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Future energy risks are ‘top threat’ to UK organizations

Energy risk – particularly in terms of security of supply and supply costs - has been identified as the top threat that major business energy users are facing. Added to this, many believe that it is the government’s responsibility to help reduce instability through funding for self generation projects and demand management tools to bridge the supply gap and keep the nation’s lights on.

These were some of the key findings of the npower Business Energy Index (nBEI), an annual report tracking business opinion on energy use, energy risk and carbon emissions, published on 18th July.

According to the report, when asked what was of most concern in relation to energy within their business, supply costs came top with a risk ranking of 6.6 out of 10, followed by security of supply with a ranking of 6.1.

For major energy users, increased regulation in the energy sector, the subsequent impact on reputation, and ambitious carbon reduction targets were identified as other high risk areas that are adding to the challenging picture businesses are facing.

However, despite risks associated with energy being identified as a top concern, one in six major business energy users still do not have a policy in place to manage it – although 91 percent do have one in place for health & safety, a more ‘traditional’ business risk.

David Cockshott, director of industrial and commercial markets at npower comments:

“It is worrying that while businesses have identified that risks associated with energy - from security of supply to cost - pose a real threat to their immediate and future operations, many have admitted to not having a strategy in place to manage it. While many businesses have embraced the benefits of energy management and energy efficiency, when it comes to solutions to manage risk, there is less of a focus from organizations.

“This could be because they don’t believe the two main areas of concern – cost and supply - are something within their control. However, there are ways businesses can mitigate their risk, including investing in self generation or demand management technology.”

However businesses’ attitudes to investing in self generation as a means of shoring up security of supply, paints a picture of disengagement. Despite their concerns over energy risk, nearly two thirds (62 percent) say that investing in self generation and demand management technology is not a business priority. While 51 percent cite lack of finance as a barrier, and 38 percent say they simply do not have the resource to manage the project.

When asked who should finance investment in self generation, 61 percent of businesses of all sizes felt that the government should be responsible – only 18 percent believe it should be self funded.

While the government’s proposed ‘Green Deal’ should go some way to assisting SMEs, it would not provide the same help for larger energy consumers.

David Cockshott continues:

“While this year’s nBEI shows that more easy-to-implement energy efficiency measures and improvements are happening across businesses of all sizes. When it comes to large scale self generation projects or demand management initiatives, there is still some resistance.

“This is despite many businesses highlighting energy risk as their top concern for the foreseeable future. As demand on the grid starts to become a major issue, large energy users in particular will need to look at new ways to manage their energy more intelligently; whether through self generation or through demand management tools such as load management.”

“What is clear, however, is that businesses believe that investment in these areas should come from government. While the government is keen to support smaller companies through initiatives such as the Green Deal, the report shows that larger businesses believe the government should also look at ways to help them. For instance, to mitigate risk and reduce instability through incentivising self generation and demand management tools.”

More details.

•Date: 21st July 2011 • Region: UK •Type: Article • Topic: Enterprise risk management

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