Introduction
From rising energy costs and fluctuating energy prices to understanding complex sustainability reporting requirements and reducing carbon emissions, businesses today face a wide range of energy-related challenges.
For energy-intensive businesses in particular, there is increasing pressure to improve energy efficiency, reduce environmental impact and comply with changing regulations and reporting requirements to stay compliant and protect themselves from risk.
Energy challenges and sustainability are often treated as two separate priorities, but in reality, they go hand in hand. By improving energy efficiency, businesses can reduce their environmental impact whilst also making their operations more cost-effective and resilient.
In this article, we take a look at five of the most common energy challenges faced by businesses and explore practical ways to overcome them with the right knowledge, strategy and support.
Five Common Energy Challenges in Energy-Intensive Businesses and How You Can Overcome Them
For energy-intensive businesses, managing energy effectively is essential to controlling costs and maintaining efficiency. Here are five common energy challenges these businesses face, and practical ways that you can overcome them.
1. Rising Non-Commodity Costs
Energy costs are made up of both wholesale costs (the actual price of energy purchased or used) and non-commodity costs which cover the additional charges associated with supplying and delivering energy, such as network charges, government levies, taxes and other regulatory costs. These non-commodity costs can make up 60-64% of a business’s energy bill, accounting for a significant part of overall energy expenditure.
The non-commodity costs for electricity that businesses are required to pay include:
- Distribution Use of System (DUoS) charges – costs for using the local electricity distribution network
- Transmission Network Use of System (TNUoS) charges – costs associated with using the national electricity transmission network.
- Balancing Services Use of System (BSUoS) charges – costs of balancing electricity supply and demand on the network.
- Capacity Market charges – funding for ensuring there is enough electricity-generation capacity available.
- Feed-in Tariff (FiT) costs – support for eligible renewable and small-scale generation.
- Climate Change Levy (CCL) – a government tax on business energy use, although some businesses can qualify for reductions or exemptions.
- Electricity Market Reform (EMR) costs – charges associated with mechanisms supporting electricity-market security and low-carbon generation.
Non-commodity costs are rising due to a combination of increasing investment in the electricity network, government policy, environmental schemes and the cost of maintaining a secure and reliable energy system. As the UK transitions towards a lower-carbon future, significant investment is needed to upgrade and expand electricity networks to be able to support increased renewable energy generation. These costs are recovered through a range of non-commodity charges, meaning businesses can see higher charges on their energy bills even when wholesale energy prices fall.
Whilst some non-commodity charges are fixed or site-based, others are linked to consumption, capacity or usage patterns. Businesses can still reduce the amount they pay towards certain charges by lowering their overall energy consumption through energy efficiency measures and better energy management.
2. Volatile Energy Costs
The British Chamber of Commerce found that over a quarter of businesses struggled to manage their energy bills and, for many of them, the unpredictability of energy costs places pressure on budgets and can make it difficult to allocate adequate funds to energy use.
Energy markets are volatile by nature, with factors such as supply and demand, geopolitical events and weather patterns all having an impact on the wholesale price of energy. For businesses on flexible plans, this volatility can have a huge knock-on effect on budgets and energy security.
To reduce the impact of volatile energy costs there are several steps businesses can take to protect themselves.
By choosing the right energy contract, your business can gain greater control over the amount you pay for your energy and reduce the impact of energy price increases.
Fixed-rate contracts can provide more certainty by locking in an agreed unit price for a set period, whilst flexible purchasing strategies can allow larger businesses to take advantage of market movements. The right approach will depend on your energy consumption, risk appetite and budget requirements.
Businesses should also take steps to improve their energy efficiency, as reducing the amount of energy you use is one of the most effective ways to reduce exposure to rising energy prices. Reviewing equipment, heating and cooling systems, lighting and production processes can help identify areas where energy consumption can be reduced without affecting productivity.
Switching to renewable energy is another effective way to protect your business against price volatility, by shifting your reliance away from the grid. Generating your own energy on site can help provide greater certainty over your energy costs whilst reducing your dependence on fossil fuels and lowering your carbon emissions. Over time, investing in renewable energy can therefore support both your sustainability goals and your long-term financial resilience.
Ultimately, although businesses cannot control the wider energy market, they can control how exposed they are to it by developing the right strategy with a combination of procurement strategy and energy efficiency.
3. Complying with Reporting Requirements
Sustainability and energy reporting, such as ESOS and SECR, is a large part of staying compliant for many businesses, and with regulations being tightened year-on-year, staying on top of reporting commitments can present a challenge, especially for energy-intensive businesses. Certain businesses may also face additional reporting obligations, such as TCFD or PPN 006, making it even more important to have a clear and consistent approach to managing energy and emissions data.
Non-compliance in sustainability reporting can result in hefty fines and other penalties, as well as reputational damage. So, ensuring you have the right processes in place can help make compliance more manageable and give you a better understanding of your overall energy performance.
One of the simplest ways to stay organised is to create a reporting calendar so you can keep track of key deadlines and any information that needs to be submitted throughout the year. This gives you plenty of time to gather the necessary data before a deadline approaches.
It’s also important to make tracking and recording energy use and emissions a regular practice, rather than something that only happens when a report is due. Regular monitoring and outlining clear roles and responsibilities makes it easier to identify changes, spot inefficiencies and ensure the data you need is organised and available.
By treating sustainability reporting as an ongoing process rather than a once-a-year task, you can reduce the risk of non-compliance and make better-informed decisions about your energy strategy.
4. High Carbon Emissions
For energy-intensive businesses, managing carbon emissions can be a major challenge. Higher levels of energy consumption typically mean higher emissions, meaning understanding and actively managing your carbon footprint is essential.
Consumers, stakeholders and regulatory bodies are looking at carbon emissions with more scrutiny and placing greater emphasis on businesses taking responsibility for their environmental impact. As a result, reducing emissions is becoming an increasingly important part of corporate social responsibility (CSR).
A key challenge is understanding the full extent of your business’s emissions. Whilst most businesses are able to track Scope 1 and 2 emissions without too much trouble, Scope 3 emissions can make up a significant proportion of an organisation’s overall carbon footprint. These can include emissions from purchased goods and services, transportation, business travel and other activities across the supply chain. Understanding where these emissions come from is essential for businesses looking to reduce their overall impact.
One of the best ways to address this is to develop a clear carbon reduction plan. Start by establishing a baseline of your current emissions and identifying the biggest sources of carbon in your operations, then set realistic targets broken down into achievable steps. Aspects of your carbon reduction plan may include; building and equipment upgrades, switching to renewable energy, working with suppliers to reduce emissions throughout your supply chain and bringing the rest of your team on board to tackle energy waste and increase efficiency.
5. Lack of Energy Resource and Specialist Knowledge
For many businesses, a lack of dedicated resource and energy expertise can make effectively managing energy use more difficult. Energy management is often seen as a secondary responsibility, with staff focusing on their day-to-day roles rather than monitoring energy consumption, identifying inefficiencies or developing long-term reduction strategies. This can make it difficult for businesses to understand where and when their energy is being used, what their biggest sources of carbon emissions are and where the greatest opportunities for savings can be found.
Simple steps such as implementing submetering and an energy management system, carrying out regular energy audits, assigning responsibility for energy management, and developing an energy reduction plan can help businesses make more informed decisions.
A lack of knowledge and data can also prevent businesses from making the savviest decisions when it comes to energy technologies, funding opportunities and monitoring methods. For example, some businesses may be unaware of how much they could save through energy-efficient equipment, improved heating and cooling systems, building improvements, solar generation or smarter energy management systems. Without accurate data and regular monitoring, it can also be difficult to measure the impact of any changes that have already been made, making it harder to justify the cost of new investments.
Working with an expert consultancy can help businesses overcome this by providing them with dedicated resource, expertise and tools. Professional energy support can help your business identify cost-effective improvements and develop a clear strategy for achieving your energy and carbon reduction goals.
How Can Consultus Sustainability Help Your Business Overcome These Energy Challenges?
At Consultus Sustainability, we have a range of services designed to help your business overcome the challenges that come with running energy-intensive operations.
Rising Non-Commodity Costs & Volatile Energy Prices
Although you cannot directly control all energy price increases, it is possible to mitigate their effects with the right support and guidance. Consultus Sustainability offers a range of tools and services that can help you reduce your energy use and take control of your energy costs.
For support with energy procurement and risk management, Consultus International can help businesses navigate complex energy markets, manage exposure to price volatility and develop procurement strategies to suit your business goals. From market insights to purchasing at the right time and under the right terms, our specialist team can provide the expertise and guidance you need to make more informed energy decisions.
Our sister brand, Ennovus Solutions, can also help you further reduce the impact of rising costs, by helping you take your energy into your own hands with renewable technology installations, including wind turbines, solar panels and battery storage.
Complying with Reporting Requirements
The Consultus Sustainability team can help your business stay on top of your sustainability reporting including ESOS, SECR and Scope 3 reporting, helping you to collect high-quality data that not only helps you stay compliant, but can also be used to inform your wider sustainability strategy.
High Carbon Emissions
Our Net Zero Pathway service is designed to help make reaching your sustainability goals achievable and measurable. By assessing your current carbon emissions and setting out clear, practical actions, the service provides a structured roadmap to reduce emissions and support your journey towards net zero.
Lack of Energy Resource and Specialist Knowledge
When you partner with Consultus Sustainability, your business is in good hands! Our team of experts can work with you to fully understand the challenges your business is facing and fill any gaps in your in-house capabilities.
We are part of a wider group; Consultus International, who’s knowledge and service offerings span all areas of energy management, across multiple business divisions including:
- Utility connections with Connectus Utilities
- Energy procurement and risk management with Consultus International
- Sustainability and compliance with Consultus Sustainability
- Renewable energy, energy efficiency technology and energy audits with Ennovus Solutions
Ready to tackle your business energy challenges? Get in touch with our team today to find out more and discuss your options
