Cost, carbon and resilience: How to protect business finances from the “energy trilemma”

Last updated: 31st October 2022

In a recent independent survey and series of 1-2-1 interviews with businesses spending more than £20 million per year on energy, it was revealed that energy has recently replaced Covid as the top business concern.

Energy is now a board-level concern for more than 80% of businesses surveyed, showing the impact that the global energy crisis is having on businesses.

Not only are rising energy costs a major pressure point, but there are also key considerations to be made about carbon emissions and the resilience of supply, known as the “energy trilemma”. In recent years, decarbonisation has moved up the agenda for businesses and as we become more reliant on energy, there is a good chance of demand exceeding supply. Five to 10 years ago, this trifecta of energy problems pulled in different directions at different concern level. Now, however, they are all pulling in the same direction and need equal consideration and planning by organisations.

Organisations need to have a deep understanding of their buildings’ energy consumption, where the energy is purchased (hedge or wholesale), how it is generated, and future energy use including how plans to expand may impact that. This will allow firms to make the best tariff decisions and will also provide better data to inform operationally and financially strategic business decisions.

It is no surprise that the current climate has propelled energy efficiency and cost reduction to a boardroom level top priority for eight out of 10 companies. Nearly three in five businesses (58%) are increasing energy efficiency to manage risk, and this rises significantly to 84% of businesses when considering those that spend more than £2 million on energy.

The increase in energy costs over the past two years have been the most significant since the 1970s and forecasts predict that energy prices in 2022 will end up 50% higher than last year. This is despite energy prices nearly tripling in 2021. A minimal 12% reduction is expected in 2023, but high levels are expected throughout 2024.

A guide for finding long-term energy crisis solutions

These are sobering predictions, and with the energy trilemma of cost, carbon and resilience pulling in the same direction, the futures of many organisations will be at stake. Having an effective energy management system is critical to controlling and reducing the amount of energy a business uses, reducing cost, risk and carbon emissions.

Although the £25 billion support package for UK businesses is a welcome measure from the government, it is a short-term solution to a long-term problem and once the support has finished, financial directors will once again find themselves under pressure to make business energy savings.

To simplify the process of identifying long-term energy efficiency measures in buildings for executives, consultants at IES have developed a four-stage roadmap which will improve energy usage within premises and make bill savings of at least 20%.

The IES Guide to Reducing Business Energy Costs involves understanding consumption, identifying room for improvement, setting up remote energy monitoring and considering bigger building investments.

Using this guide, organisations will be able to overcome rising energy costs while also aligning with climate and ESG commitments. Focusing on energy efficiency as soon as possible will also future-proof buildings for possible future efficiency legislation that addresses the root issue of sky-high energy costs and climate change.

The energy trilemma is a serious business concern for board-level executives, especially those tasked with balancing the books and shaping environmental strategy. IES’s energy crisis solutions are a map to guide through troubled, largely unprecedented waters and we are proud to be able to support business owners and financial directors as they navigate this crisis.

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