The recent change in the law allowing councils to sell power to the grid has had me thinking about how passive we are in our relationship to electricity. It comes out of the wall, I have never actually seen it, I am a bit vague as to how ‘it’ actually works (isn’t it electrons going in a big circle back to the power station ? ) and I think AC/DC was a technical term about current before it came to mean something more esoteric. But that’s the sum of my knowledge and I suspect that this relaxed attitude is shared by many in the public sector.
Taken in aggregate, the public sector is one of the biggest consumers of electricity in the UK but also one of the most compliant. The generation companies send the stuff (whatever ‘it’ actually is) down the wires, we blindly use it to run machines, lights and air conditioning and we meekly pay £100’s of millions in bills which go up inexorably year on year and are predicted to rise by more than inflation for at least the next ten years. Clearly in George Osborne’s new age of austerity, this passivity is no longer good enough. The public sector has huge potential to change its relationship with the power companies and, excusing the pun, be the spark in an energy revolution.
The obvious place to start is micro generation. As the owner of lots of flat roofed buildings and windy open spaces, the public sector is ideally placed to be at the forefront of micro generation. The Government estimate that the new feed-in tariffs could be worth £100m to local authorities alone but despite this only a tiny fraction of UK power is generated by local authorities. Along with cars, sausages and counter attacking football, the Germans are so much better at this than us and their public sector equivalents manage to generate nearly 100 times as much renewable electricity from their estate as we do. This is embarrassing at best but more fundamentally an easy and compelling statistic for the Government to brandish in the spending review. Stop whinging about cuts, go and build solar panels on all of your schools.
Secondly we need to think about the little known concept of voltage power optimisation. Did you know that most electrical equipment runs along quite cheerfully at the European standard of 220 volts whereas the UK grid supplies at an average of 242 with wide variations. This wastes electricity but also means that the equipment is over stretched. If you run a normal light at too high a current, it will, like James Dean, burn brightly but die more quickly. So by installing VPO transformers you can save up to 20% of your electricity bill and prolong the life of your equipment. This is not rocket science but ask around your office today, who has heard of VPO technology and why haven’t you got any?
Finally we need to look at smart metering and building management. A smart meter will tell you in real time how much power your building is consuming and communicate this back to the grid. This will enable you to automatically turn things on and off to correspond to changes in electricity demand and more importantly pricing. It sounds easy but again it is bewildering why big users such as schools, prisons and hospital are not doing this.
Their obvious retort to my hectoring is 'yes yes Michael but all of this costs money and the public sector hasn’t got any spare'. Well the banks and private equity houses are waking up to the investment potential of all of this and providing a range of financial packages based on ‘pay as you save’ principles. Government backed feed-in tariffs over 25 years coupled with public sector credit worthiness is a compelling investment case, so getting somebody to lend is not a problem. Saying you can’t afford to save money and honestly nobody will help you is not going to cut much mustard with the axe man George.
So in conclusion, stop being an unthinking victim of the power companies whilst complaining about spending cuts. Look around your estate for micro generation opportunities, install your VPO kit and smart metering, learn about how you use electricity and start making savings. Knowledge is power !
Michael Ware is corporate finance partner at BDO
