Energy Price Rises Remain the Steadiest Signal for Business Investment in Energy Management in 2016
For the past few months the news waves have been filled with stories about weakening government support for renewable energy, and cheap energy from the glut of shale gas and excess oil production. This has been followed by numerous announcements from the UK government – like the removal of subsidies across biomass, onshore wind and solar energy, axing of Green Deal funding and ending of the zero carbon homes target.
So with the softening of policy in the UK and the possibility of cheap energy from shale gas, will 2016 be a barren year for energy efficiency? Not exactly. Our research finds the steadier signal for business investment will continue to be energy price rises. Verdantix annual surveys with UK energy and facilities managers show that cost saving are a top investment driver for energy efficiency projects. With electricity prices still tracking upwards – energy management will remain on the agenda for energy-intensive firms. DECC expects UK electricity prices to grow in real terms from 2016 to 2020 at a CAGR of 4% for commercial firms and 5% for industrial firms. Our analysis finds this will be supportive of an energy management market growing at around 4% annually over the next 3 years.
Similar patterns have been observed in other markets. For example our research on Australia finds that even following the removal of the carbon tax and numerous energy efficiency incentives – energy management is still thriving with spending increasing by around 6% annually. This is because even without the carbon price, businesses continue to face steep electricity price increases in the long term due to costs for network upgrades. For example Australian energy consultants Energetics found there was a 20% increase in electricity prices in 2013 due to an escalation in electricity network upgrades.
For detailed analysis on spending across five segments of the UK energy services market in 2016 and beyond – look out for our upcoming webinar The Future Of The UK Energy Services Market on 17 September 2015.