UK consumers care about price – that much is clear from the Vestas Global Consumer Wind Study 2012. And well they might. Government figures for 2011 show that the annual average electricity bill rose by £36 to £453 from the previous year.
It’s a trend that is never likely to be reversed. Electricity prices started to rise sharply from 2004 when the UK became a net importer of natural gas. Around 28% of the UK’s electricity fleet is gas-fired. This connection between fossil fuel imports and high energy prices is not lost on consumers – 77.5% of GCWS respondents expressed very high or moderately high levels of concern about dependency on fossil fuels.
Although the overwhelming majority (83.4%) of respondents said that they thought national governments should play a leading role in the adoption of renewable energy, those surveyed expected less from the private sector.
Almost half of respondents, 46.8%, agreed strongly or moderately that utilities should play a leading role. But that share dropped to 24% of respondents who expected action on renewables from companies.
But the reality is that although government mandates backed by healthy subsidies, in particular in Europe, kicked off the procurement of renewable electricity, the private sector has picked up the ball and run with it.
The Corporate Renewable Energy Index compiled by Bloomberg New Energy Finance shows that the share of renewable energy purchased voluntarily by the private sector is on the rise, a welcome boost for governments in countries like the UK that are trying to boost the adoption of renewables through energy policy.
“Much of the demand for renewable technologies has been driven by specific energy policies,” said the report. “But there is also a growing awareness of the benefits of generating and using clean energy over and above the incentives provided by government, especially among corporate energy users.”
CREX surveyed 300 companies and showed that procurement of renewable energy grew from 14% in 2009 to 16% in 2011, or from 68TWh to 160TWh.
Telecommunications and financial sector companies ranked top of the table for procurement. BT Group, one of the world’s oldest and largest telecoms companies, procured 42% of its electricity from renewable sources last year.
Royal Bank of Scotland last year set a goal of being “a leader among its peers by 2015” in reducing and managing its carbon footprint. Last year, the bank bought 61% of its total electricity consumption, 634GWh, from renewable sources – the largest total renewable electricity use in its sector, according to the CREX report.
Other consumer-facing UK companies have also boosted the procurement of renewable electricity. Last year, HSBC sourced 10% of its electricity from renewable sources, not including offsets. Boots, the UK’s largest chemist, procured 63% of its electricity from renewable sources.
In 2006, British Sky Broadcasting Group (BSkyB) became Europe’s first carbon-neutral broadcaster, and in 2011 it obtained 83% of its electricity from renewable energy sources.
“BSkyB believes that a reputation for environmental responsibility is important in attracting consumer and business customers, and also helps attract and retain talented employees whose values are aligned with these goals,” said the report.
Motivated by Climate Change
Consumer attitudes to climate change have played a crucial role in this increase in renewable energy procurement.
Most respondents (65.2%) in the GCWS strongly agreed or agreed moderately that burning fossil fuels causes global warming and 69.5% of respondents said they would prefer to have their electricity supplied by renewable sources.
Most respondents were in favour of subsidies for clean energy: 82.2% in favour of wind subsidies as opposed to 58.8% for nuclear.
But consumers are more wary of increasing costs. Only 15.9% of respondents said that they would be willing to pay 1%-5% more for renewable electricity as opposed to 58.2% who said that they would not pay more.
Corporate procurement provides a solution to this friction point between consumer aspirations for clean energy and premiums for green electricity: As companies drive demand for renewable energy, costs will decrease for all consumers.
But corporations do not make decisions on green procurement to simply enhance their image with consumers.
Commercial consumers of electricity have also seen their energy bills rise over the past decade. Natural gas currently trades at around $11.18 per mmbtu, but prices have spiked aggressively in recent years, peaking in October 2008 at $15.93.
In Europe, wholesale electricity prices reached 53.7 €/MWh in April, 32% higher than in April last year, partly due to volatility in the price of natural gas.
In the UK, electricity consumers saw prices rise by an average of 7.2% between Q1 2011 and Q1 2012 by an average. Gas prices rose by around 15% over the same period.
Such volatility can eat away at revenues. Increased procurement of renewable electricity provides a level of certainty that the gas-indexed wholesale electricity market cannot.
Bottom line advantages are as good for corporations and their shareholders as they are for the household book-keeper.
This piece appears on Breaking Energy as part of the Energy Transparency series in partnership with Vestas.
