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Detective Work Uncovers P272 Advantages

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Revealed: the hidden benefits of pass-through contracts for businesses affected by P272. Sherlock Holmes says the world is full of obvious things that nobody ever observes – like the opportunity Utilitywise has uncovered simply by choosing the right tariff type.

It took some detective work but eventually cost-savings were dragged out of the complexity and confusion cast between pass-through tariffs and all-inclusive tariffs. Also known as a fixed tariff, this is the option energy suppliers are nudging their customers towards after P272 comes into effect on 1 April 2017.

But it may not be right for your business and could cost you cash you don’t need to spend.

P272 is a mandatory industry change made by Ofgem that affects meters in the 05 to 08 profile class (known as max demand meters). If your business has one or more of these meters, it must be reconfigured to a new way of billing called Half-Hourly (HH) settlement. You can read about how bills will change and its impact on business here.

Deducing the benefits

After switching, energy suppliers say all-inclusive deals are easier for firms to budget with. They are less vocal about the budgetary advantages of pass-through contracts.

Chris Toole, Market Segment Manager at Utilitywise, says: “Energy suppliers haven’t exactly hidden the benefits of pass-through contracts compared to an all-inclusive or fixed tariff, but neither have they made them entirely clear.

“The P272 changes are multiple and very complex, so it took us a while to realise that with a fixed contract you won’t be able to take advantage of load managing and the resulting savings you could make.”

Load managing means moving or lowering consumption at peak times. So a pass-through contract is the better option if your business can change working patterns. If you can shift opening hours from peak-time red (4pm-7pm), for example, to less expensive amber or green time bands (1pm-4pm), it would save you money.

Exploding the easy-to-budget myth

An all-inclusive contract looks good on the surface for budgeting energy spend. However, with HH billing you are billed for exactly what you use so the bill will vary each month anyway as consumption fluctuates, even just slightly. It means you can neither budget precisely every month nor do you have the potential to save through load managing.

Most suppliers have fixed and included third party costs like the DUoS charge – that’s the Distribution Use of System levied by Distribution Network Operators (DNOs) for using the National Grid – in the contract unit rate.

The DUoS has a published annual rate, which the DNO charges the supplier. It is then included in the overall unit rate within an all-inclusive contract. Even though the rate is fixed by the DNO some may see it as an opportunity to build in a margin to cover themselves for customers using energy at higher rate time-bands.

So if you shift your energy demand or load manage it away from peak times, you won’t get the benefit until you renew your contract and your DuOS charge is re-calculated and you’ll have spent a year giving the supplier money you didn’t have to.

For example, the DNO DUoS charge is 0.5p per kWh within the red band peak time. The supplier may charge 1p per kWh as a fixed charge within the overall unit rate as it has a 50% margin to cover itself from the customer using excessively in this expensive peak time. The customer then moves consumption to cheaper green peak time when the DNO actually charges 0.1p per kWh instead of 0.5p but they don’t benefit as they are on an all-inclusive tariff. The supplier, however, makes 0.9p profit instead of 0.5p.

Save immediately with a pass-through contract

A pass-through contract puts you in control and allows you to load manage to achieve an immediate impact on your costs.

These contracts are based on a fixed unit rate per KWh where third party costs are completely ‘passed through’ directly from the DNO. These include DUoS charges but also others known as TNUoS and BSUoS.

With a pass-through contract:

– The DNO passes actual DUoS charges directly to you, as a separate charge on your supplier bill with no margins added by the supplier. The charges show as an additional line on the supplier’s bill and are paid as part of that bill but at no more cost than the DNO charges

– You can take advantage of load managing and reduce third party costs within the lifetime of the existing contract.

The only disadvantage is the bill itself will be slightly more complex than a fixed-rate’s.

How Utilitywise can help

“If you can change your working patterns, our advice is to take a pass-through contract not an all-inclusive one,” says Chris.

The problem is that Utilitywise believes around 90% of suppliers are not offering pass-through contracts for those affected by P272. To adjust the balance, we have partnered with Engie, which will offer a one-year to a five-year contract that’s either fixed, pass-through or anything in between.

Chris adds: “The ability to determine whether it’s worth load shifting is to understand where you use energy. If you cannot move working times it’s probably not worth moving to a pass-through contract but you should at least have the option to choose rather than be driven down one path.”

To find out more, visit – www.utilitywise.com/products-services/procurement-and-tendering/p272/  call 0330 303 0233 (Small – Medium businesses) or 01527 511 700 (Large – Corporate).

Energy

What Should We Make of The Clean Growth Strategy?

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Clean Growth Strategy for green energy
Shutterstock Licensed Photo - By sdecoret | https://www.shutterstock.com/g/sdecoret

It was hardly surprising the Clean Growth Strategy (CGS) was much anticipated by industry and environmentalists. After all, its publication was pushed back a couple of times. But with the document now in the public domain, and the Government having run a consultation on its content, what ultimately should we make of what’s perhaps one of the most important publications to come out of the Department for Business, Energy and the Industrial Strategy (BEIS) in the past 12 months?

The starting point, inevitably, is to decide what the document is and isn’t. It is, certainly, a lengthy and considered direction-setter – not just for the Government, but for business and industry, and indeed for consumers. While much of the content was favourably received in terms of highlighting ways to ensure clean growth, critics – not unjustifiably – suggested it was long on pages but short on detailed and finite policy commitments, accompanied by clear timeframes for action.

A Strategy, Instead of a Plan

But should we really be surprised? The answer, in all honesty, is probably not really. BEIS ministers had made no secret of the fact they would be publishing a ‘strategy’ as opposed to a ‘plan,’ and that gave every indication the CGS would set a direction of travel and be largely aspirational. The Government had consulted on its content, and will likely respond to the consultation during the course of 2018. And that’s when we might see more defined policy commitments and timeframes from action.

The second criticism one might level at the CGS is that indicated the use of ‘flexibilities’ to achieve targets set in the carbon budgets – essentially using past results to offset more recent failings to keep pace with emissions targets. Claire Perry has since appeared in front of the BEIS Select Committee and insisted she would be personally disappointed if the UK used flexibilities to fill the shortfall in meeting the fourth and fifth carbon budgets, but this is difficult ground for the Government. The Committee on Climate Change was critical of the proposed use of efficiencies, which would somewhat undermine ministers’ good intentions and commitment to clean growth – particularly set against November’s Budget, in which the Chancellor maintained the current carbon price floor (potentially giving a reprieve to coal) and introduced tax changes favourable to North Sea oil producers.

A 12 Month Green Energy Initiative with Real Teeth

But, there is much to appreciate and commend about the CGS. It fits into a 12-month narrative for BEIS ministers, in which they have clearly shown a commitment to clean growth, improving energy efficiency and cutting carbon emissions. Those 12 months have seen the launch of the Industrial Strategy – firstly in Green Paper form, which led to the launch of the Faraday Challenge, and then a White Paper in which clean growth was considered a ‘grand challenge’ for government. Throughout these publications – and indeed again with the CGS – the Government has shown itself to be an advocate of smart systems and demand response, including the development of battery technology.

Electrical Storage Development at Center of Broader Green Energy Push

While the Faraday Challenge is primarily focused on the development of batteries to support the proliferation of electric vehicles (which will support cuts to carbon emissions), it will also drive down technology costs, supporting the deployment of small and utility-scale storage that will fully harness the capability of renewables. Solar and wind made record contributions to UK electricity generation in 2017, and the development of storage capacity will help both reduce consumer costs and support decarbonisation.

The other thing the CGS showed us it that the Government is happy to be a disrupter in the energy market. The headline from the publication was the plans for legislation to empower Ofgem to cap the costs of Standard Variable Tariffs. This had been an aspiration of ministers for months, and there’s little doubt that driving down costs for consumers will be a trend within BEIS policy throughout 2018.

But the Government also seems happy to support disruption in the renewables market, as evidenced by the commitment (in the CGS) to more than half a billion pounds of investment in Pot 2 of Contracts for Difference (CfDs) – where the focus will be on emerging rather than established technologies.

This inevitably prompted ire from some within the industry, particularly proponents of solar, which is making an increasing contribution to the UK’s energy mix. But, again, we shouldn’t really be surprised. Since the subsidy cuts of 2015, ministers have given no indication or cause to think there will be public money afforded to solar development. Including solar within the CfD auction would have been a seismic shift in policy. And while ministers’ insistence in subsidy-free solar as the way forward has been shown to be based on a single project, we should expect that as costs continue to be driven down and solar makes record contributions to electricity generation, investment will follow – and there will ultimately be more subsidy-free solar farms, albeit perhaps not in 2018.

Meanwhile, by promoting emerging technologies like remote island wind, the Government appears to be favouring diversification and that it has a range of resources available to meet consumer demand. Perhaps more prescient than the decision to exclude established renewables from the CfD auction is the subsequent confirmation in the budget that Pot 2 of CfDs will be the last commitment of public money to renewable energy before 2025.

In short, we should view the CGS as a step in the right direction, albeit one the Government should be elaborating on in its consultation response. Its publication, coupled with the advancement this year of the Industrial Strategy indicates ministers are committed to the clean growth agenda. The question is now how the aspirations set out in the CGS – including the development of demand response capacity for the grid, and improving the energy efficiency of commercial and residential premises – will be realised.

It’s a step in the right direction. But, inevitably, there’s much more work to do.

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Energy

How Much Energy Does Bitcoin Use, Really?

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how much energy bitcoin requires
Shutterstock Licensed Photo - By Chinnapong | https://www.shutterstock.com/g/noipornpan

Many headlines have capitalized on the rapid rise of Bitcoin’s value. However, there’s a darker side of things that may entirely escape people’s awareness — the vast energy usage associated with Bitcoin mining. The practice involves adding information about transactions to a publicly accessible record called the blockchain.

Bitcoin miners increase the amounts of the cryptocurrency they own by being involved in mining. That means there is a built-in incentive to start mining and keep doing it. The energy consumption associated with mining may not be as visible as it is in traditional types of mining because everything happens in the digital realm — however, it’s exceptionally high, which is a cause of concern to many individuals in the know.

The Rise in Value Brings About Higher Energy Consumption

It’s not hard to find impressive headlines and news stories about how the value of Bitcoin has soared over the last few months. Many people even suspect they’ll soon witness the inevitable burst of a “Bitcoin bubble.” Miners are taking advantage of the current boom, though, which involves depending on power-sapping computers and related equipment.

In the early days of Bitcoin, it was possible to mine on basic home computer setups. Now, the most dedicated miners invest in the best computers around. In some cases, that means the machines they use are quite energy efficient, which is a good thing. However, the purchase of equipment that uses electricity well isn’t enough to make a significant dent in the overall Bitcoin energy usage.

The Approximate Energy Usage Statistics Vary

When you start doing in-depth research about just how much energy consumption Bitcoin demands, be prepared to come across many different figures. Although people are doing diligent research, they still can’t reach an agreement. For example, according to statistics from the Bitcoin Energy Consumption Index, the annual energy usage is just under 32 terawatt hours.

That’s the estimate for per-year energy use of Serbia and more than 150 other countries. However, analysts find it impossible to reach a unified conclusion about the per-transaction energy consumption for Bitcoins.

Figures from Digiconomist estimate one Bitcoin transaction takes 255 kilowatt-hours of power — or enough to power an American household for more than eight days. Marc Bevand, another analyst, disagrees with that figure, though his remarks on the matter are not as specific. He discusses how many of the highly publicized statistics fail to account for the technological innovations that occur as equipment improves.

He gives the example of an S9, which is a standard piece of Bitcoin equipment, claiming 16% of the S9’s revenues went towards electricity costs. If that figure is more accurate, it would mean each Bitcoin transaction uses enough power to keep an American residence going for just under four days.

Bitcoin Miners May Be Able to Branch Out From Cryptocurrency

Some Bitcoin miners are attracted to their trade for more reasons than just the lucrative and ballooning prices of the coins. People from a wide variety of industries, from banking to insurance, are looking at uses for blockchain technology. In the insurance sector, fraud costs $40 billion per year, but the verification method that miners understand and work with dramatically reduces fraud and makes blockchain appealing to insurance professionals.

Also, banks are increasingly researching Blockchain as a supplement to their current methods. As the prominence in the market goes up, the allure of being a Bitcoin miner does, too.

Also, going back to Bitcoin specifically, as the value of each coin goes up, people become more motivated than ever to invest in better technologies that help them remain profitable for as long as possible. When all these factors combine, it’s not hard to understand why energy consumption rises.

Do Banks Use More Energy Than Bitcoins?

Some analysts argue that even if the energy demanded by Bitcoins is exceptionally high, it’s still not at the level of energy used by banks. To keep things in perspective, it’s important to realize that the banking industry keeps its total energy usage figures under wraps, leaving people to do lots of speculating.

One analyst determined there are approximately 30,000 banks in the world, and each one has ATM networks, offices and other components that require electricity. When adding all the relevant factors together, the final figure this individual came up with is that banks use about 100 terawatts of power per year, less than the earlier-cited figure related to Bitcoins.

However, people have given opinions that the amount is too conservative. It does not include the energy used by bank employees, such as when employees drive to their offices or fly to meet clients. It bears mentioning, though, that the Bitcoin figures mentioned in this piece probably don’t either.

There are countless statistics about Bitcoin energy usage, and most of them are not promising. But instead of reading a few of them and immediately feeling shocked, it’s important for people to take a broad look at the findings and reach their own intelligent conclusions based on the collective research.

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