A growing number of businesses in the UK are either switching to renewables tariffs or deploying clean energy generators on-site, driven largely by politics and CSR agendas.
Having last week warned that UK businesses are “missing out” on the benefits of renewables, SmartestEnergy chief executive Robert Groves talks to Clean Energy News about the main drivers behind adopting renewables, and the importance for businesses to stay one step ahead of both their competitors and a future hike in oil prices.
How do you feel companies are missing out on renewables?
The politics leads to the economics from a renewable perspective, and that’s all part of the global agenda. Governments have to reduce the amount of greenhouse gases that we’re putting into the atmosphere and businesses are now following. If we look across the world we can see groups such as the Renewable Energy 100, which are a group of global brands like BMW, Nike, Google, Unilever that have made a commitment to power their global operations with 100% renewable electricity. They’re doing that because it’s good for their business, it’s good for their brand and it’s good for positioning themselves in the market place and creating a competitive advantage for them against the companies that don’t.
In the UK we’re slightly behind that. If you look at FTSE100 companies only about 30 or 40% of them are using renewable electricity. We’ve said we think they’re missing a trick, and have given them the example of four of our customers who do procure renewable power, and they do that because it creates a competitive advantage for them in the market place. It differentiates them from their competitors. That’s the main reason why companies should, from a business perspective, procure renewable power to drive their bottom line.
How much has the COP21 been a driver for greater procurement of renewables?
Politics is playing a central, pivotal role in the way we generate and consume electricity. Businesses will, as regulations change, be forced to change the way they consume and produce power. That’s happening already. But the leaders are ahead of the pack and they’re making the decision to switch to a renewable, more sustainable future ahead of those regulations. Although governments are sending very strong signals about what companies should do in terms of increased carbon reporting, the real driver here is businesses making the decision that they’ll have to do it sooner or later so we may as well do it now.
Is that being driven at least in part by schemes such as ESOS and carbon reporting reforms?
They’re all having an effect and they’re building up this background noise which is convincing the boards of companies that they should make this big decision.
How has the financial feasibility of renewables been affected by subsidy cuts?
They have been affected from a UK perspective. Amber Rudd, the secretary of state, called it her ‘reset speech’ and in that the repositioning of government policy to reduce the amount of subsidy going towards renewables has had a significant impact, particularly with PV and onshore wind. But the medium to long-term picture is that globally, these technologies are coming down their cost-curve so quickly that we’re not far off a future when onshore wind and PV are viable without a subsidy. I think the long-term direction of travel is still towards these technologies, I just think we’ve had a short-term delay as the amount of subsidy is withdrawn.
As the wholesale energy prices have fallen, do you think this difficulty in being able to forecast that is having an impact on companies being willing to embrace renewables?
Those prices are very low and are primarily being driven by a low oil price, but don’t forget that we still have the most expensive energy prices in Europe. I want to caveat that by saying that an energy price is not necessarily the end price a consumer pays – German customers pay much higher end prices than we do in the UK – but that aside, consumers in the UK are enjoying low energy prices as a result of that oil price, and that’s taken the heat off them a little bit. It’s removed the need for them to think about energy as much as they would do otherwise.
Oil will bounce back, it will go up and the tariffs that are put on top of the energy prices to pay for all the subsidies that are paid under the electricity are going up and up in the long-term. In the medium to long-term the energy price is going to be a lot higher, and the end price is going to be higher as well. Companies need to think about that and they need to think about how they reduce the amount of energy they consume, and how they might even produce it themselves.
Does that lend weight to the popularity of power purchase agreements that have been becoming more prevalent?
I think we’re going to see more and more mainstream businesses that haven’t had that traditional focus on their energy costs start to look at it as soon as we start to enter in that future wherein the oil price bounces back, and we get higher tariffs pushing up bills to a higher level than they’ve ever been before.
What are the main barriers to companies sourcing their energy from renewables?
Probably inertia, because there are lots of companies that supply renewable power and I think the key issue is to get it as a higher agenda on the boards of these companies.
Do you feel there’s insecurity or a lack of knowledge around renewables at the board level?
I think there is that. I think a board, when it makes a decision about its energy procurement, is going to look at the bottom line first and foremost and purchasing renewable energy is slightly more expensive than brown or grid energy. If a business is looking at it from just a bottom line perspective of how much will this renewable energy cost versus a non-renewable supply, then it’s a tough decision to make. Those companies have to look slightly further ahead, anticipate what the future might be and make that leap forward.
How do you foresee this market taking off in the UK?
I think it will take off. We launched our supply business in 2008 and since then it’s grown to be – in volume terms – the ninth largest electricity business in Britain. That’s purely on the back of demand for non-premium priced renewable power. There is demand out there, and it’s increasing.