We asked a group of Sustainability Directors at our recent event on Streamlined Energy & Carbon Reporting how they expect their energy costs to change over the next 5 years:
- 42% said they expect to see an increase of 4%
- 58% said they expect to see an increase of more than 6%
Given the regulatory changes ahead, we expect energy costs to actually increase by more than 10%.
The delivered price of energy to your business is made up of the commodity cost and the pass-through regulated costs. The regulated costs now make up over 60% of the total cost you pay as a business. While the commodity costs of electricity and gas remain relatively low, with some degree of volatility, the regulated charges will increase by 20-30% in coming 3-5 years
Most businesses are not ready for this increase. They will need to prepare by taking either or both of these possible approaches:
- Adding the increase into their budgets for medium-term planning, while finding ways for the rest of the business to absorb the cost or grow sales and margins to counteract it (a 10% increase in costs will require a 5-10x additional value in sales revenue to pay for it).
- Executing a new energy strategy that drives down energy costs to enable flat year-on-year costs, or better still reducing overall energy costs.
The second approach is the better option for any business, but achieving a reduction in costs is difficult if most of the basic energy efficient changes have already been done, such as installing LED lighting.
The question then becomes, how can you go above and beyond basic energy efficiency measures?
Our work on advanced data analytics and energy performance is driving an average 14% reduction in energy costs. We are proving that it is possible, in the face of growing energy regulated prices to drive overall energy cost reductions. The key ingredient is understanding the data.
We found that businesses are often unaware that regulated charges are applied at different times of the day and can vary by region across countries. It is difficult for businesses to assess building performance at the times when electricity is costing 2x or 3x more than usual.
Through connecting buildings to our ADAPt system (Assured Data Analytics Platform), we are enabling our clients to see how their buildings are performing and helping them to drive actions to save energy and improve the work environment for the people in the building. It’s a win-win and can reveal a goldmine of new opportunities for cost reduction and improve wellbeing.
If you are interested in learning how this approach can be applied to your business, then please contact us here.