Energy company boss Guss Weiss believes high power costs are making UK business ‘dangerously’ uncompetitive, and has doubts they are achieving their low-emission goals. Peter McCusker reports.
For many years the Big Six energy retail companies have recoiled from tackling each other head on in the fight for market share, says Dutchman Guss Weiss.
But in the wake of the competition inquiry into the market by the Competition and Markets Authority (CMA) last year, he says there are signs of change.
“There have been a number of new entrants into the market recently and I am optimistic that things are changing. The markets are being shaken up.”
Mr Weiss heads Leeds-based GDF Suez Energy, a business primarily targeted at delivering energy services to industrial and business users.
He says the business market is far more competitive than the domestic retail sector - but has serious concerns UK energy policy is damaging the country’s long-term economic prospects.
“The current price of energy in the UK market reflects the environmental costs of emitting CO2.
“Countries across Europe have implemented policies to encourage renewable energy and reduce CO2 emissions. This would not matter of everyone adopted the same policies, as we would have a level playing field.
“But the UK has gone further by bringing in the Carbon Price Floor (CPF) and this is adding to business energy costs. My big concern is how to keep UK companies competitive in Europe.
“We are already seeing the energy price in the UK differ to mainland Europe - we are now some 30% more expensive. This is dangerous for the competitiveness of the UK.”
The CPF was introduced in 2011 and sees larger UK carbon emitters charged £18 for every ton of carbon dioxide they emit, which is way above the European carbon price of £4.50.
The North East has witnessed at first hand the damage it causes with Alcan at Lynemouth closing its smelter with the loss of over 500 jobs, shortly after the CFP was announced - saying it would wipe out is annual £40m profit.
Mr Weiss continued: “This is not just affecting the UK, it is also affecting Europe too, many of the continents base industries have relocated to parts of the world which are growing much faster, and do not have the same environmental regulations, as Western Europe does.
“But by losing the base industries to the Far East and Middle East, for example, the world is unable to tackle the emissions issue which the policies were designed to counter.
“Many developing nations have less stringent emissions, and CO2 emissions have increased two to threefold.”
GDF Suez Energy, which is based in new high rise office block in Leeds close to the city centre, helps companies manage their energy usage and source energy more competitively (see panel).
It is part of the larger France-based, £60bn GDF Suez group, which has assets all over the world and a diversified portfolio of additional business activities.
The group has invested some £500m in the UK in recent years; it employs over 20,000 in the UK and now provides 10% of the UK’s gas storage facilities.
One aspect of the green energy revolution has been the impact on utilities. German power generators E.On and RWE are struggling to adapt to with Germany’s green power revolution, with the former recently announcing plans to establish a new renewables division in a bid to head of this threat.
Mr Weiss continued: said: “Those with the power generating assets have for many years been very profitable businesses, but many of the utilities are having a really hard time now.
“Things started to change around 2008 with the recession, which reduced energy demand.
“This came at the same time as some major structural changes were taking place with many base industries looking to leave Europe for the developing world. Take an aluminium smelter for example; it can use as much power as a city the size of Newcastle.
“At the same time renewables were entering the arena and the cost of energy started to become an issue for household and businesses.
“Back in 2005 utilities were planning for a 3% rise in energy consumption and had based their new build plans on that, but these assets are now on-line and they are no longer competitive. The demand is not there.”
While supporting the aims of the green energy transition Mr Weiss highlighted the numerous challenges it poses those operating in the energy sector.
Earlier this year the National Grid warned that if we had a severe winter the margin could fall to dangerously low levels, leading to potential power shortages.
Mr Weiss believes there will be no blackouts this winter; even if we have a severe cold snap, as the UK has sufficient fossil fuel capacity - but went on to say that almost one-third of this fossil fuel capacity will not be making any money, despite the recent fall in the gas price.
In December the UK Government held its first Capacity Market auction to ensure supplies of baseload power will be available over the coming winters.
Whilst securing supplies for future years it is also set to add further costs to the price businesses and household pay for their energy.
It is widely agreed that over the next few years the level of all third party energy costs – renewables subsidies, Capacity Market measures and network upgrades – will increase from 30% to 50% of the total energy bill.
And it seems that whatever the outcome of the General Election, or the CMA inquiry, that energy costs will continue to be to the fore of the political debate.
Mr Weiss said: “The weird thing is the energy molecules are becoming less expensive but total energy costs are getting more expensive.”
He added: “Most people do not realise how expensive renewable energy is.”
With energy bills running at £5m a year for some of Teesside’s energy intensive chemical and process industries securing and managing this resource is big business.
Winter energy bills for industrial users are partially based on usage during the TRIAD – three half hours period during November and February - and GDF Suez Energy says it has been able to save large industrial users hundreds of thousands of pounds by being able to predict when a TRIAD is gauged.
Based in the Leeds, the business employs 215 people, has been operating in the UK market since 1999, and is part of larger GDF Suez group.
Its gas market share in the UK is 7.5%, whilst its market share for electricity is around 6% and this places it in the Top 10 of UK energy suppliers, supplying energy to around 1,400 business and industrial customers.
Customers include companies such as Ford Europe, Severn Trent Water, CEMEX, Infinis and Hanson Industries, and closer to home Cleveland Potash.
The business has traditionally focused on the larger end of the electricity supply market but in recent years it has started to expand its customer portfolio in the mainstream business market.
Regulations around emissions, renewable energy and energy efficiency have increased markedly in recent years and these provide opportunities for energy services companies.
While many business suppliers typically offer fixed-price or rolling contracts based on the prevailing market rate, GDF Suez says it also allows its customers to fix the price they want at a later time.
As well as energy provision and management the company has some 300 Power Purchase Agreements (PPA) in place with energy generators.
Last week it announced it had reached a PPA with waste business AmeyCespa, to buy electricity from its major new energy-from-waste facility in North Yorkshire.
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