Your business will very likely pay a higher energy price next year.
But this blog is not about debating when, whether or by how much prices will rise. If you would like to discuss our views, please contact us. This blog is about two simple facts, illustrated by the two graphs below:
Chart 1: EU carbon prices (€ per metric ton)
Chart 2: Energy Intensity (kilogram of oil equivalent per thousand EUR)
Chart 1 shows EU carbon prices, or more precisely the price of European Emission Allowances (EUAs). Most of you have probably seen this chart, but you may not know that as of Jan. 1, 2019 a new regulatory reform came into force, knows as the Market Stability Reserve (MSR). The MSR is aimed at providing price stability by removing allowances from market auctions if the number of allowances in circulation is above 833 mt, and reintroduce them to auction if it falls below 400 mt. In short, carbon prices now have an implicit floor balanced by the MSR, which means energy prices in carbon-heavy economies are unlikely to fall.
Chart 2 shows that Poland ranks among the top 5 highest energy intensity countries in the EU, very far above the largest European economies of Germany, UK, France, Italy. Polish businesses use 2 kWhr of energy for every Euro of GDP generated, while businesses in Germany, or France use half as much. Even more surprisingly, Poland’s energy intensity is more comparable to the energy intensity of much smaller economies (Bulgaria, Czech Republic, Hungary).
Why is this important?
EU carbon prices will continue to have a very significant impact on Polish energy prices because Poland relies on coal (the most carbon unfriendly fuel) for more than 80% of its energy generation. You, as a business owner, cannot change much of that.
You can, however, change the energy intensity of your business. There are multiple inefficiencies in your business that can be improved and can help you reduce the amount of energy you consume. And that will make your business more competitive with businesses from Germany, or UK, or Italy…Wondering how you can do that? Read some customer stories below.
One of our clients is an operator of retail shopping facilities. The facility’s monthly electricity bill does not offer any details about the energy consumption of the individual areas of their operation. With the help of Energy Intelligence, the facility director spotted major energy consumption in the parking garage during the night, when there are no visitors. After some due diligence, the facility’s engineers discovered that the issue was a large neon light, which was consuming excessively large amount of energy and needs to be replaced.
A second customer is the owner of a holiday resort who was looking for solutions for reducing its energy consumption given recent steep energy price increases. The owner was also keen to build resiliency against power outages given the resort’s remote location. By using Energy Intelligence the resort’s owner was able to find the optimal size photovoltaic system to meet the resort’s constant energy needs during the day. More importantly, 3-D Energy’s real-time consumption analytics showed the owner that he needs battery storage to cut the business’ daily consumption peaks. This significantly reduced the resort’s energy intensity.
A third client in the manufacturing sector just signed a new energy contract for 2020 at a much higher rate than in 2019. Given the reality of the new energy prices, the manager was looking for ways to reduce the factory’s energy intensity. Energy Intelligence identified that in a typical manufacturing shift, factory staff starts operating two of the major energy consuming production lines within an hour of each other. Due to this overlap, there was a major spike of energy consumption, which several times caused the facility to exceed its energy contract limit with the utility and pay penalties. Factory management is now considering adjusting their production shifts to operate the production lines sequentially to avoid unexpected energy consumption spikes.
The energy intensity of your business can make a real difference to your company’s profitability and competitiveness. There are many things you can do to change that – and Energy Intelligence can provide you with simple but effective tools to optimize the energy consumption profile of your business.