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University energy costs set to rise, warns Inenco

The energy consultancy says that UK universities are likely to add over 20% onto non-commodity costs by 2019 if they don't take action to reduce them

Posted by Julian Owen | January 26, 2018 | People, policy, politics, money

Energy consultancy Inenco is advising universities to start the new year by taking action to reduce their non-commodity energy costs. Research carried out by the company has revealed that UK organisations combined can expect to have paid an extra £7.42 billion on their energy costs by 2019 if energy management strategies aren’t implemented, with universities seeing an average increase of 21 per cent, or £43,501, over a three-year period (2017-2019).

While wholesale energy costs are affected by many unpredictable factors, making it difficult to forecast whether they will go up or down, it is far more certain that non-commodity costs will rise. According to Inenco, in 2017/2018 alone, the Renewables Obligation (RO) Levy, the Feed-in-Tariff (FiT) Levy, the Contracts for Difference (CfD) Levy and the Climate Change Levy (CCL), coupled with carbon floor costs, will add around £41/MWh (4.1p/KWh) to an energy bill.

Inenco says cost rises will be significantly lower if energy management strategies are implemented. To help organisations decide on the best course of action, it investigated the impact of continuing along the same path versus implementing a range of measures to manage energy consumption. The company analysed data from an inner-city university, large retail park, small retail store and manufacturing site. They calculated their energy costs rises over a three-year period (2017-2019) if they kept the same energy strategy or applied the following scenarios:

 - Reduce overall consumption by 10 per cent

 - Shift 20 per cent of consumption from red bands and distribute across amber bands,

 - Shift 50 per cent of consumption from red bands and distribute across amber bands

 - Implement an energy efficiency programme (aiming for a five per cent reduction year-on-year)

In the case of inner-city universities, shifting 50 per cent of consumption from red bands and distributing across amber bands and implementing an energy efficiency programme had the most impact compared to inaction. Bill rises could be as low as or £7,038 and £7,835, or three and four per cent, respectively. Failing to take action would result in a rise of 21 per cent, equating to £43,501.

The first step a university should take in implementing an energy management strategy is to review current use and projected energy costs.'

David Oliver, a consultant at Inenco, said: “Most UK organisations can expect to see their energy costs increase by 25 per cent by 2020 – and these rises are of course all happening against a backdrop of other financial challenges. With costs increasing across the board, and continuing to rise well into the future, organisations cannot afford to stand still and carry on as before.

The good news is that energy is one area where savings can be made. While wholesale energy cost rises are beyond an organisation’s control, there are still ways to mitigate non-commodity cost rises.

Combining the scenarios used in our calculations would maximise the savings, especially as shifting consumption can earn organisations revenue through demand management schemes. However, the ability to do this will depend on the organisation; it’s not always practical, for example, to shift 20 per cent or 50 per cent consumption. Implementing an energy efficiency programme is an action that all organisations can take though, and it keeps cost rises low.

The first step a university should take in implementing an energy management strategy is to review current use and projected energy costs, and to establish whether there is adequate internal resource available. The second step may require engagement with external consultants to determine which energy management solutions are most appropriate.”

Inenco’s Cost of Inaction report can be downloaded at www.inenco.com/the-cost-of-inaction. In addition, universities can use Inenco’s interactive Non-Commodity Cost Dashboard to calculate their exposure to incremental non-commodity costs over the coming years.

 

 

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