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9 August 2016 | By David Reed Community

Shifting policy, new opportunities

Businesses could really stand to benefit from the government’s new energy efficiency policy – if they are aware of it

The UK’s energy sector is in an unprecedented state of flux. Questions swirl about the future: what will the country’s fuel supply mix look like as import dependency rises? Will multi-billion pound projects such the Hinkley Point nuclear plant and Swansea’s planned tidal lagoon gain government approval? And how exactly should we pronounce “BEIS”?

The new Department for Business, Energy and Industrial Strategy, however you tackle its acronym, has some challenging decisions on its plate. Yet the uncertainty surrounding them – and the noise of a volatile energy market backdrop – has drowned out changes to energy efficiency policy that will have a certain impact on businesses.

Central to these changes is the abolition of the CRC Energy Efficiency Scheme. With it comes an increase in the Climate Change Levy, to make good the lost revenue. This shift, announced in the March budget, was intended to “declutter” the regulatory landscape by moving to a single energy efficiency tax and new reporting scheme. It has been broadly welcomed: 66 per cent of leading retailers polled by npower Business Solutions agree that the move will incentivise investment in energy efficiency.

Despite this, many business leaders – understandably focussed on pursuing their own growth opportunities – still see energy efficiency as an incidental benefit of other investment rather than an opportunity in its own right. Yet this policy shift is a unique opportunity for boards to start thinking about energy use, and using energy efficiency investment to drive strategic advantage.

After all, the impact on company budgets of energy efficiency investment is hugely positive, not least as a result of reduced fuel costs for heating, cooling and lighting – something of increasing importance, with the latter a budget line that is expected to increase over time.

Looking beyond the turbulence

Recent unplanned outages, heavy infrastructure maintenance and the fall in the pound have already pushed up wholesale gas and electricity prices – with base and peak day-ahead contracts hitting six-month highs this August. With ongoing political and market uncertainty stymieing investment in new capacity, some turbulence is likely to continue.

For businesses meanwhile, actively embedding realistic energy efficiency goals into annual targets is highly recommended (and there are plenty of ways – and tools – to do this painlessly).

There are further benefits to cutting energy use beyond reducing overheads, as research by the International Energy Agency shows. Industrial energy efficiency measures deliver benefits ranging from enhanced competitiveness, profitability, production and product quality, to improving the working environment while reducing costs for operation and environmental compliance.

But our research shows that that the government’s energy efficiency policy changes are not reaching all businesses. Our recent survey found that 39 per cent of respondents were unaware that further consultation is due to take place and another 39 per cent have no plans to participate. Without clear guidance companies risk getting unduly penalised for not receiving the help they need to better manage their energy use.

This represents an opportunity for BEIS to really deliver for business – and for businesses to proactively recognise the benefits of energy efficiency investment.