“We need a multi-dimensional, Rubik’s Cube approach to solving the UK’s energy system. By taking control of supply and demand, and looking at both direct energy and carbon costs, UK organisations can find tangible ways to decarbonise in a challenging economic climate.”
Vicky Parker, Power & Utilities Leader, PwC UK
A long-term view
As energy pricing remains volatile, planning for the future can be difficult. To date, businesses have focused on short-term considerations but as government support subsides and volatility continues, a long-term view will be essential.
Challenges are set to continue with 81% of surveyed businesses expecting to increase their prices at least moderately in the next two years as a result of energy costs, and 72% expecting energy costs to negatively impact profits. Businesses need to build more enduring resilience and to do this will need to gain greater control over their energy usage and pricing.
Developing an energy strategy that tackles cost and carbon together will be key. This is a complex undertaking as businesses look beyond energy-specific functions and consider how the design of their operations, systems and processes contribute to energy costs and carbon emissions. To gain control of their energy, long-term investments and operational transformation will be crucial for businesses as managing both energy supply and demand requires cross-functional collaboration, capital investment and long-term commitment.
Supply and demand
As businesses take greater control of their energy, considering both supply and demand levers is vital. To protect themselves from ongoing energy price volatility, organisations need a firm grip on energy at the point of supply and when controlling their own demand. Reducing consumption and boosting efficiency enables businesses to build resilience and remain competitive in a difficult market.
To get ahead, businesses need to gain greater visibility and increase their knowledge of their baseline usage and when, where and how this could change. Organisations find themselves at different stages of a maturity curve as they try to manage the effects of price volatility on their operations.
To date, measures taken have tended to be short-term and supply-focused, ranging from reviewing energy procurement to renegotiating contracts. A focus on longer term initiatives is now crucial. Our survey highlights that only 25% of organisations have considered changing patterns of energy use and just 22% have reviewed the mix of products and services.
As government support subsides, UK organisations need to consider actions that will build long-term resilience by focusing on both supply and demand.
Tackling cost and carbon
In a volatile market, businesses are struggling to juggle rising energy costs alongside their decarbonisation commitments. All companies will need to take action to assess their reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) and financial reporting standards. In addition, organisations subject to the UK Emissions Trading Scheme (ETS) will need to consider the financial impact of carbon emissions as part of any cost saving strategy.
Managing these priorities in silos has proven ineffective. In this year’s Energy Survey, 63% of organisations ranked environmental commitments among their top five barriers to mitigating energy costs, while 37% said that high energy costs have hindered their progress on decarbonisation. As both priorities remain crucial, businesses must consider the full “cost-carbon” equation.
Rather than viewing these as competing priorities, organisations should tackle them together. But this isn’t always a straightforward equation, businesses will require a greater degree of cross business collaboration and leadership and an organisational commitment to long-term change and investment.
Perspectives from our discussion with National Grid
How focusing on supply and demand can reduce energy costs
As businesses navigate a challenging market, experts explore how focusing on both supply and demand can make energy more affordable, reliable and accessible while also driving competitiveness internationally.
Discover National Grid’s energy priorities as they plan for 2035
As National Grid plans for 2035, Chief Strategy and Regulation Officer Ben Wilson explains his priorities for delivering the energy transition.
Embrace agility to navigate volatility and drive the energy transition.
Agility is crucial as businesses juggle the need to reduce energy costs while making progress on their transition to net zero.
Contact us
Energy, Utilities & Resources Deals Leader, Partner, PwC United Kingdom
Tel: +44 (0)7866 727124
