Unfortunately, 2021 is set to be another turbulent year. Due to the freezing conditions last week, we saw short-term gas prices at a three-year record high with electricity prices also at an all-time high. We’re also seeing regular cuts in oil production which is being exacerbated due to the challenges of social distancing as a result of COVID-19, this is also having a negative impact on the price of electricity. Such fluctuations coupled with the continued unpredictability of the pandemic and a post-Brexit future means that we are likely to see a huge amount of volatility in the energy market in 2021.
Energy regulation such as the new Targeted Charging Review (TCR) reform has started to filter through to pricing and we’re also seeing an increase in the proportion of non-commodity costs that are being charged for as part of energy billing. In some instances, this is already as much as 70% of the overall cost of energy but it’s predicted that a 70/30 split non-commodity and commodity costs respectively will become the norm.
With the cost of energy increasing combined with an increase in non-commodity costs, the only real way to save money on your energy bill is to reduce the amount that your business consumes. To overcome the issue of volatility in the marketplace it’s worth keeping sight of fluctuations and monitoring pricing along the way. Your consultant can help you with regular tendering so that you can assess your contract within the market and renew your contract at a more attractive price.
Energy Trends for 2021 - A behavioural shift towards sustainability
On a far more positive note, 2021 is the year where we are likely to see a significant shift in behaviour as efforts to achieve the Government’s Net-Zero targets by 2050 increase.
It’s encouraging to see that the use of renewable energy is becoming far more commonplace and in 2020 we saw a substantial increase in the number of clients requesting quotes from renewable sources and we predict that this will continue in 2021. 2020 was also the year where UK electricity generated from renewable sources overtook fossil fuels, the first time that renewables were the main source of the UK’s electricity over a year. If you haven’t already made the switch, it’s worth asking your supplier for a green energy quote as prices are far more affordable and are offered as standard.
The recent Ten Point Energy Plan as outlined by Boris Johnson in November 2020 and followed up with a White Paper by BEIS in December last year sets out some clear guidelines for a UK wide focus on reducing carbon emissions. Following on from the ban on the sale of new petrol and diesel cars being brought forward to 2030, and the sale of new hybrid cars prohibited from 2035, there was a clear focus on electric vehicle adoption as the Government committed to accelerating the deployment of EV charging points as well as a wide rollout of EV infrastructure.
We’re also seeing a significant shift in consumer behaviour as individuals become far more discerning with our buying choices. It’s clear that being green or sustainable is no longer simply a tick box exercise and companies are being forced to demonstrate that they are mindful of their approach to reducing emissions and CSR efforts in order to meet their customer’s expectations. This is also reflected in Government legislation. Larger businesses that fit the requirements for regulations such as ESOS and SECR are now required by law to report on their business's carbon emissions and demonstrate reductions where possible. Expectations are also increasing in the professional arena. For example, one of the top tier banks will only lend to businesses who can demonstrate that their buildings operate at E level efficiency or above.
The journey to absolute carbon neutrality is a long way off for many as issues such as self-generation and battery storage require significant investment and planning. However, as with any significant change, it's far easier to break down into short- and long-term goals, starting with setting out clear and realistic objectives for reducing carbon emissions year on year. To start this journey we recommend that you regularly measure, monitor and analyse your energy consumption, something that can be achieved easily through information from your supplier data (so long as you have HH metering). From here you can set out short and long term strategy that meets your individual business objectives.