With prevailing energy market conditions causing sharp price hikes that show no signs of abating – what can you do and who do you turn to for advice and viable solutions?
Since the beginning of 2021, negotiated contract pricing for large commercial customers has increased from 11c/kWh to 18c/kWh for a three year period. This means a customer using one million kWh per year is paying $70,000 more for electricity per year than 19 months ago.
Mass market customers have not been impacted to the same degree with pricing moving from 9c/kWh to 12.5c/kWh.
Rather than bore you with the (too numerous) details and interrelated factors that have caused this unwelcome turn of events, let’s explore the options open to businesses to mitigate sky high energy costs.
Time to turn to the experts? Many businesses are turning to energy management consultancies to help them navigate the challenging energy markets and provide services to assist them to get the very best deal on their utilities.
They are also hiring consultants to explore sustainable and renewable energy options to help them diversify their energy portfolio and give them maximum bang for their buck in terms of energy efficiency, pricing and carbon liabilities.
But according to Total Utilities Director Chris Hargreaves, it’s a case of ‘buyer beware,’ when it comes to hiring an energy management consultancy. He says the quality of service and outcomes vary dramatically.
“If it was my business, there are only a small handful of organisations I would consider using in New Zealand to obtain energy contracts on my behalf and to have the ability and insight required to properly explore efficiency and sustainable solutions.
“The consultancy industry for energy is not regulated, so effectively anyone can start up a business that offers procurement services,” he says.
Chris advises considering various factors before hiring a consultant, including how many procurements they conduct each year. The energy market is highly dynamic and energy retailers are entering and leaving the market at unprecedented rates and pricing models and practices are changing daily.
If the consultant or advisor you are using is not pricing in the market on a regular basis, then you are likely to get caught out by the market changes. Look for companies conducting over 100 procurement exercises per year (as an example, we average almost 350).
You should also establish whether your consultant reviews the entire market of energy retailers for pricing (we do), or just their favoured few companies (nope, not us).
Also, does your advisor or consultant gather detailed market intelligence to track wholesale pricing and industry developments? Do they warn you of potential ‘gotcha’ clauses to look out for in energy contracts as part of their procurement process? Needless to say, Total Utilities ticks all these boxes.
Aside from engaging a reputable energy management consultancy to help you traverse choppy utility waters, Chris explains there are various ways to hedge against rising costs, to minimise budgetary risk and ensure you comply with regulatory requirements.
Cost saving starts with sustainability & efficiency He says that first and foremost, now is the time to explore efficiency, sustainability, and low carbon solutions to increase resiliency.
“By exploring sustainable solutions such as LEDs, Renewable Energy Certificates, solar and energy conservation methods, you can achieve short term wins and relief from volatile energy prices, whilst also unlocking long term sustainability benefits and future proofing your business.
“Sustainability not only saves money by creating energy efficiencies, it also decreases your reliance on the grid, so you are no longer at the mercy of volatile energy prices,” he adds.
Keeping the lights on One of the trends we’re seeing in the industry is a move away from centralised, utility based generation – to so called ‘distributed generation.’ This is a shift from a single source to many sources to allow for increased resiliency and reduced reliance on the grid.
For example, traditionally if the grid goes down, you have no real option to keep your business going. But if you have solar with battery storage, you might be able to keep the lights on until the grid comes back online.
Additionally, you avoid the full impact of market volatility if your energy sources are distributed – it goes back to the wisdom of the old proverb, ‘don’t put all your eggs in one basket.’
Talk to us A great place to start when it comes to navigating the ever-changing energy markets is to talk to our team at Total Utilities. Our data-driven approach, born out of comprehensive investigations and analysis, allows us to carefully tailor energy services and solutions to your business.
With our proven 20 plus years in the energy business, we negotiate over $400 million worth of energy contracts for our clients every year. We can leverage relationships to get you better prices.
Our detailed pricing analysis and tendering services help save time and money by pinpointing the best possible energy contracts and ensuring the most favourable terms and prices.
We put sustainability, cost saving and energy efficiency at the heart of our clients’ businesses, so that they can be both sustainable and highly profitable.
And in this environment, setting sustainability and carbon reduction targets isn’t just about reducing your environmental impact – it simply makes good business sense.
Contact us to find out more about our energy management consultancy services.
Sign up below for Total Utilities Market Commentary to receive all the latest market news and insights.
Part Three of Planet Spratt’s Journey to Sustainability
The tragedy of the commons is an economic problem in which every individual has an incentive to consume a resource, but at the expense of every other individual—with no way to exclude anyone from consuming. Initially it was formulated by asking what would happen if every shepherd, acting in their own self-interest, allowed their flock to graze on the common field. If everybody does act in their apparent own best interest, it results in harmful over-consumption (all the grass is eaten, to the detriment of everyone)
The problem can also result in under investment (since who is going to pay to plant new seed?), and ultimately total depletion of the resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others—and themselves too—who can no longer enjoy the benefits. Generally, the resource of interest is easily available to all individuals without barriers (i.e. the “commons”). *
*The Investopedia Team – March 2022
As a child I spent my hazy summers at a family bach overlooking a local farmer’s property. His property commanded sole access to a tidal beach and we could only go down to swim, sail and play with his permission. It was permission he gladly granted – it was the asking that was the important thing.
Over the years we got to know this “old man” and he would share information, “secrets” he called them, about the beach and its bounty. First there was the cockle bed well past the low tide mark but easily accessible for adventurous nine-year-olds prepared to get their bottoms wet. We would walk out at low tide, shuffle our feet around in the sand and then fill our little buckets with shellfish. We only took enough for dinner (cockle fritters with a touch of sand) and never wasted them for fear of a stern telling off by mum and dad or the farmer.
Later he showed us how to set a net for the snapper that schooled into the Bay at high tide during their early summer migration. The snapper fed on the cockles and kina, fattening up before moving up into the shallows to spawn among the mangroves in the upper harbour.
When we were a little older he showed us how to live bait off the rocks for the highly territorial kingfish who feasted on the Sprats, Mackerels and baby snapper that returned to our bay in late summer after spawning.
Then came the changes. The farmer died and no one survived him who was willing to run the farm or pay the rates. The local council stepped in to “protect the asset” and turned it into a park for use by all. We watched with interest as roads were built, footpaths laid, public toilets and bus stops installed. Then the people came. First in ones and twos. Then in their dozens. By the height of summer hundreds and sometimes thousands descended onto our once private slice of heaven.
With them came cockle hunters. We didn’t mind the kids and parents with their buckets and squeals of delight. It was the “sack people” who walked up and down the beach in human chains descending on the cockle beds when they discovered them and then filling huge sacks with their prize. They came every weekend taking and taking and taking until even our “secret” bed had been found and pillaged.
After a couple of seasons the cockle beds were almost totally destroyed. The sack people still came, but only very occasionally and for lean pickings. Every sack they took reduced the shellfish stocks even further. The families who took home a hard won bucket of cockles don’t really bother with cockling too much these days. An icecream from the dairy up the road is an easier prize.
The snapper don’t come round the headland much these days either, there isn’t sufficient left for them to eat. The kingfish still hunt mackerels and sprats around the rocks, but their numbers are tiny compared to before and none of them are the 75cm legal size even if you were lucky enough to catch one.
People still swim and laugh and play in the shallows. What they don’t know is that the sack people have denied them the pleasure and privilege of nature’s bounty. Their children will never understand the perfect complexity that once existed here and at many other beaches all up the Coast.
It’s called The Tragedy of the Commons and applies to so many of our supposedly limitless resources. The giant North Island kauri forests are gone, pillaged for export and local housing by the saw millers and gum diggers in the early days of settlement. Before them the Moas were extinguished by fire, weaponry and the fierce folk who wielded them both.
Now it is the streams, lakes and oceans that are being polluted, pillaged and poisoned by a few to their own benefit and to all of society’s great loss. It is an invisible plague that doesn’t even have the courtesy to call “bring out your dead” when passing by in their mega machines.
The Tragedy of the Commons problem that William Forster wrote about nearly two hundred years ago tells us a lot – mainly about ourselves.
One issue is the way we humans so often rationalise our behaviour with cliches like:
“I have my rights you can’t tell me what to do”
“If I don’t take it someone else will”
“There is plenty to go around I am only taking my fair share”
Another issue is that the application of quotas, catch limits, water rights and pollution controls require three main things:
Government Intervention
Willingness by both companies and individuals to pay for the cost of the resources that they consume
A means of measuring and controlling resource exploitation
The true cost of unfettered resource exploitation has occupied my mind recently. I made a trip to Nelson and saw the scallop seeding plant down near the harbour.
The scallop fisheries in Tasman and Golden Bays were fished to extinction back in the 1970’s and an attempt has been made to restore this lost treasure by breeding fledgling scallops in huge tanks and then collecting their “seeds” and distributing them across a range of sites that previously contained large quantities of these wonderful shellfish.
Nature’s resources destroyed forever
This decade-long attempt has been a failure. Dredging was the preferred (and cheapest) way of taking scallops commercially and privately fifty years ago. This method destroyed the sea grasses that covered the sandy bottom. These seemingly unimportant grasses were in fact the source of protection for growing scallops. The sandy bottom has been left a desolated desert and the scallops are gone, forever it seems, despite science’s best efforts to heal the damage done two generations ago.
What makes this, and so many other examples, so important is that there are still many people in New Zealand and around the world who treat our common resources as unlimited and consider the “most economically efficient” method of extraction as being the right way to do things. It’s not just businesses who act this way. Individuals like the sack people will destroy a resource seemingly without a second thought for the consequences.
Many of my generation have grandchildren now. Like me they have been to the beaches of our childhoods and found them depleted and barren – despite the pretty trees, the shiny concrete footpaths and solar powered public toilets.
We Baby Boomers too have seen that we have a role in changing the world around us. We are powerful and rich (so my children tell me) but we are not utterly immune to the pain of the loss of our natural treasures.
My colleagues and I are analysts by training and profession. Our response to sustainability is actively measuring our business’s carbon footprint now. Things like fuel, travel, lighting, heating and freight are all counted. We offset these emissions by paying for the carbon we consume either directly via renewable energy certificates (REC’s) or indirectly via government mandated carbon credits.
We are also doing this same analysis for many of our clients who are recognising that their customers want real answers to the problem of climate change and environmental destruction.
Our customers also see younger talent making employment choices on the basis of a firm’s social responsibility policies.
By measuring our usage, limiting our consumption and paying a fair price for our share of the planet’s prolific treasures there may be light at the end of the tunnel.
Perhaps one day my grandchildren’s grandchildren will see this time as a turning point in history as they fill their tiny buckets with just enough shellfish for a meal of cockle fritters with a touch of sand.
Today’s Earth Hour (Saturday 26 March, 8.30 – 9.30pm NZ time) again puts climate action into the spotlight – but a recent MYOB survey highlights that while there’s strong support for climate action among SMEs, many are confused about how to progress.
Earth Hour, which started in 2007 as a symbolic lights-out event, is now held around the world on the last Saturday of March each year to promote action on climate change and to ensure a brighter future for people and the planet. So, what better time to explore results from the latest MYOB small and medium-sized enterprises (SME) snapshot survey regarding attitudes to climate change?
The survey captured responses from more than 500 local SME business owners and decision makers and results showed 82% of SMEs are concerned about the impact of climate change, with more than 43% very or extremely concerned. Only 18% said climate change was not a concern.
Carbon footprint confusion
The survey also pointed to the fact that more than 69% didn’t know how to measure their carbon footprint – just 21% knew how to measure it and 10% were unsure. Many didn’t know how to begin the process, couldn’t find the best initiatives to fit their business, felt it would be too costly or had a lack of free time and lack of information.
While many SMEs said they need help to map out their plans, the level of willingness to change is positive – though nearly a third (32%) said their business was not currently carbon zero or carbon neutral, they did have plans to be.
Total Utilities can help!
At Total Utilities, we have dramatically pivoted our business model over the past few years from supporting businesses to monitor and reduce their utilities overheads from gas, water, electricity and cloud consumption – to using that data to measure your carbon footprint and support a sustainable transition.
With our comprehensive energy consultancy services that assess, identify, improve and manage your energy usage and efficiency, we can not only help you measure your carbon footprint, but also assist in your journey towards decarbonisation. We have all the knowledge, skills and experience to help you achieve savings, improved efficiency and a more sustainable business model.
Sustainability essential to doing business
Total Utilities Sustainability Director, David Spratt explained that on top of the gains that can be achieved by decarbonisation, businesses also have to consider their employer brand in view of today’s skills shortages. People are looking for employers whose values align with theirs, and in many cases, who are actively demonstrating their progress on sustainability and decarbonisation.
Consumers are also demanding more from companies in terms of sustainable practices. A recent Colmar Brunton poll revealed almost half of New Zealanders say they have switched to brands that are more sustainable. “You have to consider the cost to your business of not transforming,” added David.
Need help measuring your carbon footprint? We’re here to help! Contact us at Total Utilities.
Sign up for Total Utilities Market Commentary to receive all the latest news and insights on reducing your carbon footprint, sustainability, and renewable energy.
“If a thousand years were to pass in a second what would be left of us?”
The Dig – Movie
I read somewhere that the best time to plant a tree is twenty years ago. The next best time is today. Autumn is coming and with the rains will come the opportunity to begin planting out the stream on my property that is so in need of a kind and considerate lover.
It is only five weeks but my efforts to bring my stream back to life have been an inspiration. Not in a, “Gee Dave, you are a great green guy,” kind of way, but with the people I have already met and talked to along the way.
Jim
Jim used to live on my land along with all the land around it. He wasn’t an easy conversationalist, preferring his own company unless it was down at the golf club over a few beers. He was, though, inspiring when we moved out from town eleven years ago.
Inspiring because he always helped but never interfered. Inspiring because he seemed capable of turning his hand to any task.
Most of all he was inspiring because he planted, one by one, the trees, bushes and shrubs that became the beautiful wetland and arboretum (a botanical garden dedicated to trees) that borders my place. My stream, when it’s not bone dry, flows into the wetland on Jim’s arboretum. From there it flows down and on to the Manukau Harbour.
Eels, conversely make their way back up from some mysterious place in the Pacific, into the Manukau and eventually find a safe place in amongst the wetland reeds. If I succeed in making it a safer place, they will continue their journey up my stream as they have done in the past.
Each morning I have my tea and toast on the front deck and look across and up at the established kahikateas and ancient totara that inspired him to protect by surrounding them with plantings from a nursery that was closing down and saplings from surrounding farms.
All I see is how many different colours of green there are. All I hear are the hundreds of birds he protected by sustained pest control programmes.
One time the neighbour clear felled a patch of trees on the land nearby. Possums, destroyers of forests and bush and predators to nesting birdlife, fled across to my place and into Jim’s arboretum. We silently went into competition, killing sixty of them in a two week period. Maybe the neighbour did us a favour – he never controlled pests on his land. Possums have never been a major problem since.
“We sure sorted them,” Jim said over a beer one evening.
‘WE’. Jim never said ‘we’. He was far too stoic to say that.
Jim left without really saying goodbye last year. He never liked a fuss. He sold the property and arboretum to Gary. Rumour has it that developers were eyeing up the land and that Jim rejected their offers despite pressure from the agent.
Gary
Gary had been looking for a spot to build a place for a while. He went over Karaka way and all he saw was bare blocks. “By the time I planted it out and the trees grew I’d be dead.”
He had a look at the arboretum and the land behind it that he could build on . He fell in love and made an offer which Jim rejected as ‘too low.’
“How much?”
“Ask the agent.”
“Too much,” said the agent who didn’t know the value of trees except as firewood.
“How much?” asked Gary.
The agent told him and Gary said yes. It was cheaper than the bare blocks in Karaka and he liked the view.
I spoke to Gary about the stream and my plans for it the other day. He lit up and offered me cuttings from the giant flaxes in the wetland.
“I’ll give you a hand planting them if you like. We can have a beer on the porch after and share the view.” ‘WE’. He said we. He never says ‘we’ except to his mates.
Ken
Ken is a horticulturist, gardener and all round ball of muscle and energy that makes this skinny old guy feel more than a little inadequate when he arrives with his chainsaw, weed wacker and hedge trimmer and smashes through work in a day that would take me a week if my back held out.
We have known each other for a while now and when I showed him my stream project I wasn’t sure if he would be as overawed by the enormity of the task as I am prone to be. He was engaged – no excited about the plan. I felt energised just being around him.
“We could clear five metres back from the stream to make it a bit easier to sort out the planting and fencing plan,” he offered after a bit of thought.
WE. He never says ‘we’ – he is too polite to say that.
A day later the stream bank was cleared, the old man’s beard cut back with the contempt this native forest smothering vine deserves and all the existing native shrubs were upright and free of weeds. Ken was on fire and so was I.
Samuel
Samuel minds my sheep for me. These days there are only six older ewes, all a bit fat from over feeding, beautiful and a bit posh. They are the product of a breeding programme that ended when I tired of lambs bleating all day and night because they were separated from their mum by a seven-strand fence and a wide-open gate.
Samuel treats them with a gentle hand. He even whispers to them– mimicking their low bleating and soothing them when he and his dogs work with them. I’ve never seen them cut, not even a nick, when he shears them. That is more than I can say for the ‘expert’ shearer I hired a decade ago whose heavy-handed brutality saw me shoo him off my property.
“Bloody townie,” he called back, not amused that I had held him responsible for the blood stains on my shell shocked animals. He didn’t hear my reply as he left – neither will you see it in print. I am far too polite for that.
Samuel is also a fencer in the off season. We walked the stream and I shared my hippy vision of plants, fish, frogs and eels. “We can fence off this spring,” he said. “The frogs and fish can breed in there away from the kingfishers. Set a couple of rat and stoat traps and it’ll be ideal.” ‘WE’. He never says ‘we’ – he’s far too shy and solitary for that
Please feel free to contact me, Planet Spratt, at [email protected] if you have any feedback, ideas or suggestions
Or you can make business and media enquiries to Total Utilities here.
The COP26 summit brought governments together in Sept 2021 to discuss accelerated actions towards the goals of the Paris Agreement (2015), which is an international treaty signed by 196 participating member states at COP21 in Paris, 2015. It aims to keep the global average temperature at ‘well below’ 2 degrees above pre-industrial levels, ideally 1.5 degrees, to strengthen the ability to adapt to climate change, and build resilience; align all finance flows with, ‘a pathway towards low greenhouse gas emissions, and climate-resilient development’.
New Zealand has signed up to United Nations Framework Convention on Climate Change (UNFCCC) and as a signatory to the agreement we have to commit Nationally Determined Contributions (NDC) to climate action. Our first NDC saw us committed to reducing greenhouse gas emissions to 30% below 2005 levels by 2030. However this was refreshed at the summit to increase our commitment to reduce emissions by 50% at 2030, compared to 2005 levels.
One of COP26 objectives is to phase out coal. The current Government has already committed to removing coal as a fuel source from our economy. A ban on new coal boilers used in manufacturing and production will come into effect by 31st December 2021 and phasing out existing coal boilers by 2027.
A further option proposed is to prohibit other new fossil fuel boilers (gas, LPG) where suitable alternative technology exists and is economically viable.
The key instrument that will be used to foster a move to a low carbon economy will be the emissions trading scheme (ETS), and a series of changing emissions budgets. An emissions budget seeks to limit greenhouse gases that can be emitted over a period of time.These changing budgets are spread over three key periods: 2022-2025, 2026-2030 and 2031-2035. This will reduce the quantity of Government-issued New Zealand Carbon Units. As these quantities reduce, the cost of carbon will be increased.
When the emissions trading scheme (ETS) was first introduced, the price of carbon was fixed at $25 per tonne; however, there was a 2 for one surrender ratio meaning that for every tonne emitted, only half a tonne was surrendered, making the effective price $12.50/tonne.
Over time the market caps have been lifted, and emitters have moved to a one for one surrender ratio. In the last two years, the Government introduced a floor and ceiling in the market: $20 floor and $50 ceiling. This year, prices were raised to make the minimum price $30/tonne and ceiling price $70/tonne. The ceiling will be increased by 10% per year plus inflation.
The below table covers current carbon spot pricing and New Zealand Unit (NZU) future pricing with a view on where carbon prices could go out to in 2030. This is the cost that relates to the gas field producing natural gas or the electricity generator producing electricity. For gas customers who are Time of Use (TOU) metered, this cost is passed through as a line item on each invoice. For small commercial gas consumers and all electricity customers, the cost of the ETS is built into the energy tariff. You can see the change from 12 months ago where the carbon price has nearly doubled. In November 2018, it was priced at around $25/tonne.
Energy companies within NZ will have to look at their generational assets and search for alternative solutions in a fast and least disruptive way to avoid shortages and payment of increased ETS costs.
Transitioning the economy’s energy needs to electricity requires much more than just new generation, the national grid operator and local electricity network distributors will need to invest billions to get things moving.
Whatever is done, NZ needs to sort out its energy policy and fast to ensure the security of supply, the ability for manufacturing to thrive in NZ (by avoiding having to outsource our emissions), and keep prices as low as possible.
