Our research identified six recommendations for businesses who are interested in exploring decentralised energy as a strategy to secure supply and reduce costs and emissions to gain competitive advantage:
Step 1: Step back
Before adopting decentralised energy, you should review the organisation’s annual energy bill and consider its significance in terms of profits. Requesting projections for the next three to five years will also allow you to assess the longer-term impact of energy prices.
Since 2005, UK businesses have seen a six per cent average annual increase in electricity prices. This is having a serious bottom line impact which, given the current market outlook, is only like to become worse unless managed more strategically.
Step 2: Find the right location
There are a growing number of decentralised energy technologies and each requires different site requirement.
Whether you are using anaerobic digestion, biomass CHP, solar or wind, identifying a feasible site is essential.
An evaluation of each site will need to be carried out to ensure it is applicable to the intended technology.
Step 3: Check out the technology
As well as identifying which sites would be suitable for different technologies, CFOs must consider the technologies that would be suitable for their business.
Different organisations have different needs and whether yours is a business with one site or a business with multiple use sites, you will need to select the right technology carefully.
Solar energy might work well for a large retail complex, while CHP can often work better for fast moving consumer goods businesses, for example.
Step 4: Ensure it fits
Understanding the stability and contribution of Renewable Obligation Certificates (ROCs) Feed-in Tariffs (FiTs) and taxes can make or break the business case. Having determined the most suitable sites and technologies, you should ensure they include relevant Government incentives when developing their energy strategy.
For example, electricity generation of fewer than five megawatts is eligible for government FITs, providing guaranteed payments for the next 20 years for the generation of electricity from renewable sources.
Meanwhile, for larger electricity generation units, ROCs can be claimed that carry a market value and can be sold to utilities. The advent of the Energy Bill will add further complexities in understanding the evolving mechanisms for FiT CfD’s and their implications.
Either way, each provides a potential benefit that requires the necessary due diligence.
Step 5: Safeguard yourself
As one of the less well-understood sources of energy, it is not surprising that CFOs are often cautious when deciding to invest in decentralised solutions.
It sounds simple but you should always request case studies from your implementation partner. Though many firms have now completed successful deployments, it is still important to see the tangible evidence.
Furthermore, such proof points can be invaluable when it comes to wider internal sign-off.
Step 6: Take it to the top
Most importantly, board-level involvement is essential to seriously progress any energy strategy. As long as the procurement of energy remains to be seen as predominantly a procurement issue, and not as a strategic level investment decision, the decentralised energy opportunity will not be fully realised.
To safeguard against the impact of changes to their energy supply, UK businesses need to realise that energy procurement needs to be on the agenda of every board.
Now is the time to take stock and consider the likely implications, and volatility of the market, before it has the ability to change the way business operates altogether.