Economy Seven Article – Francis Clark

Yes, there is a case – and often stronger than businesses realise, given the cost pressures that are building in the energy supply system.
 
The country’s energy supply industry is at the start of a major, multi-decade shift in the way it meets the needs of individual businesses.
 
The policy framework is beginning, in certain limited areas, to get the incentives right for local businesses to play their part in that change. Irrespective of any action or inaction on their part, energy costs are expected to rise substantially over the coming decade, so there are real risks in the changing situation too.
 
Energy efficiency measures are becoming straightforward decisions for many businesses, offering short paybacks and aligning with broader corporate objectives.
 
Reviewing energy use and environmental impact should be on the agenda of every business as there has been, and continues to be, a lot of innovation and new product development which makes cost savings easier to achieve without any loss in output.
 
The cost savings can be substantial even at today’s energy prices and the steps taken now will mitigate the impact of future price rises and/or government intervention.
 
From a business perspective, however, the real challenges lie in meeting some of the energy generation opportunities.
 
Part of the longer term, upward pressure on energy prices comes from funding the revenue support mechanisms for renewable deployment. For the right business in the right location these can offer interesting investment prospects at the current level of support.
 
But there are practical barriers, not least the capital intensive nature of most projects, the length of time from inception to commissioning and the potential drain on core business management time.
 
The general business environment does not help at present, either. It will be easier to source funding for such projects when the broader economic picture and, specifically, the capital market environment are fully recovered from the recession. We are still not quite there in my view.
 
Public policy in this field, which is clear in its ambitions, also sometimes fails to deliver the right framework. Only when the creativity, resources and sheer hard work of private sector business are harnessed can the UK generally begin to meet the challenges it faces.
 
This needs to be done with carrot rather than stick. More regulation or untargeted business tax or levies will not inspire businesses proactively to change their environmental impact.
 
But the right incentives, with practical help, could cause a stampede to deliver the green agenda, to the benefit of all.