UK businesses could cut £4bn from their energy bills by investing in energy efficiency according to British Gas business boss Gab Barbaro. But he says they must think longer term to realise the prize.
“UK businesses spend £20bn [on energy],” said Barbaro. “There is a 10-20% energy efficiency opportunity they can realise. That is a £2bn – £4bn profit opportunity for businesses.”
Procurement departments have excelled in extracting value from supply contracts, said Barbaro. “But if we focus [purely] on commodity cost, then we miss that opportunity.”
Speaking at the Energy Live conference in London, Barbaro pointed to earlier predictions by Frontier Economics that power prices will rise 5-10% over the next 12 months due to Sterling’s fall.
“If prices are going up, the best way to manage that is to take control of their usage. It is a lot more rewarding and a better investment than trying to predict the commodity cycle, which will go up and down,” said Barbaro.
“Business users have done a great job through procurement teams of managing down pricing. But in reality, the huge value is taking control of your assets,” he added.
“The amount of incentives that are beginning to develop now, through distribution networks, National Grid, government – a lot is unaddressed.”
Barbaro said energy efficiency and broader services was a ‘no regret’ opportunity both for business and for British Gas, which is spending heavily to scale its energy services business.
He said customers win because as well as “ten to twenty percent” bill savings through energy efficiency, they can generate revenue by exporting excess power. Meanwhile, he admitted, providers make higher profits.
“The margins energy suppliers make on industrial and commercial customers are very thin, sometimes negative,” said Barbaro. “But the margins that can be made on energy services [are better] and another benefit is that you end up with a more engaged customer.”
SSE chief executive Alistair Phillips-Davies was speaking alongside Barbaro. He confirmed the view that prices would rise.
“On prices, people in this room are going to be facing some issues. Short-term electricity prices for balancing this winter are up 40-70%; gas prices are up 15-20%; coal prices are up strongly, driven by mixture of currency and some scarcity issues,” said Phillips-Davis.
“That is something people must consider carefully when managing their hedging costs.”