UK manufacturers are being urged to consider the wider implications of a fixed term energy service contracts following findings from Aggreko’s latest report, The Power Struggle.
The latest research, which surveyed 251 manufacturers across the UK, states that 57% had or would use an Energy as a Service (EaaS) contract to gain access to a distributed energy solution. Of that group, the vast majority had a one- or two-year fixed energy price agreement with their provider, and a small percentage said they had been or were on a three-year deal. According to Aggreko, the price (per kWh) is usually based on predicted usage, so an increase or decrease in demand can subject a business to potential penalties.
Aggreko highlights the risk associated with this approach amid a volatile energy market as businesses could be tied into expensive fixed pricing arrangements for long periods, irrespective of whether the market begins to settle after they have signed.
Matt Watson, Sector Manager for Manufacturing at Aggreko Northern Europe said: “It is unsurprising that more companies now seem to be engaging with Energy as a Service (EaaS) contracts. We have been monitoring the sector for some time and earlier research indicated the demand for more flexible energy models. However, companies need to be aware that it’s an umbrella term with varying levels of benefits to the user depending on the supplier.”
The temporary energy provider is advising companies of the alternatives available instead based on a monthly hire charge. If demand increases or decreases with Aggreko’s own Hired Energy as a Service agreement, the user is able to add or take away capacity. With UK manufacturing growth hitting a 16-month low in May, Aggreko says customers are welcoming this functionality.
Matt Watson added: “The vast majority of people who said they are currently procuring a decentralised solution via an Energy as a Service contract said their energy prices are fixed for two years. This is a worrying statistic because we have all seen how much can change in that period of time. Flexibility of supply and pricing is absolutely crucial to the future of industry in the UK.”
Aggreko provides a range of decentralised energy solutions that help businesses produce their own cleaner energy while receiving reliable, scalable power. Any surplus can then also be put back into the grid to cut costs further. Solutions are specified according to the exact requirements of the business and could include gas generation, CHP, or energy storage solutions. The company has also seen an increase in companies using greener technologies including Stage V low emission generators that run on both hydrotreated vegetable oil (HVO) and diesel, and batteries.
For more information and to download the full Power Struggle report, click here.