FT - 2020Moneytalksymbol

It seems that no sooner had the government boldly declared that there would be no windfall tax on energy suppliers, they decided that there would be something called an ’energy profits levy’ on energy suppliers, intended to raise £15bn for the Treasury.

The money would be spent on helping individuals and households cope with the dramatic increases in the cost of gas and electricity, some of which have already come into effect since the end of April, but with even steeper rises forecast for the coming autumn. Welcome as this may be, it is as they say, just a drop in the ocean for people experiencing increases of hundreds of pounds in their monthly gas and electricity costs. And it does only apply to ‘households’ – not businesses, however small or large.

And in the same week we saw the first news stories that owners of electric vehicles (EVs) have suddenly noticed that the cost of charging their shiny new toys has started to rise quite noticeably, especially those who rely on commercial, publicly-accessible rapid chargers. The same reports still note that it was much cheaper to charge at home using the special overnight electricity tariffs which are available. Of course, it also helps if your home has solar panels which allow you to charge during the day… Although the Chancellor hasn’t addressed the issue of EV costs so far, it is conceivable that as those costs rise, he could reduce the VAT rate on commercial charging points from the current 20% down to (say) the 5% rate that applies to domestic energy supplies.

Unfortunately, we have to face the fact that energy costs are only going to rise in the medium and long term, regardless of whatever happens in the way of short-term fluctuations in oil or gas prices. While much of the recent increase has been due to ‘shortages’ or ‘rising demand’ of one sort or another, if you can bear to look at your energy statements closely you will notice that not only has the unit-cost increased, but so has the daily standing charge (quite dramatically in some cases). So not only are you paying more for actually using energy, you’re paying more just to be connected to the grid. And that is supposed to pay for the switch from carbon-based fuels to non-carbon fuels; given that it is now public policy in the UK (and most other developed economies around the world – with the possible exception of the US) to switch to ‘zero-emission’ energy generation, that cost is not going to fall.

Over the years, as retail forecourts went from being ‘shops for motorists’ to ‘convenience stores’ they became filled with more and more energy-consuming equipment: retail space was filled with freezers and chiller-display cabinets, and to make all of it look bright and encourage punters to spend, everything was lit-up with the amount of lighting that used to only be seen in a working TV studio. And that was just the shop: look around your office and see how many electricity outlets have something plugged-in permanently with a little label saying something like ‘Do not switch-off’ or ‘Do not un-plug’. Naturally, all this equipment generated a lot of heat, so the next step was to install air-conditioning everywhere…

Now if you’re lucky enough to have a site that has been re-developed within the last couple of years, then the chances are good that most of this equipment will be as efficient as current technology allows. You might also have an app running that shows you what is consuming how much energy at any given time. If so, use it. Even if there’s not much that you can actually ‘switch-off’, there may be things running that you can at least ‘turn-down’ – perhaps the air-conditioning doesn’t really have to be set to ‘arctic’ levels all of the time?

However, if your site is somewhat older, you really ought to conduct a bit of an energy audit. Start with the obvious: if you still have any of those halogen bulbs that were so fashionable in the 1990s and early 2000s – get rid of them and replace them with LEDs that use about 10% of the energy. That goes for the forecourt as much as the shop. Consider installing light switches in store rooms, offices and toilets, that only operate when someone opens the door and goes into that room. Are there any outdoor lights that only need to be on in when it’s actually dark outside, rather than being on a simple timer? Look at the possibility of installing solar panels on your roof – and while you’re at it, check with your local council whether they’re offering any grants to small/medium businesses to encourage energy efficiency. These do exist in some areas of the country, even if they’re not widely publicised.

And it’s no use just switching things off when you’re there doing your audit! You should consider it as part of staff training to identify what can be switched-off (and what can’t) or turned-down at all times of day or night, and that doing-so becomes a habit, not just a one-off.

As a rule, older equipment is generally less efficient than modern replacements. If your shop is full of chillers and freezers that were installed maybe 10 years ago, think about replacing them. They may still be working perfectly well, but they won’t last for ever and replacing them with new ones may cut your energy usage quite considerably. The same applies to car washes, jet washes, compressors and vacs out on the forecourt. Yes, there will be a capital cost to all of this, but that may have tax advantages anyway, and the efficiency savings may pay for it sooner than you think – especially when the next round of price increases hits later this year.

It may be more difficult to ‘switch-off’ as much equipment today as it used to be, but at least look at what really is essential, and see where you might ‘turn down’ the rest – because high energy costs are here to stay.


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