Transparency is needed for energy purchasers

Energy purchasers are trying to balance cost and efficiency; the biggest barrier to this is a lack of transparency, says Dan Ibbetson.

The energy market is unrecognisable from what it was a decade ago. After years of very little change, we have been facing a period of profound transformation that has influenced every corner of the market.

This change has been driven by a number of factors, such as the growing demand for lower-carbon solutions. With 196 countries signing the Paris Agreement in 2015, there is a global commitment to limit temperature rise to below 2C this century. As a huge contributor to emissions, the energy market has been under ­growing pressure to adapt to support global ­reduction targets.

The move to renewable energy has also led to an increase in localised energy sources and microgrids. More customers are becoming independent from the grid, meaning the dependency on mass-scale power plants has fallen drastically.

Underpinning all of this is the growing role of technology, which has further improved efficiency, as well as huge shifts in demographics as more people migrate to urban areas.

With more variables to consider than ever before, decision-making has never been so challenging. Energy managers are facing the reality of having to strike a delicate balance between competing variables to meet a number of different priorities, such as cost and emissions targets. But the volume of information required to do so effectively is simply overwhelming.

Power providers have an important role to play to equip energy purchasers with the information they need. To get a better sense of the priorities of ­decision-makers, we recently conducted a global survey. When comparing solutions, 50 per cent of those we spoke to said cost was the first thing they look at. However, the biggest barrier to better costing is transparency.

What this adds up to is energy ­purchasers believing that they are not being given the information they need to make the best decisions – 48 per cent said their energy provider does not do enough to help improve the competitiveness of their business.

As an industry, we need to stop approaching relationships with customers as a one-way transaction. Rather, these relationships should be seen as partnerships, and the industry should work alongside decision-­makers to enable improved operating efficiency and performance. The industry benefits when the customer benefits.

To equip our customers with the information they need, Aggreko has created a Cost of Electricity Calculator. All variables, such as fuel type, climate, and time horizons, can be input into the calculator and then layered with the specific energy data to build a complete and unique picture of every project and the most efficient solutions.

While we know that cost is a key priority, we also recognise the need to compare solutions based on other variables, such as emissions. Later this year, the calculator will be expanded to include emissions calculations.

This calculator alone isn’t going to solve an industry-wide, and indeed global problem about the lack of transparency around energy decision-making. But we do hope it kick-starts a wider conversation about the need to share the right information with decision-makers.

With so much complexity in the market, decision-makers are unsurprisingly overwhelmed as they try to compare solutions. The key to unlocking the potential is to establish transparent relationships. Only then will energy managers be able to make informed decisions to the benefit of their business.