Firms Failing To Budget For Capacity Market

Around half (48%) of firms surveyed in a new report said that they had not budgeted for the impact of a new policy scheme – the capacity market – that will add to their electricity bills next winter.

The finding came as part of the Directors’ Energy Report, published on 24 February by The Energyst. It said that suppliers and third-party intermediaries (TPIs) could need to re-double their engagement efforts on the costs of the new policy, which has been implemented to help ensure the UK avoids blackouts. Without this engagement, it was possible that companies could be left facing “bill shock” over the next 12 months.

Cost is key

The report also sought companies’ views on the issues that were most important to them when it came to buying energy. It found that cost was the key consideration for over three quarters (76%) of respondents, with fewer than one in 10 prioritising environmental concerns (4%) or flexibility (7%).

Similarly, cost was the key factor when influencing energy efficiency investments. Almost six in ten (56%) cited rising energy costs as the reason they would spend more on measures to reduce their energy demand. Just under half of firms (45%) had an allocated capital budget for energy efficiency improvements in 2017, with organisations that spend over £1mn/year more likely to have set aside a dedicated budget (59%).

Demand side technologies

The survey further showed that a majority (53%) of companies were considering taking up demand response opportunities, as part of which firms are offered financial incentives to reduce their energy consumption so as to help balance the system.

Meanwhile, almost all respondents (98%) said that they would buy renewable energy if it did not carry a premium. Although some suppliers offer renewable energy at similar costs to non-renewable, changes to government policy have seen some organisations switch back to conventionally-sourced energy because of “significant cost increases”.

The report provides detailed insights into how businesses are responding to today’s key energy challenges.