Guest post: Managing Energy Contracts, part II

Andrew Horstead, risk analyst at energy and carbon management specialists Utilyx, looks at energy and carbon management in face of higher energy prices. This blog is his second in a series on managing energy contracts.

The UK Government has recently announced the latest carbon budget after a prolonged standoff between the Department of Energy and Climate Change and the Treasury as well as business and transport departments.

Chris Huhne, the energy secretary, confirmed in his speech that between 2023 and 2027, the Government will pledge to cut Britain’s emissions by 50% from 1990 levels. Is this a legitimate plan from what is meant to be the ‘greenest ever Government’ or is this just more rhetoric on the issue?

While a commitment to a long-term carbon reduction target is honourable and an essential building block for businesses, proposing the energy targets is not the most difficult part. Now the Government, as well as UK businesses and individuals, need to work together to achieve them.

The UK needs to make substantial investments in renewable energy technologies and there is also an urgent need to upgrade the ageing energy infrastructure to cope with these new energy sources. Just as urgent is the need for a radical shift in behaviour within organisations. With a direct correlation between energy use and carbon footprints, procurement managers have a real opportunity to drive changes within organisations, lowering both emissions and costs.

There are several steps that businesses can take to reduce their carbon footprint:

Measure your carbon footprint

Measuring carbon can be as simple as collecting utility bills or doing a walk-around survey of an office to establish where and how much energy is used and then inputting the information into a spreadsheet. By doing so, business will be able to identify waste and then look at various carbon cutting solutions.

Look at ALL carbon reducing options

It’s important to remember that different solutions have different impact in each business environment. For example, some companies would benefit most from simply installing heating controls, while others may need to look to on-site generation to deliver significant energy savings.

Prioritise in order of cost effectiveness

By using the appropriate methods and tools, such as a Marginal Abatement Cost Curve (MAC Curve), it is possible to calculate the net value of each proposed carbon-cutting project in any particular business environment.

By ranking different options in order of cost effectiveness, energy managers can now prioritise their investment decisions and create a clear financial plan for driving these changes. Once the measures have been put in practice, the carbon and energy savings can be easily monitored and investment justified.

To sum up, UK businesses face challenging times ahead. With the energy bills set to rise and new ‘green’ regulations coming into force, it is becoming apparent that effective carbon and energy management needs to become a part of an overall business strategy.

Regardless of the size of the organisation, buying and consuming less energy will always lead to a smaller carbon footprint so it’s well worth taking steps today to help cut costs and emissions tomorrow.