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Predictions for the business energy market – Peter Franklin

Peter Franklin, Director of Enstra Consulting, gives his predictions for the business energy market

Building sustainable businesses

As we look forward towards the coming year, there are a number of developments that could have a major impact on energy for businesses.

1. The Green Deal. The Green Deal should gather pace during 2014 and allow small and medium sized businesses the opportunity to invest in the infrastructure to improve the energy efficiency of their buildings without any upfront capital investment.

This should also see the “Golden Rule” come into play more – a promise of the energy savings being greater than the premiums to be charged on the electricity bill to cover the capital cost and financing over the lifetime of the investment. In other words, this means businesses will save money from day one of any Green Deal investment.

It should be a no-brainer, however the devil, as always, is in the detail. To truly take off the interest rate applied will need to be low enough to make the “Golden Rule” work and there will need to be enough interested Green Deal providers and authorised installers to make the market take-off.

Birth and infancy are always beset by hiccups and teething problems, so whether these will be serious or not is to be seen. However the program saw minimal take up having kicked off in 2013, despite being supported by an initial kick-off fund of £2.5 million from government, plus subsidies from energy suppliers under the new ECO scheme (targeted at fuel poor vulnerable customers).

But still maybe the trick is to get in early rather like the PV experience – the initial deals may still well be the best.

Larger businesses too may well find this is the year of opportunity as the energy service contract market starts to develop in the UK.

Businesses will more and more opt to buy in lighting and heating, rather than gas and electricity, from a third party who will provide the capital investment to improve building infrastructure to improve energy efficiency, delivering the heating and lighting required at much lower overall cost. The outcome will be lower bills for businesses and a profit margin for the successful energy services contract provider given the scale of the savings available.

2. The pricing paradigm. We may well see the current assumption of continually rising energy prices challenged. Whilst investments in renewables and nuclear will bring with them additional costs in terms of generation and network upgrade, the world of gas may be turned upside down if shale gas becomes exploited both globally, and potentially in the UK. One third of US gas is now sourced from this route and it has caused gas prices to tumble across the pond. The same could happen in the UK. 2013 initially promised this but fracking controversies but the industry on the back-foot, the coming years could see its re-emergence.

Still, all is not certain since there are a number of groups who do not welcome this development, seeing it as either a direct risk to the environment through the creation of earth tremors and contamination of water supplies, or as a roll-back of decarbonisation policies and hence a lowering of defences against climate change. The shale gas protagonists counter by demonstrating that the technology has been in use since 1947 in the US, and the 1970’s in the UK – and with the appropriate regulatory framework in place, it is as safe as any previous on-shore exploration and production. 2014 will no doubt see this debate continue to unfold.


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