The government’s Clean Growth Strategy (CGS) promotes growing our national income while ensuring an affordable energy supply for businesses and consumers, as well as cutting greenhouse gas emissions. It also encourages energy savings by increasing efficiencies which, in turn, reduces CO2 emissions and saves businesses money.
Yet, energy is a significant cost for any business and with price volatility in the market, it can be difficult for organisations to accurately budget their energy spend. This is not the only factor to consider when assessing energy costs. Non-energy, or third party costs, make up 60% of any electricity bill, so it’s imperative that businesses are reducing these where possible.
Each winter season (running from November to the end of February), the National Grid identifies the three half-hour periods – called Triads – with the highest system demand. These Triads are then used to calculate Transmission Network Use of System (TNUoS) charges for medium and large-sized businesses. Traditionally businesses have been able to reduce their consumption or rely on other energy sources during these peak times in order to reduce third party costs. In the near future, with the proposed changes in Ofgem’s Targeted Charging Review to the way energy charges are applied, business will find it harder to achieve cost savings by reducing consumption in the traditional peak periods. This means businesses can no longer plan to reduce consumption via Triad avoidance, leading to increased TNUoS payments.
There are also other factors driving rising energy costs, which makes it imperative for organisations to find ways to both reduce consumption and save money. But how can they achieve this? What can businesses to do to start treating energy as a source of savings and revenue rather than an overhead?
Driving revenue through demand side response (DSR)
One way in which organisations can convert their energy from a bill into an additional income stream is through schemes such as DSR, which reward businesses for switching their electricity use at times of system stress on the National Grid.
The rewards increase according to how rapidly a business can switch its electricity use to other sources, such as its own battery storage, or simply reducing consumption. These rewards can be payments from the National Grid or the organisation’s electricity supplier through a Wholesale Market Access product. Either way, the consumer benefits from reduced energy costs through flexible consumption.
With the Carbon Trust estimating that a 20% cut in a large retailers’ energy costs represents the same bottom-line benefit as a 5% increase in sales, it makes sense to look at solutions such as DSR for businesses to protect their bottom line.
It’s not just about saving costs. It’s about intelligent energy use — shifting power usage at peak demand times and getting paid to switch power off or reduce consumption. Accessing DSR solutions can be complicated and time consuming, which is why businesses should seek the support of their energy supplier. With the right support and guidance, businesses can use energy as an additional revenue stream and maximise this for their own competitive advantage.