Cost concerns limit energy efficiency investment

Energy generators, users, consultants, contractors and many others gathered at the NEC in Birmingham in September to discuss key issues at The Energy Event.

In one seminar at the show entitled ‘Investing in energy efficiency measures’, session chairman and E2B magazine editor Sam Fenwick said that the belief held by the wider population is that energy efficiency is necessary in order to reduce global carbon emissions and slow the effects of climate change.

A United Nations report, published in September, suggested there was conclusive evidence that human energy consumption since the 1950s accounts for 95% of global warming. The harmful gases released have been the cause of many environmental concerns in recent years.

Few technologies that are energy efficient are ever fully implemented within businesses

Bruno Gardner

To tackle climate change, a recent survey conducted by management consultants McKinsey & Co estimated that an investment of $170 billion (£105.6bn) a year into energy efficiency would be needed to reduce global energy demand by the equivalent of over 60 million barrels of oil per day by 2020.

However, when asked what was more important: cost savings or energy efficiency savings, the vast majority of seminars attendees answered, “cost” – with most admitting that the costs of energy efficiency measures are not fully understood or economically viable.

With plant closures and cold snaps predicted by some to send electricity bills soaring by as much as 20%, it is easy to see why concerns over costs could be sufficient for many to take action on the energy efficiency of their plants.

Yet Fenwick and The Carbon Trust’s energy efficiency ventures director Bruno Gardner argued that most energy efficiency measures are not a reality for many companies as potential savings are overshadowed by the costs of implementing these technologies.

“Few technologies that are energy efficient are ever fully implemented within businesses,” said Gardner.

While nobody at the conference made the case for the possible return on investment or the long term value of energy efficiency measures, Gardner pointed to a number of schemes currently in place within the UK that are designed to help businesses and consumers cut costs and save energy.

Across some industry sectors the desire to ‘keep the lights on’ and remain energy efficient is already being taken very seriously

For example, The Department of Energy and Climate Change (DECC) offers businesses Enhanced Capital Allowance (ECA) in an effort to help them reduce energy costs. The ECA scheme allows businesses to claim a 100% first year capital allowance in energy-saving equipment.

Gardner added that companies should properly assess both the costs and how energy efficiency measures work before casting them aside as an inefficient expense they simply cannot afford.

Much of the perceived cost comes from building owners failing to utilise all the benefits of energy efficient facilities, said Gardner, estimating that “40% of the time those [energy efficient] buildings aren’t being used to their full potential”.

If all measures were fully utilised, he said, this could save companies many thousands of pounds every year.

However, across some industry sectors the desire to ‘keep the lights on’ and remain energy efficient is already being taken very seriously.

Northumbrian Water recently upgraded its sewage works in Newton Aycliffe. It chose Atlas Copco screw blower technology to help reduce energy consumption and minimise its service costs.

Northumbrian Water engineer Alan Harle said the upgraded technology had already increased efficiency by up to 20% and the water firm is now planning to upgrade all its blower systems with the Atlas Copco technology.

Even simple measures can be taken within process plants to evaluate overall usage and efficiency. This can be achieved via data analysis taken from an energy logger such as those employed by Mitie.

Mitie engineer Mark Hobbins said that loggers, such as the Tinytag device his company used, “log very specific data, making it a useful tool for energy and power assessments”.

Whatever energy efficiency measure process plant operators opt for, they do so in the knowledge that the cost of energy is only going to one way – upwards – and without investment this will began to have substantial impacts on their bottom lines.  

That is of course unless the Labour Party is successful in its plans to freeze energy prices for 20 months if it wins the 2015 general election.

However, even this move will fail to get firms off the hook of investing in energy efficiency: given the ageing state of UK energy generation and transmission infrastructure, a huge amount of investment is needed to “keep the lights on”; process groups believe a freeze on energy prices will limit that investment and ultimately cause higher prices and possibly unwelcome power outages in the future.