While George Osborne may be playing the blame game for the busted cap on renewable energy subsidies, the truth is that successive governments have failed to decarbonise UK plc at the lowest cost. Demand reduction would have been a cheaper option than the support levels afforded to some forms of generation, and should have been supported instead, according to Mervyn Bowden, former head of energy at Marks & Spencer turned energy consultant.
He also thinks that businesses are ill-prepared should the supply-demand balance this winter turn out to be less stable than some predict; and that Esos should have more mandatory elements to force businesses to become more energy efficient.
Only a fraction of firms have an energy risk management plan, said Bowden. “That is severely worrying [given that], if there is going to be a supply demand balance issue, and blackouts, this coming winter is going to be the one.”
More encouragement and support from government is required, Bowden believes.
“Esos is fine but it has no real teeth. The problem is that is has not got enough mandatory elements.”
That lack of bite will force up energy bills as more expensive options are supported, Bowden warns.
“Some of the stuff is so simple and such a no brainer. Successive governments have incentivised renewable energy generation big style, like the crazy subsidies on solar PV at 40 odd pence per kilowatt hour,” Bowden said.
“That money should have gone into reducing demand. Because if you look at the relative returns, even at simple cash payback level, the feed in tariffs are based on a financial return of about 8%. Whereas you can get 50% or more from the right energy efficiency schemes.
“They are virtually in a position where they don’t need subsidising. But I am not quite sure what is going to make some businesses wake up and go down that path.”
Esos for SMEs?
Meanwhile, Bowden thinks that an Esos type scheme should be expanded to capture smaller businesses.
“There are lots of SMEs who are not quite in the energy intensive user category who probably could benefit hugely from taking a more sensible pragmatic view on energy management – but don’t,” he said.
“One of the odd things about Esos is that it goes down to organisations with 250 employees. But what about the organisations below that? They are the ones that really could save an awful lot of money depending on how important energy use is to their overall business.”