Navigating the energy crisis: Insights from industry experts

Households and businesses alike have felt the bite in recent months from the energy and cost of living crisis, with steep increases in energy prices hitting us all. The supply and demand on the global wholesale market have been impacted by several worldwide issues, from the war in Ukraine to soaring energy demands post-Covid. These increased costs have been and will continue to pass on to the consumer. We spoke to Nick Finnigan, Client Manager EMS Specialist, BSI, and Tom Southall, Executive Director of Cold Chain Federation, to gain insight into how these challenges have impacted the industry.

Current energy price trends:

The changes in industrial energy costs have been staggering, says Nick Finnigan, Client Manager EMS Specialist, BSI. Between January 2020 and October 2022, we saw some extraordinary occurrences in UK wholesale gas and electricity prices. Ofgem data revealed that electricity increased from £53 (per MWh) in January 2020 to £372 in October 2022, a 700% increase. Gas prices increased from £0.48 (per therm) in January 2020 to £4.38 in October 2022, an astounding 900% increase.

At the end of 2022 and into 2023, wholesale electricity and gas prices have dropped to similar levels to January 2022 but remain high compared to previous years. It’s important to stress that although energy prices are decreasing, no one expects them to return to where they were previously. Now, building higher energy prices into your business strategy is imperative.

It’s become increasingly clear that managing energy to reduce costs is essential to all of us, Finnigan continues. Where short-term political issues have indeed exacerbated the price rise, it looks likely that high energy prices are here to stay. The UKI must focus on energy supplies; where they come from; the risks associated with those energy supplies; and the need to look inward to ensure a sustainable energy future. We face the challenge of the pressure that decarbonizing our energy supply brings. Organizations also face pressures to meet net-zero commitments, become more energy efficient, and demonstrate their commitment to reducing their impacts on climate change. Energy use is many organizations' most significant environmental impact, but efficiency improvements can help achieve broader ecological goals.

Beyond cost savings - The benefits of energy management:

And energy efficiency isn’t just about cost. Reducing energy consumption is equally important.
By using an energy management system, you can see significant financial benefits, often with a swift return on investment. But this isn’t the only benefit, and there are increasing regulatory drivers for implementing a certified energy management system, such as:

• The Energy Savings Opportunity Scheme (ESOS) – certification to ISO 50001:2018 is a route to compliance
• Streamlined Energy Carbon Reporting (SECR) – where larger organizations must report annually on energy use, energy efficiency actions taken, and energy efficiency opportunities identified
• Improved energy management can support the achievement of broader sustainability goals, including those set as part of an environmental management system certified to ISO 14001

Build resilience with BSI's sustainability solutions:

The energy cost crisis has affected all businesses, from small and medium enterprises to large multinational organizations and industries. Some have even been forced to close their doors and cease trading. There are many examples of businesses struggling with the additional financial burden, including several clients of BSI, who now have a renewed focus on energy improvement schemes.

To combat this, the obvious starting point for energy management is the ISO 50001:2018 Energy Management System Standard. This standard is used by large and small organizations across the world to manage and reduce energy use and costs. ISO 50001 is an excellent framework to help implement an energy management system (EnMS). The standard helps organizations become more resilient against energy costs and availability, from large retailers to smaller manufacturers and small businesses. Whether you’re interested in certifying to ISO 50001 to reduce costs, comply with legislation or increase your sustainability, implementing the standard provides a systematic approach to achieving all three.

An energy management system can help identify and manage risks associated with future energy supply, measure and monitor energy usage for improved efficiency, cut energy consumption and bills, reduce carbon emissions to meet government reduction targets, and demonstrate sustainability credentials to interested parties. Many products within the BSI Sustainability portfolio can help clients manage energy use and environmental impacts and ensure compliance with various regulatory requirements, like ISO 50005, UK ETS, and environmental data verification.

Investing in energy efficiency:

The food industry is also feeling the chill from the crisis, says Tom Southall, Executive Director of Cold Chain Federation. The food industry, particularly cold storage, is a significant energy user. For cold storage alone, we estimate that the UK uses approximately 4.1TWh of energy, and at the height of the 2022 crisis, costs tripled to an estimated £1.5bn. Although wholesale costs have gradually reduced, prices remain significantly above pre-2021 levels. For individual businesses, the impact depends on their specific energy contracts with suppliers and customers. Still, high energy costs continue to drive inflation in temperature-controlled products like food and pharmaceuticals.

While in the short term, some businesses (unable to pass cost increases to customers) have struggled to adapt to high energy costs, the outlook for the industry remains strong. Cold chain is a critical service that will always be in demand. It’s continually being fuelled by a growing population, increasing demand for chilled and frozen products, and the need to minimize food waste. We are not, however, expecting energy prices to return to pre-2021 levels anytime soon. Therefore, these sustained higher energy prices will have two key impacts: an increase in costs for temperature-controlled logistics, which ultimately means higher prices for consumers, and a step-change in business investments in energy efficiency measures and generation. We can expect solutions such as solar panels to help businesses become more self-sufficient and resilient to future market volatility.

We also want to highlight the significant potential for cold stores to play a central role in the future net-zero UK energy network, as set out in the government’s own Industrial Decarbonisation Strategy. Cold stores are uniquely placed for various energy management mechanisms, including generating energy and recycling heat from refrigeration to thermal and physical energy storage. Our recent report ‘The Cold Store of 2050: Maximizing Efficiency to Reduce Emissions and Drive UK Energy Transformation’, outlines this vision and is available on the Cold Chain Federation website.

BSI solutions for energy improvement:

Assessing the options and producing a coherent strategy for managing energy consumption and efficiency within complex industrial processes can be challenging. ISO50001 is a trusted and recognized standard. It can support businesses in implementing the structures and strategies needed to maximize the financial and sustainability benefits of a more robust energy management approach.

Energy prices are volatile, which is a risk for us all, concludes Finnigan. No one expects them to return to where they were, and everyone needs to build higher energy prices into their business strategy. It’s vital to manage energy, looking at ways of becoming more efficient through managing energy and identifying improvement projects. BSI has several products to help organizations focus on energy improvements.

Nick Finnigan, UK&I EMS & EnMS Scheme Manager, BSI

Nick joined BSI over ten years ago as an EMS Specialist assessing all types of industry and business against ISO 14001 as well as ISO 9001, ISO 45001, and ISO 50001. More recently, Nick was appointed the UK and Ireland ISO 14001 Scheme Manager and in January 2022 joined the newly formed Sustainability Team. With the current challenges facing businesses from climate change, increased costs, and the journey to Net Zero, he is convinced that ISO 14001 is a major tool in driving continual improvement, reducing impacts and costs.

Tom Southall, Policy Director, Cold Chain Federation

Tom leads the policy and advisory work of the Cold Chain Federation, the UK’s trade association for the temperature-controlled logistics industry. With a background including public sector environmental policy and private consultancy, Tom’s work at the CCF covers a wide range of policy areas including energy and climate change, food safety, health and safety, and transport policy.