ENERGY EMERGENCY: When the lights go out

24 June 2013

A storm is brewing for the UK's energy policy, say some experts. FMs should take note.

If you want examples of companies going out their way to save energy, you don't need to look far. Take McDonald's, for instance, which has installed Building Energy Management Systems (BEMS) from Trend Controls across 1,100 UK branches.

The restaurant chain says this has helped it reduce costs and maintain its sustainability agenda. ''Like many other multi-site quick service restaurants, energy usage is something we need to monitor and manage from cost and environmental perspectives,'' says Peter Schroeder, energy and environment consultant. ''We're also part of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme and have to measure and report energy consumption. These factors mean it's more important than ever that we use energy wisely.''

Each one of its restaurants is given strict usage targets and has the latest technology to monitor and manage its energy. The task of installing this equipment is given to Sidcup-based Powell Systems Engineering.

FMs all over the country will identify with Schroeder's interest in cutting energy waste. And, as reports of the UK's approaching energy crisis become increasingly widespread, they'll recognise the dangers of saving energy wherever they can. The impending crisis may sound to some like scaremongering but there is sufficient evidence that it is gathering pace, and that - like climate change - it could be something that preoccupies the next generation in all the wrong ways.

A report entitled 'A crisis in UK energy policy looks inevitable' by Peter Atherton and Guillaume Redgwell of Liberum Capital makes disturbing reading. The authors suggest that EU policymakers have grossly underestimated the difficulties and risks of their drive to de-carbonise the power sector. They add that EU policymakers have failed to take into account the huge changes in the economic, commodity and financial environments and adjust policy accordingly.

They also say the economic arguments supporting the current climate change dominated energy policy look weak and public support is uncertain. And they say ''Given the hostile rhetoric that utility companies face today from across the political spectrum on bills and profits, it takes quite a leap of faith to believe future governments will steadfastly defend the huge bill and profit increases that will inevitably result from current policy.''

Political risk is bound to rise sharply in the UK energy space as the inherent implausibility and contradictory nature of the policy goals are exposed by events, say the authors, concluding a crisis in UK energy policy looks increasingly likely. Utility companies and investors would, therefore, be prudent to limit future exposure.

Probable triggers for the crisis are listed - and it is these that should cause all FMs to sit up and take notice. The triggers include a generation capacity crunch in the 2014-17 period leading to a sharp spike in power prices, a lack of dispatchable generation by the end of this decade onwards, and spiralling consumer costs and developer profits that a future government will find untenable.

True, the authors' conclusion remains in the realm of probability rather than inevitability. But they're not alone in their warnings of a crisis in the not-too-distant future.

A recent article in The Spectator, for instance, said the one outcome we can be sure of is that our electricity bills will soar - as Alistair Buchanan of Ofgem has warned - and that 'fuel poverty' will afflict our poorly pensioned ageing population as never before. If nothing is done to bring on reliable, large-scale new generating capacity as swiftly as possible, we'll also be learning to live with power cuts on a Third World scale.

Furthermore, The Spectator said that within three years, the 'reserve margin of generation' - reliable spare capacity in the system - is set to fall from 14% to just over 4%, which Buchanan describes as 'uncomfortably tight'.

''Just how uncomfortable is illustrated by another Ofgem modelling the chances of the lights really going out: the risk of customer disconnections owing to a critical shortfall of energy this winter was estimated at 'one in 3,300 years', but by 2015/16 it will be 'one in 12 years'. A pretty dramatic narrowing of odds, you might think, and even that depends on positive assumptions about generating capacity that could easily prove wrong.''

And so it goes on. The upshot for this is that just as FMs thought their job was done, they're realising it most certainly isn't. There's going to be more pressure than ever before for companies to cut energy waste, and that pressure is going to be increasingly felt by FMs. It's not just about changing light bulbs anymore. It's about upgrading existing equipment, having an office equipment policy and maintaining equipment (see box). In a nutshell, it's about heating, cooling, power and vehicles, and everything else that conceivably uses energy.

Something as small as a PC monitor left on overnight can prove costly, with one study showing the amount of energy consumed is equivalent to laser printing 800 A4 pages.

Several companies are innovating in order to provide solutions to the problems we face. For instance, Wind Prospect recently launched a business venture 'Nevis Environmental' with the aim of reaching a target market outside of the renewables industry.

The launch of Nevis will, the company says, allow the team to deploy its skills and experience associated with environmental management and monitoring into wider markets, including those traditionally set outside of the remit of the energy services marketplace.

Meanwhile, at McDonald's, Powell Systems Engineering will this year carry out installations across a further 50 McDonald's restaurants. The final word goes to Peter Schroeder of McDonald's: ''As a global entity we believe in leading by example and make our energy reduction targets deliberately tough in order to go beyond the minimum of what is expected. Using BEMS in our restaurants helps us achieve our on-going environmental objectives.''