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5 Minutes With… David Kipling, CEO, OEP Group

 960 640 Stuart O'Brien
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In the latest instalment of our energy management industry executive interview series we spoke to David Kipling (pictured, right), CEO at OEP Group, about the company, the challenges facing energy managers, sustainability, the surging price of gas and why your organisation should be exploring PPA and green tariffs…

What are the biggest challenges facing energy managers in the next 5 years?

There is going to be huge focus on energy in the next 5 years, as businesses see a pincer movement of higher energy prices and increasing pressure for sustainability.  Add to that the next ESOS deadline in 2023 and the increasing disclosure of energy performance via SECR reports, tight corporate budgets and energy managers are facing a perfect storm.

In 2025 we’ll all be talking about…?

Demonstrating progress in implementing the 2023 ESOS findings (which will may mandatory to implement by then, in my view) and also the potential end of Climate Change Agreements (CCA) as we know them.  Businesses’ are going to need to more and more innovative, and are facing a wave of new capital investment.

What should businesses be doing about sustainability?

Our experience is improving sustainability and saving energy costs go hand in hand.   It makes sense to accelerate sustainability and there could also be advantages to your business by being ahead of your competitors in being more sustainable.  The only downside is capital investment is usually required, but that’s where my company can help.

What do you think will be the impacts of the recent high and volatile gas and electricity prices?

It has exposed weaknesses for many businesses in their energy management.  It has demonstrated the risk of higher prices, at levels previously not envisaged, and the potential impacts it could have.  I think businesses will start looking much harder at how to save energy and their hedging strategy.

What is the role of energy broking in mitigating the recent prices?

Energy broking has a significant role to play, mainly in helping businesses choose the right tariff (fixed or flexible) and also in hedging strategy, but they aren’t the whole answer.   Their scope to manage non-commodity and wholesale costs is limited. Energy brokers in reality can only deliver a limited amount of savings, and more control is in the hands of company’s to reduce energy consumption and use onsite generation to reduce market price road bumps.

What priority should company’s have on energy efficiency and onsite generation?

I think it should be at the top of the agenda.  Reducing consumption is the best way to reduce cost (and improve sustainability) and onsite generation offers a defence against market price movements.

Should businesses be exploring PPA and green tariffs?

Entering into a wind or solar PPA is topical, reduces CO2 and offers some defence against volatile wholesale costs.  But it doesn’t protect consumers against non-commodity costs for using the grid.

Green tariffs offer CO2 savings but they don’t impact local consumption.   They are also subject to the grid price changes that we have seen recently.

My personal view is that both PPA and Green tariffs can be inhibiters to change.  If they lock in an amount of usage, this can stop businesses looking for changes that reduce their consumption and their local CO2 emissions. 

How can your business help energy managers address these challenges?

OEP helps businesses both identify energy efficiencies and onsite generation, and fund them using our zero capex model.   We don’t charge for the upfront appraisal that identifies all the measures that could be enacted.  The result is both lower consumption and also stable, predictable prices for onsite generation over the term of our agreement (typically 10 years).

What’s the most exciting thing about your job?

I get a real kick from identifying solutions that have been missed previously.  Also its great to see our projects being built within the customer’s premises and to seeing our proposals become the reality.

And what’s the most challenging?

We still face the “too good to be true” scepticism but its rewarding when they relent and see that what we are proposing can really work, and is supported by the data.

What’s the best piece of advice you’ve ever been given?

Focus.   Its easy to get distracted to jump on the latest bandwagon, but we are going to stay very focused on energy intensive manufacturers, where we can have the biggest impact for our planet.

What can you do about skyrocketing energy costs ?

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By On-site Energy

UK gas costs recently reached a record high with wholesale gas at 4.5p/kWh for Winter 2021, compared to just 0.9 p/kWh last year, and corresponding wholesale electricity at over 12p/kWh.  Add on to this the non-commodity costs at 8.0p/kWh, CCL and standing charges, and many businesses will suddenly face grid electricity costs of 20p/kWh or more, and gas as much as 5.5-6.0p/kWh.

Forward costs for the next few years are also looking high, so if you haven’t hedged or bought forward then you could see massive increases in costs.

So what can you do about it ?

The best thing you can do to avoid this hike is to reduce consumption. Suddenly energy efficiency measures whose payback was too long previously should be more attractive because of the higher costs of energy.  It would be wise to revisit what opportunities you have, and  to have your operational energy needs reviewed.  Inefficiencies that you have lived with for years such as over-sized steam boilers, inefficient motors, outdated refrigeration, obsolete plant, power correction, lack of VSDs, T5 lighting etc, will be worth addressing.

Additionally, generating your own power on site – “behind the meter” – avoids the non-commodity costs and CCL that go with grid power, and is amongst the cheapest form of power you can now source.

A key question though is where does the money come from for these measures ?      If the paybacks are still too long, or cash is already committed to other projects, then you can look for zero capex options where the provider will install the measures without cost to you,  and then charge you over time for their use. This is what we do at On-site Energy (www.on-site.energy) for energy intensive manufacturers.

We can conduct a free review of your energy usage and recommend efficiency measures and onsite generation solutions without any commitments from you.  At the end, we provide you with our recommendations for both efficiency measures and onsite generation, and options for both capex and zero capex funding.

If this sounds interesting then please get in touch with our CEO, David Kipling at david@on-site.energy or call him on 0151 271 0037.

Need Accurate Sustainability Reporting? Make sure you have quality data first!

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By Bill Identity

Sustainability reporting should be a quick and easy way to understand how your business performs against best sustainability practices relating to energy, water and waste, and employee programs. Get ahead of the curve and download your free guide from Bill Identity today.

Click to Download Free Guide

Alarm sounded on energy costs for business

 960 640 Stuart O'Brien
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The outbreak of COVID-19 led to a substantial reduction in energy demand, but an industry veteran has warned that the tide is turning – where forward annual energy prices were averaging at 4.5p six months ago, the cost today has risen to 7p, a monumental increase of 45%. 

Corin Dalby, founder of philanthropic energy buying consultancy Box Power, has issued a stark warning to businesses across the UK about the surging wholesale energy prices they could be stuck with when October rolls around.

Figures have shown how the outbreak of the coronavirus crisis, at the start of last year, caused a substantial reduction in energy demand as commercial activity was restricted for the majority of businesses and organisations. While some of this was offset by the increase in residential usage, this drop in demand meant prices plummeted.

However, since December, it seems the tables have turned. Where forward annual energy prices were averaging at 4.5p six months ago, the cost today has risen to 7p – an increase of 45%. Dalby puts this down to a successful vaccine roll-out leading to increased consumer confidence and believes that as long as this upward trajectory continues, prices of commodities like oil, LNG, electricity and carbon will just keep rising.

“The market is extremely volatile right now,” says Dalby, “No Summer to Autumn period is ever easy-going, with it often being the time that power stations choose to shut down for maintenance and hurricane season comes about, but this year has the added factor of European storage levels being well below normal.

“That’s why business figures need to put their procurement hats on now. By waiting until one month before their current energy contract is due to end, businesses will have no choice but to compare the marginal percentage difference between two or three providers’ rates there and then.

“Little to their knowledge, one of these providers could have been offering brilliant rates a mere few months earlier – so they’ve missed out on huge savings by simply not checking. It’s also possible that the effect of lots of businesses hunting around for deals at the same time results in demand-pull inflation – escalating prices even more.”

There are a number of reasons why businesses leave switching to the last minute, according to Dalby – either due to hope that things might improve, putting it off due to thinking of it as a hassle, or waiting for the ‘switching window’. But it is possible to switch and lock in deals as early as 24 months ahead of a contract’s end date. In fact, this could have huge benefits.

“Last April, on the day when oil stock price dropped to -$20, we advised one of our clients to take advantage of the cost and lock the deal in – even though their current contract isn’t up for renewal until October this year. Now, they’re all set to reap the benefits, no matter what happens in the market.”

Dalby sums up by emphasising how: “Planning and timing is everything– especially for those looking to avoid getting trapped in a position where they are expected to pay over the odds, with potentially disastrous consequences for their day-to-day business longevity.”

Energy chiefs predict sector recovery post-Covid-19

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Energy leaders responding to a survey conducted by the EBRD and summarised in a Covid-19 policy note investigating how the sector will deal with the 5 per cent fall in energy demand worldwide brought by Covid-19 in 2020, have indicated they are confident of a quick recovery.

One-third of respondents from 32 countries across the EBRD regions say they believe energy demand will recover fully in 2021; a further 45 per cent believe it will have recovered by the end of 2022; and more than 90 per cent believe recovery will be complete by the end of 2023.

The Covid-19 pandemic has seen falls in both energy demand and investment. The International Energy Agency estimates that demand fell 5 per cent worldwide in 2020, with fossil fuels affected most, and investment in new technologies fell further. With the energy sector responsible for more than 70 per cent of greenhouse gas emissions, clean energy needs to be at the heart of the world’s economic response and plans to “build back better” after the pandemic.

The EBRD, already at the forefront of climate finance, is committed to making a majority of its investments green by 2025. In December 2020, it conducted this survey of senior decision-makers in the energy sector to understand better how pandemic response measures correlate to the longer-term green recovery trajectory. More than 100 responses from policymakers in 32 countries on three continents are the basis of the results.

The survey’s findings on the impact of Covid-19 on the energy sector are that emergency spending hit energy investment hardest, delaying investments in generation and network maintenance in ways that, in some countries, could damage the future resilience of the sector. Private-sector actors are widely believed to have been more affected than state-owned enterprises.

Respondents were however largely positive about the sector’s emergency response, especially on energy security, with success acknowledged in putting in place a safety net for domestic customers, especially in European Union countries.

Respondents also stress the need to build back better to reduce the risk of future shocks. To achieve a swift and sustained energy-sector recovery, the top priority they highlight is grid modernisation, followed by investment in renewables. Clean energy and the digital transition also score highly.

Just under half think Covid-19 will provide greater opportunities for the development of renewables, despite it being a top priority for a sustainable recovery. But more than half say their country will focus on a clean energy transition.

While an inclusive transition is seen more as an outcome of a successful and sustained recovery than a driver of it, over 90 per cent of respondents consider Covid-19 to have increased the importance of scaling up digitalisation in their countries.

“The key issue in future will be the ability and desire of debt-burdened states to finance the investments required to deliver a clean energy transition,” the report on the EBRD survey said.

How Purpose-Built Containers Can Help Businesses Meet Their Environmental Goals

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In the age of sustainability, businesses are growing the efforts to meet new environmental goals. Whether preserving the environment or reducing waste, your choice of workspace is vital.

Of course, sustainability has more benefits for businesses than simply protecting the environment. For consumers, sustainable businesses that are ethically aware are rewarded with their custom. In fact, one consumer index found that 47 per cent of people worldwide have changed to a different product or service because a company violated their personal values.

Considering environmental practices as a strong consumer value, you can expand your operations while remaining sustainably aware. Purpose-built containers have long been used as extensions for businesses. However, the benefits of this space can also help meet your environmental goals. Here, we look at why purpose-built containers are the solution for your sustainable business. 

Less is more

Purpose-built containers can add a lot to a business. But it is actually what they take away which makes them so environmentally friendly. According to WRAP, the UK construction sector uses 400 million tonnes of materials and generates 100 million tonnes of waste every year. This waste contributes to over a third of the UK’s total waste. The evidence suggests that construction is currently operating at unsustainable levels.

Containers can reduce the amount of waste generated by minimising the types of materials used in their simple yet effective design. The steel walls are fabricated to minimise waste, each being designed and cut to size. Any excess materials can contribute to the construction of another container. A typical 20 ft container may only weigh about 2,230 kilograms, meaning that the weight of materials is lower than purpose-built brick and mortar spaces.

The benefits of this are overwhelming for businesses. Money can be saved on both material cost and constructing heavier-bearing foundations. To further meet your environmental goals, this saved money can be diverted into other sustainable investment funds.

Purpose-built containers can also save space. Condensing your working environment into a container helps protect the natural environment too. This means that natural habitats are not disturbed by the construction of larger industrial spaces.

Energy conservation

Purpose-built containers can benefit your business through energy conservation. Containers can be easily insulated, meaning that temperature is regulated during both hot and cold seasons. Fuel needs are also minimised, as the confined space of the container means that not as much energy is needed to climate control work area.

Containers can also help with your investments in renewable energy. The simple design of the container means that solar panels can be mounted on the roof of your repurposed space. The energy from which can be used to power electrical essentials within your new space. Using renewable energy is the most proactive way for a business to meet its environmental goals. It is also a visible sign for customers that your business is dedicated to sustainable practices.

Longevity and reusability

One concern that businesses may have with purpose-built containers is their longevity. However, this issue is ill-founded. In fact, containers used for retail or industrial space can last around 30 years. Hard-wearing materials such as steel are coated with zinc paint coat, slowing the process of rusting. Erosion is also less likely than one would expect with brick-and-mortar spaces. 

The solid structure of these containers mean that your business can rest assured that its space is protected from the elements. Reducing repairs can help to combat issues with sustainability and will contribute towards your environmental goals.

Equally, the long-lasting and minimal material needs of containers means that they can be reused and repurposed. Of course, the original purpose of these containers was for hauling and storage. Today, they are a popular alternative for many businesses looking for a workspace. When container space is no longer needed, the space it occupied can be easily reclaimed without contributing to landfill waste or paying for expensive deconstruction. The material or container in its entirety can then be rebuilt or reused by another business or for other purposes.

When reviewing your business’ environmental goals, consider how your workspace can help to achieve this. Purpose-built containers can be used to achieve energy efficiency and reduce waste. Plus, the simple design benefits the installation of insulation and renewable energy sources. These spaces are a viable tool for growing businesses to ensure they maintain sustainable practices.

Italian renewable industry expands future renewable development

 960 640 Stuart O'Brien
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The Italian Government is expanding the integration of renewables in its generation mix to create an infrastructure for supporting sustainable green generation, thereby tackling the issues of land constraints and making continuous strides in meeting the net carbon neutrality ambition by 2050.

The constant decline in the development costs for offshore wind and floating solar PV has garnered special recognition in the country’s renewable energy plan. The Italian renewable capacity, excluding hydropower, is estimated to reach 60GW by 2030 from the current 36GW, growing at a compound annual growth rate (CAGR) of 4.5%, according to GlobalData. 

Somik Das, Senior Power Analyst at GlobalData, said: “The floating offshore wind project is a technological advancement and investments in the segment provides Italy the prospect of staying ahead in the growth curve. Along with the floating offshore wind projects, developers are also looking at building hybrid offering with integration of solar PV to improve the generation yield.” 

This year is attracting growing interest from various players that are active in the supply chain and who are investing in the Italian renewable energy landscape. In June 2020, Italian developers began work on the €750m (US$840m) 7Seas Med floating wind project with 25 floating wind turbines with 10 megawatts (MW) capacity. Terna has pledged an additional investment of €7.3bn (US$8.3bn) by 2024 to meet the growing demand for electricity from green energy.

Recently, Saipem signed a pact with renewable energy (RE) developers Agnes and Qint’X, to co-develop a project combining 450MW of offshore wind capacity with floating solar PV technology in the Italian Adriatic Sea. In a similar instance, Eni New Energy SpA has laid its plans to invest €14.7m (US$17.3m) and construct a 14 MW floating solar PV plant in Brindisi.

GlobalData says Italy is one of the primary markets for several global investors, as the country provides a perfect amalgamation of ideal climatic conditions, optimum solar irradiance, and wind speed to implement cutting-edge solar and wind technology. Floating offshore wind turbines provide more access to deeper water than conventional fixed-bottom wind turbines. This expands the practical range for wind energy development, and can potentially get access to locales with steadier and higher wind flow.

Das added: “Being limited in geographic landmass, the country is making use of its coastlines and its waters to meet its RE installation targets by the conclusion of the decade. Italy has the 2nd largest solar PV installed capacity in Europe and is looking to make headways in the offshore wind segment. The RE space is seeing global players like European Energy A/S, Sonnedix, Octopus Investments Ltd, and Copenhagen Infrastructure Partners KS investing in the country, making giant steps towards sustainability and zero-carbon generation.”

Proptech eyes improved building performance with new platform

 960 640 Stuart O'Brien
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A new digital twin platform has been launched that claims to change the way buildings are managed and perform, helping to make them safer and more energy-efficient.

Twinview is powered by cloud-based, 3D digital twins – digital replicas of physical buildings – which connect the virtual and the physical buildings with real-time analytical data.

Its creator PropTech says this allows building owners to manage, monitor and maintain critical construction and operational information.

The platform has been four years from research and development to go-live, with PropTech stating it is already in discussions with a number of national and international businesses.

Initially, the platform is focused on those responsible for estate management, with an emphasis on commercial, universities and social housing sectors. In the long run, it is envisaged Twinview will be used by contractors and designers, and across sectors such as hospitality and hotels, retail, infrastructure, transport, private housing, and schools.

Rob Charlton, CEO at Twinview, said: “The original concept for Twinview was very much developed in response to discussions we were having with clients. The problem was that while complex building models were developed through the design and construction process, due to the need for proprietary software, training, and hardware, this information could not be viewed or maintained after building handover.

“We’ve worked closely with real estate investment trusts as well as digital specialists in the sector to make sure Twinview will help address a number of issues that have been discussed for some time. While we started work on the platform before the tragedy at Grenfell Tower, it does respond to the recommendations made by Dame Judith Hackitt in her report. Twinview will provide a ‘golden thread’ of information which is easily accessible by anyone, anywhere.

“While there are existing solutions that deliver elements of what Twinview offers, very few do everything that we are doing in one environment. Twinview removes the need for specialist and expensive hardware, software and training. Not only can users view models online using just a web browser, they’ll also be able to update their models and view and access live data right down to individual asset level in milliseconds.” 

UK power market hits consolidation as Brexit looms

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A major change is underway in the UK power market, with increasing competition, regulatory headwinds, growth in renewables and investors’ uncertainty in Brexit all playing a part.

That’s according to research by GlobalData, which says a significant number of mergers and acquisitions (M&A) within the UK power sector has signalled a period of consolidation, along with over 10 electricity and natural gas suppliers folding their businesses within the last year.

GlobalData says the smaller scale suppliers are most at risk, with some exiting the market after they failed to hedge the risks properly, and others falling prey to big players through M&A.

“It is evident that companies will only be able to survive in this competitive market if they are able to achieve economies of scale,” said Ankit Mathur, Practice Head of Power at GlobalData. “The small players have provided an opening for large energy companies to diversify and enter the UK energy retail business.

“For example, Shell Energy debuted into the UK energy market after acquiring First Utility in 2017 and recently proposed to acquire Green Star Energy. This proposed transaction along with announcements of Octopus Energy acquiring Co-op Energy, and Ovo Energy slated to acquire SSE Energy’s retail business, marks the third such announcement in the last three months that indicates the UK retail market is under a consolidation phase.”

GlobalData says the UK’s Big Six energy suppliers (British Gas, EDF Energy, E.ON SE, npower, Scottish Power and SSE) have been badly bruised by the fierce competition from more than 60 smaller competitors offering cheaper and affordable prices.

According to Ofgem, the Big Six companies have lost around 1.3 million customers and are serving just above 70 per cent of the domestic customers. Their cumulative profits tanked by 10 per cent and earnings before interest and taxes (EBIT) fell by 35 per cent in 2018 as compared to 2017.

Mathur added: “The smaller companies in the next tier are boosting share; however, they are more prone to the risk, with some exiting the market. The new stringent entry requirements for new suppliers including tighter funding requirements, providing a customer service plan and passing a ‘fit and proper’ test may restrict new entry into the market.”

Leading edge demonstrators to ‘jumpstart energy revolution’

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Four smart energy systems demonstrator projects across the UK have been announced by Energy and Clean Growth Minister Claire Perry.

From charging electric vehicles and managing heating and power through machine learning to storing power with lithium ion batteries and using heat pumps, the projects are designed to show how energy innovation can be put together to provide cheaper, cleaner energy for users.

The projects are:

  • The Energy Superhub, Oxford, led by Pivot Power LLP
  • ReFLEX Orkney, Orkney, led by the European Marine Energy Centre
  • Project Leo (Local Energy Oxfordshire), led by Scottish and Southern Electricity Networks
  • Smart Hub SLES, West Sussex, led by Advanced Infrastructure

Perry said: “We are at the start of a green revolution, as we move to more digital, data-driven smart systems that will bring us cleaner and cheaper energy. These projects, backed by government funding, are set to spark a transformation and change the way we interact with energy for the better as part of our modern Industrial Strategy.

“We’re excited to see how these businesses and project partners reveal how innovative tech, such as energy storage, heat networks and electric vehicles, can set us on the path to a smarter energy future. This is tomorrow’s world, today.”

Rob Saunders, Deputy Challenge Director, Prospering from the Energy Revolution, UK Research and Innovation said: “We all need energy systems that are cheaper, cleaner and consumer-friendly. We have a great opportunity with these demonstrators to show just how innovation can deliver this energy ambition for the future. Supported by the Industrial Strategy Challenge Fund, these projects can drive investment, create high-quality jobs and grow companies with export potential.”

As part of the Industrial Strategy Challenge Fund, the £102.5 million Prospering from the Energy Revolution Challenge will develop cutting-edge capabilities in local systems that deliver cleaner, cheaper and more resilient energy for consumers, while also creating high-value jobs for the UK.

The challenge brings together businesses working with the best research and expertise to transform the way energy is delivered and used. This includes providing energy in ways that consumers want by linking low-carbon power, heating and transport systems with energy storage and advanced IT to create intelligent local energy systems and services.

The funding is awarded competitively by UK Research and Innovation, the new organisation that brings together the UK Research Councils, Innovate UK and Research England into a single organisation to create the best environment for research and innovation to flourish.

Projects must demonstrate new, smarter, local energy approaches at scale, which can:

  • provide cleaner, cheaper, more desirable energy services for the end user lead to more prosperous and resilient communities
  • prove new business models that are suitable for investment and can grow and replicate in the 2020s
  • provide evidence on the impacts and efficiency of novel energy system approaches by the early 2020s