By Michael Rossman, Co-Founder – EnergyBillKill.
Climate change is such a hot topic, that the British upper lip approach is very difficult to obtain. One is either a climate change denier or tree hugger alarmist. A business that depends on energy (usage or production) is supposed to completely change how it does its business overnight or face extinction rebellion’s raff. May I request that everybody just calms down and we try to sort out truth from fiction. Truth is sometimes stranger than fiction.
Climate Change is real
Yes, the climate is changing. It is not a debate. Since 1880 global temperature have risen by 0.9 Celsius according to NASA. Arctic ice is down 12.8% and we are losing 413 gigatonnes of arctic ice sheets per year. The sea level is rising 3.3mm per year. The other known fact is that most of the warming happened in the last 35 years, with the five warmest years recording since 2010. 2016 was the warmest year on record. On top of it, from January – September, with the exception of June, 2016 recorded the warmest individual months on record!
If you are a skier, you may have noticed that the skiing seasons in Europe are starting later, and that you have to go higher, say Zermatt, to guarantee snow at any given time. In fact, glaciers are retreating across the Alps, Himalays, Andes, Rockies, Alaska, and Africa.
On top of all of the above, Oceans are much more acidic; with the ocean waters acidity increasing c. 30% since the beginning of the industrial revolution.
So, what? What does Climate Change have to do with me?
Good question, in fact if one lives in Kent, United Kingdom or Malmo, Sweden, you are seeing more sunny days. Kent is prospering as a wine producing region. Tattenger, the venerable French champagne house, just purchased a massive part of Kent to turn it into bubbly country.
However, if you ride London Tubes (other than the lovingly air-conditioned Circle, District and Metropolitan lines) you experience the Finnish sauna but with lots of fully dressed strangers in a metal tube. If you are in Derbyshire or South Yorkshire, you have recently experienced severe flooding that has both lethal and devastating.
If you travel further afield, to a country like Bangladesh, you will note that it may disappear in due course due to soil erosion and oceans taking of the land. By the end of the century sea levels around Bangladesh are expected to rise 1.5 meters. Powerful storms and high tides which have occurred once a decade, are likely to occur several times per year.
In summary, Climate Change has everything to do with us, but we just have a more comfortable blanket, sometimes, (if we are sipping champagne in Kent or discussing the latest London play while riding an air-conditioned Circle line train).
Climate Change impact on Small and Medium Sized Businesses, in a practical sense
The basic challenge for business, big or small, is what can a small business do about climate change? We have day-to-day practical challenges- running our P&L, generating sales, putting out operational fires, and generally focused either 24 hours a day or 9-5 depending on where we sit….
The reality is that Climate Change is not visible on most businesses’ P&Ls and balance sheets (and no, I am not writing about British Gas or EDF Energy). 99% of businesses are not global titans. In many ways, climate change is directly impacting the titans because of government and public policy pressure. It is much easier for the extinct rebellion to chain itself to the gates of British Petroleum’s office rather than 99% of other businesses (as a side note many parents of the extinct rebellion’s middle-class millennial revolt, are likely small business owners).
Let’s focus on the small and medium size businesses that power the economy. The reality is that climate change is impacting the cost base for many businesses through higher energy prices, more expensive/complex/extended office heating and cooling. For international trade driven, e-commerce businesses, the supply chain is increasingly subject to the slings and arrows of the changing weather patterns- just think back to the Icelandic volcano eruption in 2014 when air travel ground to a holt.
The other impact is the famous trickle-down theory. As global corporate giants across sectors, such as Phillips, P&G, Unilever are beginning to green up their supply chain, the changes reverberate across the economy. This is reflected in the higher price for ‘greener’ goods and the more exact expectations and preference for the ‘greener’ supplier.
Zurich Insurance Group recently found that 78% of surveyed SMEs expect risks associated with climate change to have a significant impact on their business. 2,600 European, American and Asia Pacific companies participated in the survey (https://shorturl.at/bcpM7). Material damage, business interruption, energy and water costs dominated the concerns. In Europe, businesses are deeply concerned about flooding risks (a realistic fear given the latest floods in the UK and on the continent).
To really hit the point home, think about it this way- if the average temperatures rise more than 1-degree Celsius earth climate mechanism may change fundamentally in a way that is hard to predict. To keep the temperature down, the world is trying to keep CO2 emissions under 1 trillion tons per year (we are currently at 500+).
The Zero Carbon Economy and Climate change
The great news is that energy efficiency, renewable energy and a zero-carbon footprint is now a commercially viable way towards a Zero Carbon economy. There are 3 ways in which companies, big and small, can be both commercially savvy and go towards a zero-carbon footprint.
The UK is already one of the global leaders in producing renewable energy. For the first time since 1881 the majority of UK’s energy generation came from renewable energies in Q3 2019. It is a major achievement! That means that renewables are now a commercially powerful and relevant energy generation input. For the largest UK energy companies (domestic and foreign) renewables are still only about 20-30% of their fuel mix.
The UK is blessed with an excellent shoreline which enables on-and offshore wind farms. Ironically with global warming, solar energy is increasingly a viable option in parts of the UK. Even more interestingly 100% renewable energy companies are emerging fast. Every UK energy company now offers 100% renewable energy. Both the Carbon Trust and OfGem (the energy regulatory) run certification schemes for 100% renewable energy certification.
You can read our blog on UK’s 100% renewable energy suppliers here. EnergyBillKill enables our customers to switch to renewables which are increasingly cheaper. We are observing that the difference between ‘brown’ energy and ‘green energy’ can be in the hundreds of pounds rather than thousands for small businesses. We do not preach at EnergyBillKill, but we do hope that more businesses choose green and renewable energy supply options.
We often hear about Tesla. Its charismatic found is dominating airwaves as well as the internet. The sexy Teslas are the toy to have if one is trendy and wants to advertise one’s credentials.
However, the commercial reality is that many businesses are buying electric vehicle for commercial transport because they are cheaper to operate and are often just a rational choice if one wants to keep operational costs down. The case and point are the famous black cabbies. The UK taxi drivers are some of the cleverest self-employed small business owners. They have to pass The Knowledge- which must be as hard as some of the toughest A-levels. Amazingly, black cabs are going massively electric and it is all due to economics.
The Chinese are often portrayed as the greatest polluters in the world; but the reality is that they are also leading the green revolution (and thankfully with little resemblance to their previous revolutionary track record). Back in 2013 the storied Black Taxi manufacturer, Manganese Bronze Holding (MBH) went bankrupt. Zhejiang Geely Holding Group bought the business for GBP 11mn. It subsequently raised GBP 273mn to produce green cabs. They are doing it at a plant outside of Coventry! (oh and they bought the sporty Lotus too). They re-branded the company the London Electric Vehicle Company (LEVC).
There are over 2,500+ electric cars that have have saved 6,800 tonns of CO2 in their short lifetime and have saved 3.5mn in fuel costs for the cabbies! (21mn passenger miles, 13mn customers served. LEVC estimates that over five years the electric taxi may save up to £27,389 for the cabbies. Next time you are in an electric taxi, ask the cabbie what they they think about their e-taxi.
This is an amazing example of when green is great businesses for everyone concerned. Some of you reading this may question the ‘green’ of the battery manufacturing etc. and you would be right to raise those concerns. Indeed, the battery supply chain has to greenify, but that is a great challenge to have now that we have sorted our a commercially viable vehicle.
BMW, VW, Ford, Nissan, Toyta are all launching or have launched massive production lines for hybrid and/or electrical vehicles. In fact, according the National Grid estimates that the number of electrical vehicles in the UK could reach 9mn by 2030 (up from about 90,000 today). This may put additional strains on electricity demand generation. All of this is driving heavy investment in Nuclear, Gas and renewable sources of energy and leads us to another point- distributed Energy Generation (e.g. putting up your own wind turbine, solar power panels) and be independent from the central networks.
Distributed Energy, Installing your own Wind and Solar Power
Distributed energy generation is known by many names- on-site generation (ONG), district/decentralized energy. Most of today’s energy is centralised. Giant energy companies command massive resources to produce and distribute electricity and gas to our homes and businesses. The gargantuan nature of the energy sector is both its strength (it can finance expensive energy producing project) and its Achilles heel (inability to meet peak demand will black out massive parts of the country).
A neat way to solve this ‘communist’ nirvana of centralized control is to ‘grow your own’ energy or in this case harvest your own energy. Prices for solar panels and wind turbines have tumbled (again thanks to massive Chines production capacity). We can now generate our own energy and even make money by feeding this energy into the grid. The futurist predict that even electric cars will be able to feed spare energy back into the greed when overproducing mobility electricity. They call it the Energy System 4.0 (the current one being 3.0).
Back to reality, and today many businesses with property assets should seriously consider generating their own electricity. In the past, one required heavy government subsidies to even think about self-production. Today, this should be part of operational planning.
According to the Economist, 35% of UK businesses already generate their own energy in the UK and 69% are investigating generating their own electricity! 72% have factored self-generation into operational planning.
According to The Economist: “Both the rising cost of wholesale energy prices, which are above-average in the UK, and the falling cost of self-generation technologies and capabilities, are driving businesses towards distributed energy. Our survey found that just under half (48%) of businesses currently producing their own electricity cite cost savings as one of their top two main reasons for doing so. However, environmental considerations (whether intrinsic or because of positive associations and brand lift) are also a strong motivator.” (The Economist Intelligence Unit 2018, Distributed Generation, A Brighter Future?).
In the retail sector, almost 40% of businesses are generating their own electricity. 60% of those generating their own electricity use solar panels. Solar panels are relatively easy to install on properties that have sufficient roof space to do so (hotels, shops, and office buildings). 25% of businesses that generate their own energy use wind power- but of course you need land to put up the wind turbine. The numbers speak for themselves!
48% of UK businesses are looking at energy generation due to cost savings rather than a PR exercise- that is an incredible %. If one listens to the policy and political debates, one would think that businesses are dragging their feet. In reality, being green is actually good business.
EDF Energy’s signed a deal in 2019 with Tesco Stores. EDF Renewables will install 15,000 solar panels across 17 Tesco stores with 5 MW capacity as well as build an on-shore windfarm with 43MW energy generation (article here). Nestle just opened a nine-turbine windfarm in Dumfries and Galloway. Screwfix just opened a Zero Carbon store in Peterborough. (article here).
Leeds has one of the largest installations of rooftop solar panels in the UK, comprising of 2,900 solar panels and generating 680 MWh in power per year; enough to generate 20% of the buildings’ energy usage. You can visit the White Rose shopping center (owned by Landsec) to check it out.