Don’t stay in the dark about energy costs

Obviously I was too young to remember the details of the 1970s energy crisis (of course!!).  This was the time when the world suddenly woke up to how dependent it was on the Middle East and OPEC.  But the time still resonated with me, possibly due to my dad’s pre-occupation with turning off lights in parts of the house when not in use!

Issues such as how far can  the UK insulate itself from international energy shocks and how much of a role renewable energy could play as an alternative to fossil fuels were first raised in the 1970s, but have retained their relevance in the context of debates about climate change and energy security.

Energy bills have risen dramatically in recent years as energy companies hike prices due to higher wholesale costs (underpinned by rising international prices for fossil fuels, particularly gas) and expectations are that further increases are in store.

As energy prices rise disproportionately to other costs, the energy efficiency of corporate real estate portfolios is becoming a key consideration for CRE teams, particularly given the sustained focus on cost cutting or cost avoidance and broader CSR agendas.

So faced with rising costs what can businesses do?

The good news is that there are a number of relatively cost-effective measures businesses can implement to make efficiencies on and drive down the cost of occupancy. A few of these strategies include:

  • Consider switching supplier to save on costs. Bit of a surprise this one – but The Energy Forecaster’s research shows 20% of UK businesses do not have the time or motivation to switch supplier, despite savings. Many are unaware of key information about their utility contracts.
  • Occupiers should consider the energy rating for every new lease that is taken on and the standards being requested from project teams when instructing any refurbishment or redevelopment works.
  • Explore opportunities to negotiate with their landlord(s) for energy efficiency upgrades to the space.
  • Take advantage of the Green Deal, expected to be launched for the commercial sector in late 2013, which will create a new financing framework that offers owners and occupiers of business and domestic property the opportunity to improve energy efficiency, while avoiding upfront costs.

Whilst I do not personally believe we will back to the blackouts of the 1970s and the 3 day week, I do think that controlling energy costs will be of major importance to corporate occupiers over the medium term and as such the issue will rapidly shape the behaviour and strategies of CRE teams.