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Change of Direction

15 July 2007

Under the Climate Change Bill, energy companies will be required to change from supplying as much energy as possible to providing energy saving solutions and 'green' fuel options to businesses. Frank Booty talks about this change to Gordon Parsons of npower and to some of his clients

“CLIMATE CHANGE IS THE BIGGEST SINGLE ISSUE facing the planet,” says Gordon Parsons, MD of npower business. “The longer British businesses wait to act on climate change, the more dramatic – and draconian – the decarbonisation of the economy will have to be.”

This was the consensus message from an npower Low Carbon Economy Forum held at the London Stock Exchange in April – and the key message of a new white paper “Making sense of the low carbon economy” published by npower business and Forum for the Future.

As the UK’s No.1 electricity supplier, npower provides power to over six million customers, over 330,000 SME sites and some 17,000 industrial and commercial customers. The company was the first major supplier to offer automated meter reading (AMR) technology to all its customers to help improve energy
management and reduce administration and asset maintenance costs.

Its ‘white paper’ points to Government data on UK emission trends that shows CO2 emissions have risen every year since 2002 – creating a gap between the current response to climate change and the Government’s long-term target to reduce carbon emissions by at least 60 per cent by 2050. It says forward-thinking companies – no matter the size and sector – need to prepare for the low carbon economy now. This means FMs need to be prepared.

“Our aim in commissioning the white paper was to provide an insight into scientific and governmental drivers behind the low carbon economy and the implications of the transition to this new way of working,” says Parsons.

Forum for the Future’s principal sustainability advisor, and author of the white paper, Iain Watt says, “Tesco is to label the carbon footprint of every single product it sells. This will affect every company in the supply chain. While there is no timeline for this major leap, there is pressure on companies going forward. Businesses in the UK should expect a suite of new regulations to bring about a low carbon economy to be enacted in the near future. When this regulatory pressure is combined with the low carbon expectations that leading businesses are starting to place on their supply chains, it becomes obvious that all companies, no matter the size or sector, will have to respond.”

In making the transition to a low carbon economy, the white paper draws a simple conclusion that energy management remains the best and most effective method of reducing carbon emissions.

Watt’s research in the white paper speculates what the low carbon economy might mean for UK business. Watt indicates that leading companies are already reducing emissions in response to a variety of drivers. Institutional investors are beginning to ask questions about the risks and opportunities climate change poses to their investments, and the environmental commitments of firms such as Sainsbury’s, Marks & Spencer, BT and AstraZeneca (in addition to Tesco) will soon begin to be felt throughout their supply chains.

Ultimately, companies should expect to source all their energy needs from low or zero carbon sources, and to sell products and services with little or no climate impact. However for many large and small businesses, energy efficiency still remains the most cost-effective method of reducing carbon emissions.

“If predictions that the low carbon economy will effect an increase in energy prices are correct, then using energy more efficiently now addresses both climate risk and price risk,” says Watt. “Yet the connection between energy efficiency and climate risk is rarely made. For businesses to be prepared for the low carbon economy, that has to change.”

Parsons says, “We have to move to providing energy solutions rather than just being an energy supplier. Already we are the largest operator of wind farms in the UK. We offer AMR technology which provides key insights into usage.”

Sainsbury’s partnered with npower business in a long-term partnership for power and gas supply plus energy demand reduction to reduce carbon emissions by 10 per cent in 2005 compared to 1997 levels. Over 450 supermarket sites are involved, and the project delivered the required reductions in carbon emissions solely from energy efficiency improvements – further improved with purchasing ‘green’ electricity. Such has the success been, the relationship has been extended with work progressing toward more challenging environmental and economic targets.

“Sainsbury’s committed capital investments of over £14m and has benefited from annual financial savings of over £10m,” says Parsons. “Optimisation and exception control of refrigeration systems provided energy savings that varied between 15-20 per cent at the company’s sites.”

FM and energy efficiency figure prominently, with customers such as Diageo Dublin, Coors, Corus, and Great Northern Brewery. Dave Lewis, business development manager for energy solutions at npower Business, says, “There’s a spectrum of services we offer. At the top end, the prime example is Diageo in Dublin where we own the equipment that provides utility services for brewing – that’s steam, nitrogen, compressed air, water and refrigeration – and we charge for these utilities. With what we supply, we take risks on such criteria as availability and quality. There’s a team on-site full-time. We’re about three/four years into a 15 year contract.”

He continued: “We have a similar arrangement with Coors breweries at Burton, Alton and Tadcaster. At Corus we have built and operate the systems using our money. It’s an unmanned plant operated on a sale and leaseback principle.”

The company also has an agreement with Great Northern Brewery at its Dundalk facility. Lewis continued: “At Sainsbury’s for example, there are shared savings, utilising their money and their people, with our expertise. We also offer plain vanilla consultancy. Any model in this spectrum of services works.”

BT, another npower business customer, aims to harness communications to reduce climate change. BT has done more than most companies in moving to lower carbon emissions – it has redesigned buildings, shrunk workspace, introduced flexible working. Its emissions run at 60 per cent lower than 1996 levels, 42 per of its waste is recycled, renewable energy is used as much as possible, and the company has seen the number of home workers rise from 1984’s 300 to today’s 12,500.

Donna Young, head of climate change at BT says, “Our carbon-busting strategy includes the 80 per cent reduction from 1996 levels by 2016, helping our suppliers produce products with lower emissions, provide a carbon footprint of our products, provide low carbon services for our customers, and empower 104,000 BT people to reduce their own carbon emissions at work and at home.”

Support for low carbon initiatives has to start with the board. At BT there are ‘carbon busters’ below director level, senior managers who support ‘champions’ in the lines of business, and drive the programme and strategy. Below these are carbon clubs, comprising people with “the desire to do something,” says Young. “Car sharing has proved very successful, 22 per cent fewer appliances are left on overnight, while two years ago the ratio of conference calls to face-toface meetings was 20:80, today it’s the other way round,” says Young.

Climate change is the biggest single issue facing the planet. FM must be part of the team involved in providing the solutions. Parsons has shown that is possible.

More info lowcarbon for the white paper, ‘Making Sense of a Low Carbon Economy’ www.forumforthefuture.

● Frank Booty is a freelance writer

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