The retail price of energy for large commercial customers in New Zealand will remain elevated in 2020-21. So what are you going to do about it?
New Zealand’s large commercial market for electricity and natural gas has been on a roller coaster ride for the last 2 years, the likes of which have not been seen before.
There are numerous drivers that influence market movements. Fundamentally though it comes down to the balance between availability of supply and user demand.
Oil, gas, thermal and hydro
The Government’s decision to ban future offshore oil and gas drilling put an end date on New Zealand being able to meet all of its natural gas requirements. The closer we get to the end of current supply the higher the price will climb.
Supply issues with our largest field, Pohokura during 2018/19 and reduced gas production overall has more than doubled gas spot pricing from 2016/17.
In dry years, the electricity system relies on natural gas and coal to provide security of supply. This is for both base load and peaking generation.
With little to no new renewable base load generation planned in the immediate future, the market price is largely driven by the use of thermal based generation.
As consumers of electricity and natural gas, we have no control over the market. However here are a few prudent measures that can be taken to mitigate cost increases in a rising market.
Strike while the iron is hot
Electricity and Gas procurement should not be a once in a 2- or 3-year event. Leaving purchasing decisions to the last minute can have significant negative consequences.
You may only have limited options, having to accept what the market is offering or move to expensive default rates. If there are short term constraints in the market, then pricing may have been more cost effective 3-6 months ago.
Aligning your procurement strategy with a specialist energy consultant provides independent advice and a view of wider market considerations. This is particularly important when setting budgets for the following year.
Have I got a deal for you?
Incumbent retailers will at times be proactive in offering “deals”. However, this is usually from their view of the world and can be part of a defence strategy to sidestep customers reviewing the wider market.
In a rising market, we typically see a significant accordion effect. This is where the difference in prices offered can range more than 20%, even among the large generator retailers.
Without context, pre-emptive renewal offers can at times be viewed with suspicion. A specialist energy consultant can vet such offers quickly.
Understanding the market means pricing is checked against offers they are currently seeing. Advice can then be provided whether to accept the offer or go to market.
The mystic art of Power Factor
Often missed on large commercial invoices are power factor related penalty charges. These are billed by the electricity retailer on behalf of the local network distribution company.
Not all networks charge large commercial customers for poor power factor, but when they do the related charges can be avoided with correction equipment. (See: what is a power factor correction unit?)
There are a multitude of off the shelf solutions out there, however employing a specialist power factor company that designs solutions specific to requirements ensures you get the best bang for buck on your investment.
If correction equipment is already installed, make sure that this is added to your maintenance plan. If well looked after, correction units should last 10 years or more. They are susceptible to heat degradation. A quick check to make sure that air extraction fans on the units are work correctly and filters are kept clean can extend the life of the unit.
Rectifying power factor related issues can also help reduce peak KVA demand and associated costs if these are being billed by the local network company.
The secret life of kilowatts
Do you know how much energy your business uses when you are not there?
Energy monitoring combined with energy data analytics will help you identify energy wastage. Monitoring electricity use with real time energy analytics can also alert you to potential issues during operational hours.
This will allow you to act immediately rather than just seeing the impact on the monthly invoice the following month. With the rapid evolution of the internet of things, energy monitoring as a service is more cost effective than ever.
Are the good times over?
Unless there are structural changes in the market, Total Utilities does not see the retail price of energy for large commercial customers doing anything but remaining elevated (+/- 25% higher for electricity and +/- 45% for natural gas) compared to the 2013-2018 period.
A combination of dry weather, growth in the New Zealand population, general growth in usage and Government policy have put this in place.
Having an Energy Strategy that aligns with your business strategy and planning ahead, being proactive in minimising wastage and understanding where savings can be made will minimise the impact of rising prices.
Improve manufacturing operations and cut costs by setting operational efficiency KPIs.
In the last 3 months the global economy has been turned on it’s head due to the Covid-19 pandemic. In light of this, manufacturers are faced with the pressures of producing more high-quality goods, with less money, time and resources. Regulations are becoming more stringent and competition is growing in a smaller market.
To achieve the goals of lean operation, industrial manufacturers need to constantly monitor, benchmark and improve.
KPIs can prove a valuable gauge of progress, helping manufacturers to set and achieve their business goals and maintain critical business resiliency.
1. Optimise maintenance schedules
Many manufacturers still operate preventative maintenance schedules. Preventative maintenance is costly because only 15% to 20% of all components fail after a predictable time. Reducing operational costs means approaching maintenance in a new way.
A predictive maintenance program – servicing machines based on need-based early stage notifications – is much more efficient than a Fixed Time Maintenance (FTM) Preventative Program.
This allows manufacturers to be proactive, rather than reactive when it comes to equipment repairs and operational downtime. They can make informed decisions, based on transparency and a pattern that is most suitable to their business.
Reduced costs and eliminated outages should be demonstrable when manufacturers transition to a predictive maintenance mode and track overall downtime.
2. Improve true downtime cost (TDC) and downtime percentage
Consider the true cost of unplanned downtime. Do you know what the cost of downtime is to your business? Decreasing downtime and improving operational efficiencies can save manufacturers millions of dollars.
By calculating your True Downtime Cost and showing measured improvements in this realm, you can illustrate saved time and money, as well as reduced waste and create a data-driven, quantifiable resiliency plan.
Understanding true costs can also help you to make cost justification within day-to-day management decisions.
3. Improve Rolled Throughput Yield (RTY)
RTY is the probability that a single unit can pass through a series of process steps free of defects. Acceptable Rolled Throughput Yield is dependent upon a very high individual first time yield for each process. It is the sum of the parts measurement that is most critical to overall operational efficiency.
RTY is a great operational efficiency KPI to track as it alerts manufacturers to the health of their entire operation, rolling all processes into a single measurement.
4. Maximizing capacity utilisation
Diminish the cost of owning and maintaining equipment by using equipment to its full capacity.
By measuring the output that is actually produced and comparing it to its potential maximum output, manufacturers can understand the efficiency of their operation. Increasing capacity utilisation increases overall efficiency.
An OEE score presents “an accurate picture of how effectively your manufacturing process is running. And, it makes it easy to track improvements in that process over time.”
Conclusion
These Operational Efficiency KPIs will give you an indication of the overall efficiency of your operation and a real sense of your resiliency needs.
Any downward trends in performance will require deeper analysis. Manufacturers should also look at processes, systems, and the performance of equipment.
With improved visibility and intelligent use of smart technologies throughout the plant, manufacturers can take a leap forward when boosting operational efficiency throughout the business. Using real-time data allows you to plan, in a quantifiable way, the need for a backup plan.
Talk to us to learn more about how energy insights can drive your energy and resilience strategy.
If you don’t know precisely how, when and where energy is being used across your business, how can you understand where your energy costs really lie, or the best opportunities to improve energy and operational performance?
Working together with Centrica Business Solutions, Total Utilities is the exclusive partner delivering the Energy Insight product solution to the New Zealand market. Using Centrica’s wireless sensor technology, you can monitor energy usage in real-time – right down to device and equipment level. When this information is relayed to our PowerRadarTM analysis platform, you can access the intelligence you need to develop a data-driven energy strategy.
The Power of IoT
Our Internet of Things (IoT) technology is providing the deep energy insights that uncover flexibility and value in your operations and generation assets. This is a ‘game changer’ in raising energy performance across all types of organisations – from manufacturing and leisure – to healthcare and education.
Energy Insight technology provides full visibility of energy usage across your site, or multiple sites – right down to individual device level. We attach self-powered, wireless sensors to equipment and processes, such as conveyor belts, lighting circuits, chillers, or any other energy consuming assets.
This instantly transmits real-time data to our cloud-based PowerRadar analytics and reporting platform. You can then access this intelligence to inform your decision making and improve efficiencies.
Deep energy insights
Hundreds of sensors, which can measure both heat and power consumption, can be installed within a few hours and won’t cause disruption to operations. Data provided by our IoT technology enables organisations to quickly identify and resolve energy waste. It can also pinpoint opportunities to reduce high peak-time energy costs by moderating consumption in these periods.
The biggest gains of IoT energy insights are often seen in improved operational efficiency and business resilience. By ensuring that critical equipment is operating optimally and preventing costly disruption, or even breakdown, large operational cost savings can be achieved. Continuity of operations is also assured, which is particularly beneficial in manufacturing environments.
The results of IoT energy optimisation
We’re seeing the positive results of our IoT enabled energy optimisation across all business sectors, including Progressive Enterprises New Zealand.
Join us on Monday as we discuss how the Internet of Things is changing Energy Management and how insights can support sustainable business. Register here.
The team at Total Utilities are very excited to have Quinton Fisher join us as our Auckland Regional Sales Manager.
Quinton has recently moved to New Zealand from South Africa with his wife and two daughters. When looking at countries to immigrate to, New Zealand, Canada and the U.K made his shortlist.
We’re thrilled that New Zealand was their first choice, and we hope that it won’t take long for his family to feel at home here. Total Utilities will do all we can to make the transition smooth for the Fisher family.
A real people person
Quinton brings with him a wealth of experience in utilities and a passion for sales. A real people person, Quinton is all about building and maintaining meaningful long-term relationships with both his clients and his colleagues which makes him the ideal candidate for heading Auckland regional sales.
2020 marks Quinton’s twelfth year in utilities
Quinton owned and has now sold a successful business in South Africa, Thinktility, a company who has helped large brands, like Kellogg’s company of South Africa, experience the benefits of reduced tariffs, smart metering and energy-efficient solutions.
Drawn to Total Utilities culture and vision
For Quinton, the culture and vision of Total Utilities was a perfect fit. He especially appreciates the feel of camaraderie and togetherness and that it is a place where ideas and knowledge are shared freely. He notes that it doesn’t matter where the suggestion comes from, whether it’s an employee’s idea or a director’s, if the initiative has merit then the team at Total Utilities will do their best to explore its feasibility and implement it.
Sustainability and renewable energy are important
Total Utilities cares about future-proofing New Zealand businesses, by helping them think about how their utility choices not only impact their bottom line but people and the planet too.
Quinton’s passions align with our vision, as he cares about sustainability, identifying and using alternative energy sources, and providing smart and efficient energy solutions backed by clever, cutting edge analysis and insights.
A skilled negotiator with a strong financial and operations background
Quinton loves helping people, building relationships and understanding how businesses operate. His skills lie in sales, marketing, negotiating favourable contracts with preferred suppliers, and he brings with him a financial, analytical and technical background.
What’s more, he also thrives on exceeding client’s expectations, helping them solve complex issues and achieve meaningful outcomes.
His why? Reducing costs for businesses, empowering them to understand the financial impact of their utilities’ usage, and what level of power they are consuming, with the aim to make their business more streamlined, save money, and increase profitability and sustainability.
Making the most of New Zealand’s outdoor lifestyle
Quinton visited New Zealand in September 2019 to see if it could be a country where his family could lay down roots. The tranquillity and natural beauty remind him of the town where he grew up. Since moving to West Auckland, Quinton has found the transition relatively painless, and now he has time to make the most of our outdoor lifestyle. In his free time, he enjoys swimming in the ocean, mountain biking, fishing, golfing and hiking.
A dynamic addition to our team
We respect Quinton’s ambition and initiative. When he decided that New Zealand was a place he’d happily immigrate to, he arranged to have a meeting with our managing director, Richard Gardiner and the rest as they say is history.
Serving the Supercity
Quinton will be helping new clients around the supercity discover better, more efficient and sustainable ways to manage their energy consumption.
Total Utilities warmly welcomes Quinton to our team. We know that he will take care of you, our clients, and provide you with excellent, insightful service.
