Treading water?

A new survey in the UK found that that while many companies have invested in energy efficiency, the savings have been erased by the energy prices they are paying.  Andrew Bounds writes in the FT about the situation in the UK.  What it fails to show is what would have happened if those companies had not invested in energy efficiency.  This is far from standing still.

Increase in energy prices wipes out company efficiency savings

Manufacturers have invested heavily in energy efficiency measures but the future of the heaviest users is still threatened by high prices and supply issues, according to EEF, which represents the industry.

A joint survey by the manufacturers association EEF and Npower, the energy supplier, found that about half of companies had changed their lighting and manufacturing processes to reduce energy use.

But Tata Steel, a big Npower customer, said its efficiency savings had been wiped out by price rises. Mark Broxholme, head of its specialist steels division, which supplies the aerospace and automotive sectors, told a business audience at the Cutlers Hall in Sheffield: “In the last three years, I have invested £7m and reduced the bill by £3m. I have just been told the bill is going up by £2.5m next year. I have spent £7m to stand still.”

The division’s total bill was £75m last year, with energy some 42 per cent of its cost base, five times the cost of workers, despite the group halving demand in the last decade.

He said a small facility in the Midlands might have to close because of high energy costs. UK prices were at least 20 per cent above those in Germany and France because of green tariffs he said. As generating capacity dwindles with the mothballing of coal-fired plants and nuclear power stations, tight supply means paying even more at peak times.

Since the division melts scrap metal to produce its high quality steel, it is greener than those producing from scratch, Mr Broxholme said.

Mr Broxholme said some orders had been moved to Thailand because it was cheaper, while Tata’s board could shut its UK plants in Stocksbridge and Rotherham, South Yorkshire.

“The only reason it has not happened is that we have the best quality and capability.”

John Hayward, chief executive of Pressure Technologies, a gas cylinder maker in Sheffield, said he knew of a company that had to wait a year before switching on new machinery because it could not increase its electricity supply

Terry Scuoler, chief executive of EEF, said the government must provide more help to intensive energy users in the budget in March.

Since 2002, the industrial price of gas has increased by 122 per cent, while industrial electricity prices have increased by 94 per cent

Green tariffs alone will add another 70 per cent by 2030

The survey of almost 200 businesses found that one-third of chief executives and managing directors had taken control of energy efficiency decisions. But half cited long payback times for not implementing more measures.

Nic Dakin, Labour MP for Scunthorpe, the site of another large Tata steelmaking plant, said politicians should focus on the cost to business as much as domestic consumers. “Without jobs my constituents won’t be able to pay their bills. It does not make sense to export our jobs to countries such as Ukraine and China.”

Wayne Mitchell, director of industrial and commercial sales and marketing at Npower, said: “Good energy management happens in the boardroom, and with the cost of energy continuing to rise, making strategic decisions with a trusted energy expert can help a business stay competitive.”