The economic case has not been made


With Party Conference season underway, new research from npower shows that business leaders are still unconvinced by the economic case for Government energy policy. The data reveals that 59% of businesses surveyed were ‘not very confident’ or ‘not at all confident’ that current energy policies reflect the needs of business in Britain, while 62% expressed a similar lack of confidence in planned energy policies.  Included amongst the planned policies is the Government’s flagship Electricity Market Reform (EMR), which is designed to help the UK transition to a low-carbon economy.

The findings demonstrate that businesses aren’t willing for their energy bills to increase in order to financially support low carbon energy schemes, such as those proposed through the EMR. 81% of the 600 senior decision makers surveyed ranked affordability as an important energy related issue for their businesses, ahead of security of supply (77%) and the move to a low carbon economy (41%).

Over a quarter (28%) of respondents said their business would not be willing for energy bills to increase at all to help fund low carbon energy schemes. A further 30% said it was ‘unlikely’ that their business would be willing to see their bills increase to help fund these schemes.

The Contracts for Difference (CfD) initiative, for example, guarantees companies with the ability to produce electricity a fixed price for using low carbon technologies. The difference between the wholesale market price and the guaranteed fixed price is paid to those producing the electricity by the Government-owned Low Carbon Contracts Company (LCCC).This comes as a cost to energy suppliers, who must then pass this additional cost on to customers in their energy bills directly impacting the latter’s bottom line. Not surprisingly, when told that Government estimates that CfDs will increase energy bills by 10% by 2020, 73% expressed concern about this.

Wayne Mitchell, head of industrial and commercial at npower, commented: “This survey has revealed just how sceptical businesses are by the effectiveness and impact of energy policies – the very policies that are going to have far-reaching and long-term impacts on their businesses. As political parties consider their energy manifestos, there is a clear case here for Government and the wider energy industry to work together to better educate businesses about the importance of these policy initiatives in securing the UK’s energy future and the competitiveness of UK plc.

“The cost of energy bills remains the key issue for business leaders. That’s why we are committed to working with businesses across a wide range of sectors to help make their energy budgets as affordable as possible. What we focus on is the long term; we work with our customers to drive down consumption by increasing knowledge of the changing policy landscape and implementing energy solutions.”

With energy prices expected to continue increasing over the long term under EMR policy, improved efficiency and demand side management become especially critical. The survey findings come as npower launches The Twenty Per Cent Imperative, which includes guidelines for how UK businesses can cut energy costs. The paper calculates that if the UK’s large businesses put energy reduction initiatives in place now, they could collectively realise annual savings in excess of £4 billion over the next 10 years if energy inflation continues on its current trajectory.

The reality is that bills are increasing and the onus is on energy suppliers and businesses to limit the impact of this. The Twenty Per Cent Imperative report, for example, shows the tangible benefit to a business’ bottom line from making small changes to the way they use energy,” said Mitchell.


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