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Renewable Energy

Survive the Energy Surcharges……..

By 12th November 2012 No Comments

In 2007 the EU instigated legally binding targets to achieve an average 20% share of renewable energy and a 10% share of transport-related renewable energy by 2020. Formalised in the Renewables Directive published 23rd April, 2009, individual country targets ranged from 10% (Malta) to 49% (Sweden). The UK target was set at 15%. Member states were required to submit National Renewable Energy Policies (NREAP) by 30 June 2010. The UK NREAP suggests a split of 30% electricity/12% heat /10% transport, requiring 108 terawatt hours per year (TWh/y) of large-scale renewable electricity generation and 126 TWh/y in the form of small-scale renewable electricity, renewable heat and transport. Moreover, Britain led the world in setting legally binding carbon emission reduction targets of 34% (2020) and 80% (2050).

Energy usage and carbon output will therefore be an unavoidable focus of government policy for the foreseeable future. Renewable generation is currently more costly than conventional methods, therefore financial inducements are required. These inducements are funded via consumer surcharges such as Feed-in Tariffs (“FiTs”) and Renewables Obligations (“ROs”). The Department Of Energy and Climate Change (“DECC”) estimate that by 2020 “green” policies will increase SME electricity costs by 43% (24% for gas) – in addition to any increase in the underlying unit price. It is hoped that parallel initiatives to reduce consumption will mitigate total energy cost increases to 26%.

To summarise:

  • Energy surcharges are likely to add 24%-43% to SME energy costs.
  • Unit energy price increases will be in addition to the above.
  • Government policy is driven by legally binding obligations and therefore unlikely to change
  • Effective energy management requires systematic incorporation into premises, equipment, processes and work practices.  Personnel must act and to think differently.
  • Technologies are available to decrease consumption (led lighting, voltage optimisation etc) or replace grid consumption/attract government incentives (solar PV, wind, biomass etc).
  • Many strategies require lengthy lead times.
  • FDs might wish to estimate how well their business could sustain unmitigated price and surcharge increases.
  • Professional advice is advisable if the full force of these increases is to be ameliorated.