ENERGY LOOMING ENERGY CRUNCH
IN NEXT FIVE YEARS Shamir Jiwa, Managing Director of MAXIM Eyes energy consultants
A
looming energy crisis will hit the UK within the next five years, warns energy regulator Ofgem, and businesses and households can expect a
series of price hikes as demand out strips local resources.
With the demand for gas soaring, supplies are dwindling and the UKs dependency on imported energy products will affect the consumer across the country, unless action is taken soon. The looming energy crunch is fuelled by the need for many of our polluting coal fired power stations to close, due to their inability to meet stringent energy and environmental targets, with the only real alternative, nuclear, being far from in favour. With four Power Stations due to be shut and disconnected from the grid, demand is still flat out, showing no signs of slowing down. With fewer Power Stations to rely upon in severe winters when demand spikes, the capacity safety margins are feared to shrink from 15% now, to 4% within 3 years. It is further feared that the UK may miss out in the race to secure imported stocks, struggling against the growing demands from countries like China. Ofgem also warn of the continued threat of price rises and by 2015/2016 one in twelve businesses will potentially be affected by blackouts, with the larger manufacturing companies being affected first.
Electricity in the U.K. will cost twice as much as in Germany by May 2015, as Britain lags behind in building solar and wind plants, with UK power being 85% more expensive than in Europe’s energy market by that date. Whilst Germany is the largest European producer of wind
and solar power, boosting its share of renewably sourced energy to 35% in 2015, from 22% last year, the UK is failing to keep up, showing only an increase from 11% to 15% over the same period. It is anticipated that power in the UK will cost as much as £53 ($83) a megawatt- hour by early 2015, whilst in Germany a mega-watt hour will cost €33 ($44) by comparison.
With the UK building less renewable methods of producing power than that of our European neighbours, what does the future hold? Has the government’s u-turn on the Feed In Tariff (FIT) on Solar caused a widening of this energy gap? Is the UK able to close that gap in the coming years? Many of the larger energy companies are energy producers and sustainable power from sun, wind and wave is very much part of their future plans. Solar without doubt is the cleanest and purest form of generated power, however the cut back in the FIT means it is less attractive as a way of generating revenue, but it is still a sound alternative for producing power for own use. Creating power for own consumption it is still a strong alternative to being dependent upon the grid and with payback on investment coming in 6 to 10 years, solar can form an integral part of any future-proof energy strategy. Entrepreneurs and business leaders are the types of visionaries the UK needs to lead the charge to close the energy gap between the UK and Europe. Green power and new technology projects will work and can make a difference. Energy projects such as wind farms, tidal farms and solar farms can create the increase in power generation that the UK needs. The technology is available and is very
Shamir Jiwa is founder and Managing Director of MAXIM Eyes (UK) Ltd – Energy Consultants & Connections Specialists. An entrepreneur and philanthropist with a keen interest in the well being of global society, the Maxim Eyes concept is to take a 360 degree view of any company’s energy strategy, identify where the gaps may be and create solutions to collectively fill the gaps. MAXIM Eyes works with corporate clients in over 4000 locations across the UK.
PUBLIC SECTOR SUSTAINABILITY • VOLUME 3 ISSUE 5
efficient, the skills and the contacts in the energy sector are second to none. What is missing is funding and entrepreneurs to make a leap of faith and see that these are the next options for British business. What other measures can be taken to reduce costs? The first measure is to be less dependent upon the grid, which is where the major cost increases will come from. Generating power for own consumption is the second most proactive step one can take, with packages available for most sizes of businesses in the UK. Managing waste and how energy is used is crucial to reducing overall costs, with every business in the UK capable of making reductions, whilst putting measures in place to be more efficient consumers. Creating a long term purchasing plan is vital in ensuring energy prices are fixed and immune to price rises. Energy brokers are capable of securing 5 year fixed price tariffs and many at the similar rates as one year fixed tariffs. Working towards being carbon neutral is another consideration and in many cases businesses or institutions in the UK can achieve this comfortably within 10-15 years. What are the possibilities in the UK for new energy sources such as shale gas? The conservative estimate is that the natural gas reserves on Planet earth are expected to last 63.6 years (Reserves to Production ratio according to BP) but those figures could be significantly improved with the introduction of Shale Gas. While many see this as a silver bullet solution, nobody quite knows what the cost of extraction is going to be and, more to the point, what the cost to the consumer will be. And whilst fracking, the extraction of gas from shale is seen by many as being disruptive to the environment, already 50% of BP’s gas extraction uses fracking techniques. Such is the appeal of Shale Gas, Centrica, the owner of British Gas, is investing £160 million into the exploration
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