Tim Foster, Director of Energy for Business, Conrad Energy
New research has found that one in five manufacturers does not have a robust energy procurement strategy. This is a surprise as whilst energy costs are a perennial concern for all businesses, they can place an outsized burden on manufacturers and logistics companies. The scale of operations and the accompanying electricity usage for businesses in this sector make them particularly vulnerable to energy price spikes.
Food and drink manufacturing and logistics businesses are particularly energy intensive, for instance owing to refrigeration needs, even when compared with the wider manufacturing sector. Indeed, the Food & Drink Federation reported that members have faced 400-500% rises in their energy bills over the past two years. This also comes against the backdrop of growing pressure from retailers to invest in ‘greening’ supply chains, which has left many manufacturers trapped between customer demands and their constrained budgets.
But that does not need to be the case. By making use of ‘behind the meter’ energy, and Corporate Power Purchase Agreements (PPAs), businesses can limit their exposure to the unpredictability of the energy market, whilst also ensuring security of supply and achieving sustainability targets. The question is how?
Affordable access to renewable energy
Food and drink manufacturers and logistics businesses with the space can look to behind the meter energy: energy generated from on- or near-site sources, for instance a wind turbine in a nearby field or solar panels on roofs. These can be installed under a PPA, with energy companies taking the burden of the upfront cost of installation, and then selling the renewable energy back to the manufacturer at a fixed price for a fixed duration.
Manufacturers with more limited space can instead use Corporate PPAs – again agreements to buy renewable energy at a set price for an agreed duration but sleeving the energy from renewable assets located elsewhere.
The logistics of sustainability
While manufacturers and logistics businesses may be keen to integrate renewables from a sustainability perspective, the reality is they also need to be able to demonstrate to stakeholders that they are doing so. Historically, it has been difficult to do this with any real degree of precision.
However, PPAs and Corporate PPAs now not only allow businesses to take comfort from the knowledge they are using renewable energy, they also enable them to demonstrate their sustainability credentials. Innovative monitoring systems can now match renewable energy generation to demand on a half-hourly basis, and can even provide the name and location of the renewable asset being used.
Businesses can thus use transparent, accurate, time-based energy matching to track their consumption. They can use this to show internal and external stakeholders that they are doing more than just talk about sustainability.
Ultimately, securing certainty on energy prices and reliability of supply solves two critical challenges for food and drink manufacturing and logistics operators, whilst also helping them to meet sustainability targets. Indeed, this will be all the more important in the face of potential further volatility in the energy market and with the grid inching ever closer to capacity.
