ENERGY PROCUREMENT
IMPACT OF COVID-19 ON THE ENERGY MARKET The impact of COVID-19 has created unprecedented economic and social consequences globally. COVID-19 has significantly affected all aspects of life, including the energy sector. Though we are nearing the end of some economic and social restrictions, the consequences may have indelibly impacted the behaviour of the energy market. Fortunately, there are tentative signs of an economic revival as businesses begin to resume operations, which means many could now capitalise on the developments on the energy market. 26
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Fig 1 Energy prices have plunged to record lows. [Source: Northern Gas and Power]
ommercial activity has been curtailed for many businesses and firms since the UK’s lockdown, with the Organisation for Economic Cooperation and Development forecasting an alarming 11.5% slump in UK GDP, greater than the falls in France, Italy, Spain, Germany and the US, the Paris-based thinktank said. The new reality compels businesses to better manage costs and energy behaviour to secure their futures or risk financial damage as we begin the post COVID-19 recovery. The time afforded to businesses as a result of lockdown has been a great opportunity to regulate and scrutinise commercial operations to identify and remedy inefficiencies. This report looks at how the energy market has been affected, and what businesses are still able to do to capitalise and manage energy and energy expenses efficiently.
IS IT APPROPRIATE TO BUY ENERGY NOW? COVID-19 has caused companies in the UK to urgently review their operations in order to maintain financial stability
ENERGY MANAGER MAGAZINE • JULY/AUGUST 2020
through months of inaction. The Furlough scheme, business grants, VAT deferrals and interruption loans have gone some way to protect businesses, but a more obvious and straightforward solution has been neglected: the cost of energy. Often overlooked, energy costs constitute the single most critical supply element for the smooth output and operation of any business, especially in services such as the industrial sector. Energy costs for the manufacturing industry often represent the second or third highest expenditure, after labour costs or materials. Manufacturers have saved money through the lower demand for materials, and governmentsanctioned financial assistance has relieved some payrolls, but what is being done about energy costs? The global energy market is currently sitting at a 70-year low. Some perceptive energy managers have managed to capitalise on this by locking in longterm fixed energy contracts at a heavily reduced premium, allowing them to budget and forecast responsibly over the long-term with discounted energy rates. Live data from wholesale energy markets indicate that the grid is
