Opportunity knocks for green energy procurement, says M&S

Speaking to edie ahead of his appearance at edie’s brand new Sustainability Live Conference in April, Patellaro said the UK wholesale energy market is well-balanced for businesses to go from brown (fossil fuels) to green (renewables) with their energy contracts.

“If a business wants a renewable supply agreement for electricity, the market is not pricing in a green premium above and beyond Climate Change Levy (CCL),” explained Patellaro. “That’s where we are at the moment and we’ve been in this position since the credit crunch.

“It doesn’t make a difference in terms of cost to serve – whether you have a brown or green supply agreement, the cost is the same. So businesses should green their supply. And there are clear benefits, both environmentally because of the reduction in carbon emissions, and financially as well, through carbon credits.”

Aiming high

The CCL is a tax on UK business energy use, charged at the time of supply. Generally, business energy suppliers will offer a cost-neutral green option – if an organisation is liable for CCL but uses green energy then it will not have to pay the CCL premium (currently 0.524p/kWh for electricity). So, if the energy supplier applies a green energy uplift of the same CCL premium rate, a business is essentially getting green energy at no additional cost.

M&S has an ongoing commitment to source 100% of its electricity for its buildings in the UK and Ireland, with 50% sourced from small-scale renewable sources by 2020.

Earlier this month, edie reported that the retailer had completed the installation of the UK’s largest single-roof-mounted solar panel array at its distribution centre in Castle Donington. The 24,272 PV panel system, which covers the site’s 900,000 sq.ft roof, was delivered through a Power Purchase Agreement (PPA) between M&S and leading infrastructure specialist Amber Infrastructure. The PPA runs for 20 years, with commitment from M&S to purchase all the electricity generated by the solar panels.

“Castle Donnington was a huge success in terms of rooftop on-site generation,” added Patellaro. “That form of on-site generation is highly beneficial in terms of the return. It is a third-party funded renewable asset which essentially allows us to de-risk financially and operationally from the project but reap the financial benefits that come out of the PPA.”

Mitigating costs

Patellaro, who has worked with M&S for more than five years, said the Castle Donington project was a prime example of a business having to adapt to new regulations, new policies and fluctuating price risks during the development of a renewable energy project.

“It was a two-year project that initially wasn’t paying off because the cost of the panels was excessive to the developers, but we had a number of regressions through financial incentives from the Government.

“We had new legislation come in around the anti-dumping tax by the EU which essentially made the sourcing of Chinese panels more expensive. It was an illustration that legislation, regulation, policy keeps changing and as an organisation you have to keep abreast, you have to try and mitigate these potential costs.

“The National Grid recently claimed that energy prices would rise by 100% within the next 20 years, so costs will inevitably rise. One of the ways to mitigate that in the long-term is through on-site generation.”

When asked for his key piece of advice for other energy procurement managers, Patellaro responded: “It’s extremely important that you get the framework of a supply agreement right. If you’re going for long-term supply agreement, you must also have the necessary clauses in place that will allow you to benefit from instruments that the market might develop; in order for you to use those instruments and mitigate price risk.

“My final point to make is that there is no additional cost to going green on electricity, so all businesses should be doing it.”

Gio Patellaro at Sustainability Live 2015

Gio Patellaro will be speaking at edie’s brand new high-level Conference as part of Sustainability Live 2015 in April. In a session titled ‘Energy – the bottom line: use less, make your own, buy smarter’, Patellaro will discuss the three main routes to energy cost reduction: using less, on-site generation and smarter procurement strategies.

Find out more and register to attend Sustainability Live 2015 for FREE here.

Luke Nicholls