Extended Expert View: UK Energy Buyers Reducing Energy Consumption

Publication Date	December 2005
Publisher	Datamonitor
Product Type	Report
Pages	19
ISBN Number	not applicable
Product Code	DAT00496

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Summary

Introduction

Recent high and volatile energy prices have produced vocal complaints from energy buyers in the UK. As well as changes to energy contracting, energy consumption reduction is also a viable tool for consumers to reduce their energy operating costs. This Extended Expert View lays out the extent to which UK energy buyers have used consumption reduction targets.

Scope

insight to the economics that have driven energy purchasing in the past
analysis of the motivation of energy buyers in the current environment of high and volatile energy prices
understanding of the current extent of energy consumption reduction targets in the UK

Highlights

Energy buyers have not traditionally taken much time to consider energy consumption reduction as it has historically been cheap, allowing them to deliver year on year cost savings through recontracting alone.

Energy buyers do not have a clear idea about why energy prices and volatility have increased over previous years or who is to blame for these changes. This lack of knowledge leads to indecision on the part of the buyers, giving them no confidence that anything apart from "business as usual" will deliver savings for them.

While energy has historically been cheap, it will not be in the future, which will force energy buyers to look more closely at energy reduction mechanisms such as energy services.

Reasons to Purchase

understand what has motivated energy buyers in previous years
market the importance of energy services to energy managers and buyers
determine the likely agenda of future energy managers and buyers

Content

Chapter 1 Executive Summary

Cheap energy has resulted in little consumption reduction, but sustained high prices should make more buyers set higher targets.

Chapter 2 Uk Energy Buyers Reducing Energy Consumption

Energy will not be cheap in the future and energy buyers face sustained high prices.
In addition, energy will not be cheap in the future with energy buyers facing sustained high prices.
Energy buyers are paralysed when trying to manage price volatility as they have no evidence that anything apart from "business as usual" will be a better option.
MEU buyers have no idea who is to blame for their predicament, reinforcing the hesitation to change buying behaviour.
Only half of all businesses have stated that they have a target for reducing energy consumption within their company.
As energy has been cheap, buyers have only been targeting small reductions in consumption, but high prices should increase targets.

Chapter 3 Appendix

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List Of Tables

Table 1: Industry Classifications

List Of Figures

Figure 1: UK Industrial Gas and Power Prices (1997 Q1 = 100)
Figure 2: UK Gas and Power prices, historical and forward curve at Winter 2005
Figure 3: A typical buyer with a 5m annual spend on power would have found themselves with a 70% higher bill in 2005, based on historical and forward curve pricing.
Figure 4: What action did you take in response to higher energy prices and volatility?
Figure 5: Who do you feel is to blame for the high prices and volatility in the UK energy market?
Figure 6: Do you have a target for energy consumption reduction, either internal or external, for your company?
Figure 7: Total amount of energy consumption within energy consumption reduction targets, by industry