How to create competitive advantage through energy cost reduction

Significant increases in the cost of energy is a compelling reason for any organisation to reduce energy consumption. The good news is that energy cost reduction is relatively easy to achieve and can lead to significant bottom-line benefits.

Energy consumes 5 to 20 percent of overhead costs. This is spiralling upwards as tariffs continue to increase in 2012 and beyond. Organisations MUST therefore find a way of mitigating this in order to remain competitive.

Wake up ….you must pay attention to energy efficiency!

The trend is towards a cheaper, greener more sustainable future and you need an active corporate energy strategy.  If you don’t adjust, you may not survive as profits decline and you will find many clients who demand environmentally friendly products just going elsewhere.

Energy management is a serious issue

According to the Deloitte resources 2011 US Study, 90% of companies have set goals regarding electricity and energy management practices. 76% have goals related to reducing electricity cost/consumption and 71% have goals targeted at improving the efficiency of the building in which they operate. These goals are significant, typically aiming for an average of 25% in electricity or cost reduction, most often with a 2–3 year time horizon. 56% of the companies have goals aimed at improving profitability through electricity reduction.

What have you done?

Energy strategies are about hard-core business decisions and not fluffy green issues. You need to understand how to compete in a rapidly changing world, better asset utilisation, smarter use of technology and much tighter management of the entire supply chain.

Your future depends on it!

If you have an energy policy and strategy document, that’s a great start. You need to understand how to transform your organisation and have a plan in place to achieve it – otherwise you may not be around tomorrow.

F1 check out as Hotel Group Counts Cost of Speed Restrictions

This week we see the importance of getting the little things right. Last weekend The Feathers Hotel Group, based in the North West of England counted the cost of a poor internet connection, when an unnamed Formula 1 team checked out of their hotel and into a rival property just a few doors away.

This came at a cost of £3500 to the hotel group, and further more, left them with an empty hotel for the weekend. Long-term it is unlikely that the team will ever stay at the hotel again, and consequently an avoidable fault has cost the group a prestigious customer. James Pink of telecommunications experts Pink Connect had this to say: “In today’s digital age, people need to be able to access information quickly so it’s more important than ever to ensure a strong, fast internet connection for customers.”

With the ever-changing improvements in technology, customers expect excellence at all times. The problem stemmed from the hotel’s use of an ADSL connection, which are subject to a fair use policy or download limit. When these limits are reached, the hotel is then left with a slow service until the following month.

Read more…

Is a competitive landscape for water supply a step closer?

With hosepipe bans in force across much of Central and Southern England and a potential impact on businesses likely in the medium term, there are understandably many column inches devoted to this precious commodity. They warn about misuse, laud projects to conserve it and argue that ‘the UK must take a “more strategic overview of water management” if it is to avoid the “spectre” of drought becoming an annual event’.

Integrated water supplies and water trading are fast becoming the source of much innovative thinking. Severn Trent, for example, recently confirmed that technical discussions are underway to look at how to transfer 30M litres of raw water 80 miles from Birmingham to Gainsborough, using its water ‘grid’ network, in order to supply 10,000 homes in Anglia Water’s drought-stricken region. This is only possible because Severn Trent has been shrewdly shifting water from the wetter west of its region to the dryer east over the last six months to balance out regional supplies.

But the act of moving water around is in itself expensive, difficult and a huge consumer of carbon-based energy. The whole process feels very much like robbing Peter to pay Paul. Research is sorely needed to find more energy-efficient and environmentally friendly ways of moving the heavy, incompressible liquid long distances.

Until that time arrives, prevention will always be better than cure. Droughts are acts (or rather non-acts) of nature we have no control over. We can, however, make a concerted effort to reduce the amount of water we use, build or put out more rain-water harvesting equipment and above all reduce wastage. A few recent examples:

• Stansted airport has reduced its water consumption by 205M litres (nearly 33%) in just 12 months by repairing leaks on its 10-mile drinking water network.

• H&M is using the WWF’s new global online tool to identify and mitigate water risk.

• Bacardi has cut water usage by 1,630M litres (50%) over the past five years across its global production, through a combination of operational discipline, conservation measures, and the use of water efficient equipment and recycling systems.

• RBS is planning to reduce water usage by 12% by 2014

• Nestlé has reduced its water usage by 28% in its factories, against a 2001 baseline, and a further 36% reduction in additional water usage, against a 2005 baseline. It aims to increase this reduction by a further 10% by 2015.

So big companies are taking big, bold steps to reduce their water usage. If they can do it, or plan to do it, so can all companies, however small. In this way, a tsunami of pledges can really make a difference to our planet and ensure that we have enough water for everyone for many years ahead.

If and when water utilities can finally move water around efficiently and economically within and across countries, we will have taken a huge step to ensuring that this life-support commodity is available without restriction to all communities, both individuals and businesses.

The day water is traded competitively, like electricity or gas, Auditel will certainly be there to offer its Clients the most advantageous tariff, from wherever the water starts its journey. In the meantime, we help Clients reduce water wastage via our Water Efficiency Audit offering. If you want to join the journey towards water conservation, please contact me via the home page.

Sources: Edie.net (various), The New Listener (http://www.newlistener.co.uk/home/moving-water-around)

Royal Mail limits stamps in the run up to the price rise

The cost of a First class stamp is due to rise from 46p to 60p at the end of April 2012. A second Class stamp will cost 50p, a rise from 36p.

The announcement of the price rises came after the regulator Ofcom lifted some price controls on Royal Mail.

There is very little doubt that these increases, labelled in today’s media as being “disproportionate” will have a significant impact on small businesses.

Ian Murray, the shadow postal affairs minster, said he would write to Ofcom, the postal regulator, urging it to investigate the “shameless profiteering at the public’s expense” by Royal Mail.

Businesses that will bear the brunt of the price rise will want to stock up before the increase at the end of the month, but Royal Mail is rationing retailers purchase of stamps and according to the BBC has capped supplies this month to 20% of a retailers annual allocation.

David Powell, an Auditel consultant in Leeds was quoted in The Telegraph after buying 2000 First Class stamps and 1000 First Class Large Letter stamps, in effect 2 years worth of postage, saving himself £430.00.

Retailers have reported a five-fold rise in sales as people stock up on stamps at the lower price.

Martin Lewis, of  Moneysavingexpert.com, said the rush for stamps was “completely unprecedented in my memory”.

Energy Deal – Good news for homeowners but no help for the business market

Interesting to see Nick Clegg on Breakfast TV announcing the new Government initiative requiring energy companies to tell consumers the best deal they have available. Apparently this has been introduced because of the bewildering number of products the big 6 energy companies currently have available which makes it difficult for households to select the best option for them.
Although this may be true I believe the decisions householders face are nothing compared to the complexity of business tariffs. As a business owner to ensure you are achieving best value you need to be sure that your meter is the correct profile for your business, available capacity is at the appropriate level for your demand, termination notices have been logged allowing you to change supplier and negotiate freely, VAT/CCL is charged at the correct level – the list goes on and you have not yet even started to consider looking at rates or length of contract !

It’s not surprising that when I ask my clients about the key benefits of asking Auditel to manage their energy contracts ‘time saving’ ranks just as highly as ‘financial savings’. If you are interested in finding out more about how Auditel are helping clients reduce their energy costs please contact me (laurence.fitch@auditel.co.uk or 01727 865501) to discuss further.

Wind power…it splits opinion

The study ‘Why is wind power so expensive?’ published by the climate change sceptic group Global Warming Policy Foundation (GMPF) suggests the Government’s policy of backing wind power could be a “blunder” which could cost roughly £120bn, ten times as much as gas plants, and actually be worse for the environment.

To meet the Government’s target for renewable energy in 2020, the report reckons 36 GW worth of wind capacity will be needed, backed up by 13 GW of open cycle gas plants. On top of this, it says extra investment in transmission capacity will bump up costs.

The study claims the same electricity demand could be met from 21.5 GW of combined cycle gas plants with a cost of £13 billion.

Read more…

Simplified call charges to help consumers

Calls to 0800 telephone numbers could be free from all phones, including mobiles, under new proposals published recently by Ofcom.

This major step is part of detailed plans to tackle consumer confusion about how much it costs to call businesses, public services and other organisations on 03, 08, 09 and 118 numbers.

Currently, the vast majority of 0800 phone numbers incur a charge for mobile callers of up to 21p a minute. Under today’s proposals, calls to 0800 numbers from a mobile would be free for consumers, in line with landlines.

Under the new proposals, Ofcom also proposes to clarify and simplify how calls to 08, 09 and 118 numbers are charged for. Services provided on these numbers include information, banking, directory enquiry and entertainment services.

Read more…

Business must play its part during drought

Businesses must join households in helping to conserve water supplies, says the Environment Agency

The call comes as a hosepipe ban affecting 20 million consumers in the South East and East Anglia comes into force.

The Environment Agency is encouraging all businesses to carry out a water audit of the workplace to establish where these savings can be made, for example by identifying leaks in need of repair.

Water saving tips for business

• Consider investing in rain harvesting and waste water recycling

• Ensuring taps are turned off. If you spot a leaking tap, tell building maintenance staff

• Have your windows cleaned less often, as long as it doesn’t affect health and safety

• Clean fleet cars less often. Just keep headlights, mirrors and windows clean for safety reason Read more…

Ofgem launches investigation into energy sales by E.ON

Ofgem have now added E.ON to the list of suppliers they are investigating to establish if they are complying with its selling obligations.

In 2009 and 2010, Ofgem strengthened suppliers’ obligations relating to energy sales. The changes set out that suppliers are required to put in place robust processes to guard against misselling. These obligations include ensuring that any marketing material that suppliers use and information that they provide during telesales and face-to-face marketing are fair, accurate, easy to understand and do not relate to products that are inappropriate for the customer. Also, suppliers are required to conduct any telesales and face-to-face marketing activities in a fair, transparent, appropriate and professional manner.

Ofgem is also continuing its investigations into the energy sales practices of Scottish Power, SSE and npower. The fact that Ofgem is undertaking these investigations should not be taken as a conclusion that any supplier has breached licence conditions or otherwise broken the law.
Read more…

Nuclear Power – is it still viable ?

The announcement by German energy companies E.ON and RWE that they plan to withdraw from a large nuclear power project in Anglesey has sparked concern over the future of the British nuclear programme. Energy Minister Charles Hendry admitted that the withdrawal was “clearly very disappointing” although pointing out that “the UK’s new nuclear programme is far more than one consortia” and that “plans from EDF/Centrica and Nugen are on track”.

The reasons for E.ON and RWE exit from the programme are not widely known although some believe it could be linked to post-Fukushima concerns raising German wariness of nuclear power rather than concerns on the commercial viability of UK nuclear power.

This now leaves EDF and Centrica as the major players in the development of nuclear projects in the UK. Whatever your thoughts are on nuclear fuel, it would appear that it is currently the government’s only serious initiative to replace the fall in generation as more old coal powered plants are decommissioned reducing the UK’s generating capacity.

At Auditel our thoughts have been increasingly looking at ways in which we can help our clients by reducing the amount of energy they use to reduce the impact of any future increases in supply cost. I am currently working on an LED lighting project for a client which could potentially reduce electricity consumption within their factory by over 20% by replacing their old inefficient lighting. Importantly this project would have a payback time of less than 3 years making it very commercially viable. Initiatives like this and also looking at securing contracts over the longer term are helping some of my client protect themselves against future price increases.

If you have any comments or would like to discuss in more detail please do not hesitate to contact me.