the government-supported price.
  • The Climate Change Levy and VAT can, however, be added on top of these costs.
  • For those customers on flexible purchase contracts, the government has confirmed further details will be released shortly.

The original blog post from September 14th can be found below.

Business energy consumers will receive financial support from the government, under a new 6 month energy support scheme, in response to the current energy crisis.

The government has said that non-domestic energy users will be offered an equivalent Energy Price Guarantee, as is currently being offered to domestic consumers. This is due to concerns that non-domestic consumers have been overly exposed to rising energy prices, without the benefit of the Ofgem price cap.

The Energy Price Guarantee for domestic consumers is set to replace the current energy price cap, and limits the amount of energy that suppliers will charge. The savings will be based on usage. This should lead to a typical UK household paying on average £2,500 a year on their energy bills for the next two years. The new support scheme for non-domestic consumers should result in similar savings.

The scheme for non-domestic consumers will be reviewed after 3 months to see how it is progressing and to consider where it should be targeted, to ensure those most in need receive support. After the 6 months have passed, only those industries considered to be ‘vulnerable’ will continue to receive support.

More information about the government scheme for businesses can be found here.

More broadly, the government has also set up the Energy Supply Taskforce, which will negotiate with energy suppliers with the aim of lowering wholesale costs. This is the main factor behind the current energy crisis. The Taskforce has already begun negotiations with domestic and international suppliers to agree long-term contracts that reduce energy prices and increase the security of supply.

How can EIC help?

At EIC, we understand the pressures that businesses are currently facing, as the energy crisis continues to wreak havoc on the economy. Our years of experience, and expert traders, can closely monitor the markets to find the best energy deals for you. Whether you are currently on a fixed or flexible contract, or looking to switch, we are well-versed in smart energy procurement.  Our dedicated team are on hand – saving you time, and money.

Get in touch today to find out how we can help you with your bills during the energy crisis.

Energy security a key concern in Europe, and green energy will pay the price

Posted on by Leila Zerai

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.

ESOS Phase 3 – how will the changes affect you?

Posted on by Sophie Wyatt

In the current energy landscape, Phase 3 of the Energy Savings Opportunity Scheme (‘ESOS’) may not be an immediate priority for your business. But while the Phase 3 deadline is not until December 2023, it is still in every business’s best interest to comply as soon as possible.

In addition, the UK government recently released the outcome of its ESOS consultation. The aim of the consultation was to raise the quality of ESOS audits, and ensure that they are consistent with net zero commitments.

In light of this, we decided to take a look at the changes to the compliance regime, and why it pays to get ahead of schedule.

The consultation focused on four core options: improving the quality of ESOS audits by strengthening minimum standards and making ESOS more standardised, looking at the role of lead assessors, how ESOS can address the net zero challenge, and public disclosure of ESOS data to encourage uptake of ESOS recommendations.

Read on to find out more…

What are the changes?

  1. There will be a standardised template for participants to include summary information, such as organisational structure, energy consumption and outlining the route to compliance.

 

  1. The de minimus is now 5% of total energy consumption (previously it was 10%). The de minimus is the percentage amount of your total energy consumption that can be excluded from your reporting. This is likely to bring more activities within the scope of reporting, which could lead to more energy savings.

 

  1. Clearer guidance on the requirements around site sampling, including clearer guidance on recommended minimum sampling levels for both number of sites sampled and percentage of total energy consumption sampled.

 

  1. Collection of additional data for compliance monitoring and enforcement.

 

  1. The addition of an overall energy intensity metric within the overview section of the report – kWh/m2 for buildings, kWh/unit out for industry and kWh/miles for transport. This also complements existing requirements under SECR and would facilitate comparison between performance in different phases.

 

  1. Requirement to share ESOS reports with subsidiaries.

 

  1. ESOS reports will need to provide more information on the next steps for implementing recommendations.

 

  1. Targets or action plans must be set following the Phase 3 compliance deadline – and they will be required to report against these in Phase 4.

 

  1. There will be an increased penalty for non-compliance – an initial penalty of up to £50k and an additional £500 per day until the company complies.

 

  1. From Phase 4 onwards the ESOS balance sheet and turnover thresholds will align with SECR (250 employees, or a balance sheet of £18 million or a turnover of £36 million)

The Environment Agency will also be working with ESOS professional bodies, to identify how further changes could be made to improve the quality of ESOS audits in Phase 3. This is likely to be through active monitoring of lead assessors’ work.

What does this mean for you?

While there are several changes to the compliance requirements, it is unlikely that this will require revisiting site audits that already meet the current ESOS requirements. However, businesses will be required to audit additional sites, in light of the changes to the de minimis.

Participants may also need to implement a net zero element to their audits and the government response to the consultation is that they will develop a methodology for a net zero ESOS assessment. The Department for Business, Energy and Industrial Strategy (BEIS) is currently working with the British Standards Institute (BSI) on the production of a new net zero audit standard, to facilitate this.

Participants can also implement other Phase 4 changes on a voluntary basis, in Phase 3.

What can you do to prepare?

During Phase 1, more than 40% of businesses were still not compliant, four months after the deadline. If this were to happen again, in excess of 2,800 firms would be fined – and suppliers would be forced to raise their prices again. So, it is essential that businesses that wish to comply do so as soon as possible.

The first step towards assessing your carbon footprint is to carry out an energy audit. Energy audits assess a business’s total consumption – spanning buildings, industrial processes and transport usage. You can pinpoint areas of high energy usage, and your business could make significant energy savings as a result.

We recommend that you:

  • Review your business structure and understand any anticipated changes.
  • Review your portfolio and ensure that you have a clear view of all UK responsibilities, including sites where you are a tenant, or where you have operational control.
  • Choose your ESOS compliance representatives – as a minimum, this must include a primary contact and a Company Director for sign-off.

If you have any questions about your compliance, please contact your dedicated team or alternatively contact esos@eic.co.uk and a member of the Carbon team will get back to you.

Where does EIC come in?

Our carbon team has extensive experience with complex compliance legislation and we are dedicated to helping you reach deadlines, efficiently and effectively. Our Lead Assessors and highly trained Auditors are on hand to assist you throughout your compliance process.

We have assisted hundreds of clients with their ESOS journey, identifying 4.65 million tonnes worth of CO2 savings. As a result, our clients have avoided approximately £80 million in fines during phases 1 and 2.

You are busy balancing other tasks and responsibilities, and we know that compliance schemes such as ESOS can seem like a hassle. Here at EIC, we can help turn that obligation into an opportunity for you.

Get in touch to find out how we can help you start your compliance journey.

Energy price rises – how can you avoid them?

Posted on by Sophie Wyatt

Energy prices continue to reach record-breaking highs, and industry sectors around the world have been forced to prepare for high prices. Individuals around the country have been forced into energy poverty, and many businesses are teetering on the edge. As a result, businesses are desperately trying to regain control of their energy bills.

Last month our EIC experts, John Palmer (Director of Flexible Procurement) and John Dawson (Energy Trade and Market Intelligence Manager) spoke with Sumit Bose from Future Net Zero. They discussed the current events shaping the energy procurement landscape and tips on how to protect your business in a volatile market.

So, what are the best ways to future-proof your business against rising energy prices?

What can you do now?

Before you look into procurement or switching to a different contract, you should first assess your business’s current situation and how it can be improved. For example, are there any areas of your business that can reduce consumption? Can you generate your own energy on-site?

By not prioritising areas such as accurate data and energy billing management, businesses could face substantially higher, and unnecessary costs. While checking for invoice inaccuracies is essential in being efficient and financial savings, many customers simply do not have the time or resources to spot and resolve errors.

EIC expert John Palmer also pointed out that accurate billing is essential. ‘Another thing to look at is invoicing – are you actually being invoiced correctly for your energy?’ he said. ‘It’s amazing how often you find there are problems with energy invoicing, and certainly our bill validation team have found quite significant cost savings as a result of invoicing errors that have been discovered.’

At EIC, our data solutions and intelligent bureau team provide full invoice checking and bill validation for clients. Each month, we will provide you with a full analysis of your bills. Highlighting any errors, along with the actions we have taken with your energy supplier to resolve these errors. Get in touch to find out more about our bill validation services.

Buy smart

With another year of triads ahead, businesses have the choice to be flexible. Planning for long-term costs and budget forecasting is advisable, particularly when considering aspects such as onsite generation and the payback for energy efficiency projects. However, it can be hard to calculate various rates and charges in relation to a business’s specific budget.

John Dawson spoke about this topic in our recent webinar. He explained: ‘Long-term forecast reports are something that EIC can provide. Also looking at whether you can benefit from asset optimisation and demand-side response schemes, again if you’ve got that ability to be flexible with your demand then you might well be able to save some money or even make an income from those kinds of schemes.’

Accurate budgeting forecasting is especially helpful during these times, where volatile energy markets are very apparent. By building up a realistic and sustainable budget cost, businesses are able to plan further ahead and develop their future strategies more efficiently.

Decide on fixed or flexible

Deciding between a fixed or flexible contract can be difficult. It is advisable to weigh up your desire for certainty, versus the option of flexibility when procuring energy in the fluctuating markets. While a fixed contract works better for a business that wants certainty that their rates will not falter, flexible contracts allow businesses with significant costs to warrant a more sophisticated solution – giving them more fluidity.

Understanding what kind of contract, on what terms, and the timescale are all very important considerations for a business. At EIC, our dedicated energy procurement support team are on hand to manage your utility supplier relationships and ensure accurate and timely consumption data. On which you can base your contract decisions.

John Palmer went on to say that ‘in terms of the way you procure, it’s got to be right for your organisation. If you need absolute budget certainty, a fixed contract probably still is the way to go – it’s about timing when you actually fix that contract. If you’re looking at flexible contracts it’s about understanding what you’re trying to achieve with that contract and getting the right risk management strategy to give you the best opportunity to get what you need out of it.’

Where does EIC come in?

Reducing your energy consumption is a simple and effective solution to reducing costs – if you know how. Finding simple ways around constantly rising prices can often be confusing and time-consuming. But it doesn’t have to be.

At EIC, our goal is to help companies navigate the best routes for themselves and their business plan. We recognise that while there are many reasons as to why energy prices are rising, we can help our clients return their business strategies to normal.

We have a range of guides on topics such as procurement, energy management, fixed and flexible contracts, and many others that can help you to kickstart your journey to a more efficient and cost-effective future. Get in touch today to find out more.

The importance of access to energy data

Posted on by Sophie Wyatt

The energy grid is evolving, and systems will have to adapt as we move towards a more flexible energy landscape. Data-driven energy optimisation could be the key to business profitability, as well as deep carbon reductions.

Climate change and net zero targets are at the forefront of the minds of consumers and investors. What this effectively means, is that energy performance is now an operational and commercial priority in building intelligence. Data analytics are crucial for businesses wishing to advance this intelligence.

Let’s take a look at the benefits you can reap from taking control of your data.

Become more efficient

Accessing and understanding data across multiple sites can bring a whole host of benefits. One of the most beneficial advantages is the opportunity to run your business more efficiently.

Efficient energy management can happen anywhere at any time. Energy data and analytics need to be readily available for businesses to obtain the full advantages. Through targeting the data of your sites, you can see where you are using the most energy, when, and for what reason. This makes it easier to identify and remedy areas of waste – making your business more sustainable and future-proofed as a result.

Cut costs

Having quick and easy access to your data is essential for every company. One by-product of becoming more efficient, is the reduction of unnecessary costs. Reducing energy waste in your business automatically reduces any costs attributed to that waste. This frees up money, which can be reinvested in other areas of the business.

Effective data management will help to inform your business decisions, keep your energy costs low and help you to future-proof your sites. Understanding data – not only from your online systems, but also from your bills, for example – can help your business to avoid charges for consumption in peak demand periods, as well as identifying waste usage. Thousands of pounds can be saved through analysing data, as it can identify spikes in wasted energy usage.

Increased transparency

As we move towards a new era of sustainability in business, it is essential for organisations to be as transparent as possible with their clients and potential investors. Transparency about your sustainability efforts can help your business to connect to customers on a deeper level. Offering accountability has been proven to encourage people to opt for certain businesses over their more reserved competitors.

Research has found that 94% of consumers are more likely to be loyal to a brand that is completely transparent. With a consumer market that is focused on sustainability now more than ever, transparency in terms of sustainable goals is key.

Where does EIC come in?

Reducing your energy consumption is a simple and effective solution to reducing costs – if you know how. Finding simple ways around constantly rising prices can often be confusing and time-consuming. But it doesn’t have to be.

At EIC, our goal is to help companies navigate the best routes for themselves and their business plan. We recognise that while there is a broad range of reasons as to why energy prices are rising, we can help our clients return their business strategies to normal.

Get in touch today to find out more. Also, head over to our piece on the changes to the TCR mandates to find out more on how this will affect you.

The energy crisis: how did we get here?

Posted on by Julie Crowhurst

If you are concerned about the rising prices, you are not alone.

As the world reels from the biggest price rise in electricity and gas in over a decade, our expert analysts take a look at some of the reasons behind the sudden surge and what the future could hold in store.

European storage inventories are well below average

Graph showing European storage levels
European storage

 

There were strong withdrawals in Q1 2021, as colder temperatures settled over Europe. At the same time, Asia was experiencing similar conditions. Japan had a very cold January along with several outages, which led to an immediate need for LNG to boost gas power generation.

As a result, LNG deliveries to Europe slowed down and the region had to rely on more stored gas. The early part of Q2 2021 saw persistent colder temperatures, low wind and maintenance, leaving little surplus to make its way into storage.

By the time injections started there was already a shortfall and the pace of injections has not been enough to shut down this deficit.

European storage is vital to ensure some security of supply over winter, especially if there are supply issues from other sources. Storage is also needed to top-up supply, when demand is high.

Reduced gas supplies this summer

UK LNG imports
UK LNG imports

 

Part of the reason for the lacklustre injections is the heavy maintenance in many gas-producing regions during this summer. Covid restrictions hampered maintenance schedules last summer and many sites were running strong through the colder winter that followed.

In addition to the shortfall in supply, LNG deliveries to the UK and Europe were drastically reduced, particularly during this quarter. This fall in import volume is due to a marked increase in demand for LNG in Asia this year. This demand growth is largely due to China ramping up its economy post-Covid, as well as other regions replenishing their depleted stock levels.

 

Weak renewable generation this summer

Wind & gas output comparison table
Power output comparison table

 

In recent years, the UK has increased its wind capacity to about 25% of the generation capacity. This summer has seen some of the lowest wind speeds, with the likes of Orsted – who have invested heavily in wind generation – reporting lacklustre returns this summer.

The graph above highlights the drop in wind output, especially in Q3 2021, and the increased need for gas generation. As a result, the need for gas to generate power has been elevated at a time of tighter gas supply.

Supply margins in the UK were extremely tight last week, and as a result, we saw some unprecedented price levels – as shown below in the UK day-ahead power price. System prices were as high as £4,000/MWh at peak times.

Day ahead forecast
UK day-ahead power price forecast

Increased cost of substitute sources of power generation

In parts of Europe, there has been an increased reliance on coal and lignite power generation. On the back of various policy moves, the price of carbon allowances in Europe has also surged. This year alone, prices have doubled. As a consequence, it has become increasingly expensive for fossil-fuelled power generation. Gas prices have risen so strongly that it has become more profitable for coal and lignite power generation in Europe (which are more polluting) instead of gas.

The UK and European governments manage the supply of carbon allowances. With a current policy of zero carbon, it is difficult to see governments increasing the availability of allowances.

Carbon
Carbon allowances

Russian gas supply

Despite the surge in gas prices across Europe, Russian supply volumes have not responded to demand. In July and August, there was maintenance on both Nordstream 1 and Yamal pipelines that saw substantial declines in Russian volumes, exacerbating the tight gas market.

The domestic Russian gas market is also under relatively tight conditions. Russian domestic storage was heavily drawn last winter and there has been some delay in replenishing them, due to heavy summer maintenance.

There has also been a reluctance to increase flows across the Ukrainian and Polish routes. In the meantime, with the completion of Nordstream 2, a preferred alternative route is ready. But there are some legal hurdles that need to be overcome, denting market hopes for the start of the fourth quarter.

 

What’s next?

There is a substantial risk premium priced into this winter, given all these factors so far. There is also an underlying uncertainty of how and when these will resolve, in the face of an unknown winter demand.

A mild and windy winter will allow for more wind generation and reduce some of the demand for heating. However, periods of cold and still conditions will see supply margins drop and system prices record high prices once more.

Gas could start to flow through Nordstream 2 this winter. But will this merely displace gas that is currently moving through one of the other routes to Europe? Or will supply increase significantly, once domestic reserves are met?

It is likely that this winter will see an increase in price volatility, with price swings in either direction.

For advice on how your business can respond to changing energy prices, contact EIC today.

This article was written by the Market Intelligence Team

The EII Exemption Scheme: everything you need to know

Posted on by Evelyn Chapman

What is the energy-intensive industries (EII) exemption scheme?

The EII exemption scheme aims to help big energy users stay competitive in a global market. Qualifying businesses can claim an exemption of up to 85% of their Contract for Differences (CfD), Renewables Obligation (RO), and Feed-in Tariff (FiT) costs. Providing firm financial footing in a post-Covid economy.

Why was the EII exemption scheme launched?

The UK has pledged to achieve net zero emissions by 2050, which will require a transformative shift towards clean energy across the economy. This has resulted in a variety of government schemes which encourage the rise of electricity generated from renewable and low carbon sources.

This initiative has seen success, with renewables accounting for 47% of the UK’s generation in the first quarter of 2020. And even as consumption dropped in Q2, wind power generated electricity continued to rise due to increased capacity. This upwards trajectory is only expected to accelerate, with promising new renewable energy projects on the horizon.

The levies and obligations funding this growth are initially covered by energy suppliers. But, these costs are passed down to domestic and non-domestic consumers in the form of higher energy bills.

This puts energy-intensive businesses at a disadvantage. Especially when competing against their EU counterparts with lower energy costs. The launch of the EII exemption scheme is a solution to this problem and aims to maintain the UK’s position in the global market.

When was the scheme rolled out?

The original solution to the issue of higher costs for EIIs was a compensation scheme launched in 2016. This allowed big energy users to apply for relief from the energy costs they had already paid.

This was then replaced by the EII exemption scheme, rolled out between autumn 2017 and spring 2018. This change of approach is meant to offer energy-intensive businesses more long time certainty and stability as well as higher cost savings.

eii

Who can apply?

To be eligible for an EII exemption, a business must meet five key requirements.

  • The business must manufacture a product in the UK within an eligible sector – the “sector level test”.
  • The business must pass a 20% electricity intensity test – the “business level test”.
  • The business must not be an Undertaking in Difficulty (UID) – the UID guidelines explain that “an undertaking is considered to be in difficulty when, without intervention by the State, it will almost certainly be condemned to going out of business in the short or medium term.”
  • The business must have at least two quarters of financial data.
  • The application must contain evidence of the proportion of electricity used to manufacture the product for a period of at least three months.

Learn more about applying for an exemption certificate.

Big energy users who do not qualify for the EII exemption scheme should still be aware of rising energy costs. They should explore schemes such as Carbon Footprinting, Energy Audits, Streamlined Energy and Carbon Reporting (SECR) and Energy Savings Opportunity Scheme (ESOS). These can provide invaluable insight into your environmental impact and routes to improve energy efficiency within your company.

Has Covid-19 had an impact on the scheme?

Covid-19 has thrown various sectors of the UK economy into a state of uncertainty and decline. The energy sector was especially impacted by the fall in energy consumption in the first six months of 2020. And resulted in a subsequent drop in electricity prices. This could make it more difficult to calculate a business’ energy intensity and whether it is “in difficulty”. Because of this, the government will be excluding the period from 31 December 2019 to 30 June 2020 from its assessment of whether a business is in financial difficulty or not.

How can EIC help?

Here at EIC, we support big energy users with the management of their energy, buildings, carbon and compliance. As a result, we’re able to uncover actionable insights that allow you to manage and control all elements of your energy bill on both sides of the meter.

Armed with a comprehensive understanding of government schemes and legislation, we can help turn your frustrating admin into rewarding opportunities. We can navigate complex applications such as that for the EII exemption certificate – saving you valuable time and resources.

Contact us to learn more about how EIC can help your business.

Zonal transmission losses hit electricity bills

Posted on by Amy Coniff

In April 2018, major changes were made to how National Grid charged for transmission losses from the electricity system. As these changes are now being reflected in electricity bills, consumers need to make sure these costs are being passed on correctly.

The net impact of the changes in transmission losses is that consumers in the north of the country are going to see notable benefits, while the south will see an increase.

 

What are transmission losses?

Transmission losses refer to the electricity lost in the main high-voltage transmission network, as it travels from generators to where it is needed. The losses are a normal and an unavoidable result of the physics of transmitting energy over any distance. However, these losses still need to be accounted for and, as a result, generators are required to provide more energy than is actually used to ensure the system is balanced.

In electricity bills, transmission losses reflect the cost to consumers for providing this extra energy. Though they are not a huge part of an energy bill, amounting to less than 1%, the modifications regarding how these losses are calculated could result in a large change in this small element of overall costs.

 

How have these charges changed?

Following the Energy Market Investigation conducted by the Competition and Markets Authority (CMA) in June 2016, it was decided that regional variations in transmission losses charges would be introduced. The CMA concluded that losses didn’t reflect the actual costs for operating the system, due to the fact that all consumers paid the same level of losses, regardless of their location, or proximity to generators.

In theory, those regions closer to where the electricity is generated will see lower levels of energy network losses compared to those who are located more remotely from generators. Therefore, the CMA’s solution was Zonal Transmission Losses. Each region would face different levels of losses, reflecting the actual costs of delivery to their location.

Previously, all consumers faced a cost based on the same calculation; all metered consumption was uplifted by the same amount – around 1% or multiplied by 1.01. The cost of the losses reflected the difference between the metered cost of energy and the cost for suppling the uplifted volume of electricity.

As of April 2018, each of the 14 transmission supply zones – which correlate to the 14 main electricity distribution networks –have a different multiplier for the extra energy to be supplied – the Transmission Loss Multiplier (TLM). These are also seasonal, as the level of energy lost on the network is impacted by weather and temperature conditions.

 

What is the impact of these changes?

For the largest businesses, which have bills that pass-on transmission costs directly, losses can change on a half-hourly (HH) basis, reflecting the changing level of energy requirements on the system throughout the day. Average monthly TLMs since April 2018 show how the multiplier has changed significantly in the last few months. This can be seen in the graphs below.

 

northern monthly TLMs

southern and eastern monthly TLMs

wales and western monthly TLMs

 

As shown, the zonal TLMs vary significantly around the average TLM for all regions, estimated to be remaining at the 1.01 level.

Of particular note is that both Scottish zones have a TLM below one. As the multiplier is less than one, this in practice means that those exposed directly to these half-hourly TLMs in Scotland could see negative transmission losses costs. This is to reflect that the majority of the UK’s generation is in the north, with consumers closer to sources of generation, while the bulk of demand is in the south, much further away from the majority of generation.

This wide variation in TLMs means there is also the potential for large swings in transmission costs based on location. The actual annual costs for transmission losses will also vary based on consumption over the year, particularly given that the changes will be seasonal too.

Based on the data on TLMs seen so far, it is estimated that transmission costs will be around 110% more than they might have been in the Midlands supply zone, while northern Scotland will see these costs drop by nearly 200%. Though this sounds significant, we must highlight that the scale of costs relative to the other parts of the energy bill are small, so in many cases consumers may not notice a huge difference in their overall annual bill as a result.

 

TLM variation

 

 

We can help ensure your bills are correct

Whatever the impact on your final bill, you should be aware of the variations that came into force in April. With such a wide variation in Transmission Loss Multipliers, it’s important that bills are checked for accuracy, particularly if a contract allows for full pass-through of the costs. Even a small error could – over time – lead to notable costs to businesses.

Here at EIC, we have an in-depth understanding of all the charges that can appear on your energy bills, and how you can control them to lower their impact.

To find out more about our energy bill checking service visit our website.

Our offices will be closed for the Bank Holiday (Monday 29 August 2022).
If you have a query, please contact us from Tuesday 30 August onwards, and we
will be happy to deal with your query then.