How to keep net zero momentum during the energy crisis
“With very little sign that the cost pressures are easing, what is the impact of this uncertainty?”, asks Anthony Ainsworth, Chief Operating Officer at npower Business Solutions.
This was the key question we wanted to address in our Business Energy Tracker 1 report - a major piece of research where over 200 large organisations told us the real impact the UK energy crisis is having on their confidence to invest, particularly in the crucial measures that will help the UK meet its net zero target.
The findings from the report are clear - 77% of respondents say energy is now their biggest business risk and that it is a board-level concern for 8 out of 10 organisations. As a result, despite an organisation’s best intentions, there is a concern that it could be a case of ‘survival first, net zero second’.
Firstly the good news. Are businesses still backing net zero? Broadly, yes, they are, with many seeing the benefits of adopting robust and long-term sustainability strategies.
Two thirds (67%) of businesses believe that net zero by 2050 is achievable, although this is down from 75% when we asked the same question in 2020 as part of our Your Business Blueprint - the Road to Net Zero report.
Nearly three quarters (72%) also say that they feel clear on the role they can play in the transition, with the same number believing that their business will benefit. When asked about the main positives of embedding a more sustainable approach, greater resiliency through saving money and carbon is seen as the top benefit for a third (33%), while one in five (20%) believe there would be reputational benefits. One in eight (12%) also believe that a strong approach to net zero will help them attract the next generation of talent.
However, the cost of funding the transition is a major concern, with a huge 93% saying they were very or a little concerned about the potential economic impact on their business. Many industrial and commercial companies have already made great strides in lowering their emissions, and now they are being asked to do even more at a time when budgets are stretched.
That is why it is so important that businesses have the right support mechanisms in place and clear policy direction to help them deliver on their own decarbonisation objectives, survive the current energy crisis, and help them become more resilient in the long term.
How can you reduce energy risk and keep net zero on track?
Despite the challenging environment, our report revealed that many organisations are taking a proactive approach to combat the current crisis by increasing their focus on low-carbon measures. More than half (55%) say that sustainability measures would be their most important investment priority over the next 12 months
So, when it comes to reducing risk and increasing sustainability, there are several steps businesses can take.
- Get a handle on your data - Understanding exactly where and how you are using energy is crucial to reducing both costs and carbon. A sophisticated energy management system will help you monitor power and gas consumption throughout your organisation – and the related emissions. Depending on the nature of your business, sub-metering can also help to provide more granular detail about specific energy uses, such as machinery, lighting, or temperature control. Businesses are seeing the value in using smart energy management technologies - the report revealed that 40% are already using them, and a further 39% are planning to install them. When it comes to an effective net zero strategy, data really is king.
- Maximise energy efficiency - It goes without saying that the less energy you use, the less you will pay. Energy efficiency was highlighted in the report as the top tactic organisations were taking to reduce risk - more than half (58%) said they were increasing energy efficiency - which rose significantly to 84% among those that spend more than £2 million on energy. Energy efficiency will also help you meet your net zero goals, so it’s a win-win all around.
- Invest in on-site generation - You can also consider investing in sustainable on-site generation such as solar, wind, or combined heat and power (CHP). This has multiple benefits, including lowering emissions and making your organisation less reliant on the grid. Again, this was a popular option in our report - more than a quarter (27%) of respondents said they are planning to invest in this measure to combat energy risk. When looking at specific technologies, solar PV is the most popular, with 27% already investing in it, and 43% planning to invest. Wind, combined heat and power (CHP), and biomass would also be considered. Waste heat recovery is also seen as an important emissions reduction technology, with 23% already invested and 33% planning to invest, with similar numbers also backing energy storage.
Power Purchase Agreements (PPAs) are also on the rise, with a third (32%) of businesses planning to use one to hit their sustainability targets.
Many options now have an attractive ROI, so it’s important to work with your energy partner to help you make a strategic plan.
What do organisations want to see from Government to support their net zero plans?
As mentioned, the businesses we spoke to overwhelmingly believe that Government needs to do more to support them as they navigate the current crisis.
For example, businesses were clear that, where possible, they want their operations to be powered by low-cost renewable sources. As such, when asked what measures they would like to see from Government in terms of energy policy, the top answer was more incentives to switch to renewable energy, with 56% of respondents calling for this action.
In addition, nearly half (45%) want to see an acceleration in investment in technologies to support their business’s net zero plans, such as hydrogen and carbon capture and storage (CCS).
Energy policy needs to step up
For us, this research shows that there are several key actions that should be considered by Government:
- There is a need to accelerate energy efficiency:
Hydrogen will be an important fuel for decarbonising major energy users, but viable green sources at scale can’t really be expected until the end of this decade. There is a need to double down on activities that can have an impact now: reducing energy demand through energy efficiency and electrifying heat and transport where possible. While existing schemes such as tax incentives and capital allowances go some way to supporting this, more can be done.
- A greater focus on direct business support:
We need to ensure that organisations, as well as households, can survive the coming cost of living crisis as energy and other costs rise rapidly. Government support for households is welcome, but support for hard-pressed businesses or public institutions is so far scant. Therefore, policy support for businesses should be a key priority in the next Autumn Budget.
- Net zero cannot lose momentum:
The next 10 years is undoubtedly the ‘decade of delivery’ when it comes to net zero. That is why it is so important that net zero momentum cannot stall. This research shows that there is weakening confidence in net zero, despite many organisations recognising the benefits it will bring. Businesses need support to keep their plans on track.
We are committed to ensuring that the voice of business is heard at the highest level. The insight from the report has given us the opportunity to present the findings to Government, as well as other influential stakeholders.
Only by working together will we see the progress we all need to keep net zero momentum on track during the energy crisis.