How the coronavirus is impacting the climate crisis

How the coronavirus is impacting the climate crisis

Every cloud has a silver lining, and it seems the disruption and devastation caused by COVID-19 has one, too.

For the past few weeks, the spread of the coronavirus has dominated every major news story and conversation. What began as a threat to the residents of Wuhan, China has now become a global pandemic, with governments around the world urging citizens to stay inside, wash their hands and isolate themselves as much as possible.

But how has this impacted the other major crisis of our time: climate change? According to satellite images from the European Space Agency (ESA), the coronavirus impact has slashed air pollution levels across the globe in what is being called the “largest scale experiment ever”.

The environmental impact of COVID-19

You might think that, because we’re spending more time at home, energy levels would be on the up. After all, surely we’re all using more gas and electricity than we normally would be thanks to social isolation.

However, domestic gas and electric are just a drop in the ocean when pitted against heavy climate hitters like air travel, vehicle emissions and heavy industry.

And as a result of the coronavirus, these factors have essentially been put on hold. Readings from ESA’s Sentinel-5P satellite show that over the past six weeks, levels of nitrogen dioxide (NO2) over industrial areas in Asia and Europe have dropped dramatically, and are markedly lower than this time last year.

Usually produced by car engines, power plants and planes, the drop in NO2 is directly associated with the actions taking by governments to stop the spread of COVID-19.

Air pollution has already dropped in the UK

The UK might be more than a week behind other countries like Italy in terms of COVID-19 spread, but roadside monitors are already showing significantly reduced levels of pollution, especially in areas like London.

Road traffic makes up around 80% of NO2 emissions in the UK. Every kilometre not driven by the average diesel car stops 52 milligrams of NO2 entering in the air. Times this by the usual number of cars on the road and kilometres driven, and you’re looking at huge numbers.

This could have long-term positive effects

There’s no doubt that the coronavirus crisis has been nothing short of devastating on a global scale, but the environmental impact of its spread could thankfully bring some positive news for us all in the long run, according to Professor of Air Pollution at the University of Leicester, Paul Monks:

“It seems entirely probable that a reduction in air pollution will be beneficial to people in susceptible categories, for example some asthma sufferers. It could reduce the spread of disease. A high level of air pollution exacerbates viral uptake because it inflames and lowers immunity.”

At The Energy Check we have set our own ambitious targets for reducing both our own energy consumption and those of our clients over the coming months and years. Our goal for 2020 is to have made energy savings totalling £9.5 million, equating to 15GWh of consumption. This correlates to an incredible 90,000t of CO2 emissions. And if we were to predict one positive out of the current upheaval it would be that organisations will look more closely at the benefits of remote working, lean manufacturing and less resource-intensive processes in the future. This can only serve to help the fight against global warming.

Want to know how you can step up your efforts against carbon emissions and save on energy costs in the process? Simply click here to get in touch.

What’s going on with the price of oil and what does it mean for you?

What’s going on with the price of oil and what does it mean for you?

What’s behind the biggest fall in oil prices for almost 20 years?

At the start of what analysts are already calling a “price war”, oil prices crashed in Asia by around 30% last week. This marks the biggest fall in cost per barrel since the day in 1991 when US forces launched air strikes on Iraqi troops after the invasion of Kuwait.

Saudi Arabia – the world’s top oil exporter – slashed its oil prices after failing to convince Russia to support sharp cuts to production. Oil cartel OPEC has previously worked with Russia on production curbs, having formed the OPEC+ alliance in 2016 when prices last suffered a significant drop.

Why are prices crashing?

The 14 members of the OPEC cartel – led by Saudi Arabia – originally met with Russian allies and other non-OPEC members in order to discuss how best to respond to failing demand caused by the growing spread of the coronavirus.

But the two sides could not agree on measures to cut oil production by up to 1.5 million barrels a day. In response, Saudi Arabia launched the oil price war, and prices have been dropping since.

Initial impacts saw Brent crude futures, the global oil benchmark, drop below $50 a barrel. At present, prices have fallen to a low of $31.02 per barrel after Saudi Arabis sharply cut the prices it charges customers. The region is home to major importers such as Japan, China, India and South Korea.

Global oil production is now significantly outpacing demand. As such, OPEC members are no expected to pump more oil to capture the market.

In a research note, oil analyst Martjin Rats of Morgan Stanley comments: “Given OPEC countries now have very little incentive to restrain production, oil markets look sharply oversupplied.”

Speaking to the BBC, energy analyst Vandana Hari of Vanda Insights research firm expressed shock on behalf of the markets following the disagreement on production costs between OPEC and Russia. Just last year, the alliance surpassed the US as the world’s top producer.

Hari comments: “The collapse of the OPEC/non-OPEC alliance is a major shock to the oil market, and it comes with the added challenge that we don’t have the full picture of what lies ahead.”

Which countries will be hurt the most?

It’s hard to see any winners in this price war. The biggest oil producing countries are set to lose money regardless of how much market share they can rescue. Meanwhile, Gulf countries like Kuwait and the United Arab Emirates need a price around $70 a barrel or higher to balance their budgets, due to high government spending and generous subsidies for citizens.

Oil dependent countries like Libya, Venezuela, Iraq and Iran have all suffered from years of conflict and sanctions, meaning they will likely pay the heaviest price in this war. The US and the UK will feel the impact too, as low prices will hurt oil companies.

What is the impact on consumers?

One potential positive takeaway from this situation that importing nations may experience some much-needed relief through falling prices, and consumers benefit in general from lower energy bills – not to mention declining petrol costs.

But any reduction in oil and gas prices will most likely be outweighed by the disruption to the economy caused by the coronavirus. Global stock markets have crashed around the world due to the impact of the virus’ spread and the oil price war. The full consequences of the coronavirus spread remain unclear.

If it’s time to compare energy suppliers and see if you could be getting a better deal, click here to speak to a member of our team today.

If you believe you are safe in a fixed energy contract you could be in for a nasty surprise

If you believe you are safe in a fixed energy contract you could be in for a nasty surprise

Beware the small print: hidden charges and subtle contract clauses often mean that your energy bills can fluctuate – even if your deal claims to be “fixed”.

Whether it’s a mortgage or a utility bill, millions of us prefer to choose “fixed term” deals when we enter into contracts with suppliers and providers. While a fixed contract may mean that we miss out on any potential savings when costs go down – such as interest rates or oil prices – locking in a contract does help to provide peace of mind. After all, without this security we may be left helpless when costs begin to creep up.

For business owners the benefits of fixed contracts often outweigh the negatives, as it makes forecasting for the future significantly easier. In fact, many of the finance and procurement teams I have spoken to about their utilities state that having this level of security in place is crucially important to their business.

Unfortunately for these organisations, the truth is that a so-called “fixed contract” can often hide significant fluctuations once you look past the headline figures. Look at the small print of your energy contract and there are a number of charges that may bring unwanted costs to your business.

Non-commodity charges

The Climate Change Levy

There are numerous external charges your business should be aware of within any energy contract, including taxes and levies imposed in relation to the supply of electricity and gas. Among these is the Climate Change Levy, which, as you may be aware, is set to increase for businesses in April 2019.

The Climate Change Levy is designed to incentivise companies to become more energy efficient and reduce carbon emissions related to business activities. And while it makes up a relatively small percentage of an organisation’s overall energy costs, there are changes coming into play in April 2019 that may nevertheless have a significant impact on your bottom line.

From April, the levy on energy will increase by 45% for electricity and 67% for gas. This shouldn’t be a cause for most businesses to panic as CCL will still only account for roughly 2.5% of the overall electricity bill, but this is just one of many charges which could increase on your “fixed contract”.

Delivering energy

Another charge that can change within a contract is the charge for delivering energy to your premises. These are termed the Transmission and Distribution Charges and it pays for National Grid and your local DNO (i.e. Northern Powergrid) to provide the infrastructure to allow electricity to arrive at your home or business. While you may think that this is just part and parcel of the service you pay for via your supplier on a fixed contract basis, many contracts include clauses that enable them to make changes if those costs are increased by National Grid or the DNO. After all, the Supplier doesn’t want any increases to cut into their profit margins!

There are published forecasts for Transmission charges (the cost of getting electricity from the Generator via the National Grid to your local Distribution Network Operator), which we currently expect to increase by around a 30% over the coming years. There are many ‘fixed’ energy contracts out there which only allow a 6% tolerance on Transmission Network Use of System charges. Should they exceed these tolerances, customers risk a supplier revisiting these charges and increasing a business’s bills.

Some suppliers will provide a p/kWh levelisation figure for various charges. If this figure is surpassed then they’ll pass on those additional fees. What does that mean in reality? Well, a recent example I’ve seen had Balancing Use of System, Renewal Obligation and Feed In Tariffs (all charges which are possibly hidden in your unit rate) at a forecasted rate of 2.36p/kWh. Yet there are forecasts showing this rising to 2.852p/kWh in the near future – an additional 0.5p/kWh.

That may not sound like a large number but when we take into account the transmission charges and CCL increases, it’s starting to rack up!

Estimated consumptions may come back to bite you

If you’re on a half-hourly meter, there is always a risk associated with a supplier taking you on as a new customer. They don’t know what your energy consumption is going to be and can only work on best estimates from your previous years usage. If you use too little or too much, the supplier becomes exposed to additional charges for selling the electricity back to the grid or for purchasing additional energy at an increased rate.

But surely the supplier takes on this risk in a fixed contract?

I’m afraid not in all cases. Typically, there is a contract clause, normally termed the volume tolerance clause, that allows them to recover those costs should you not utilise your forecasted energy consumption as expected. The tolerance is typically +/- 10%. Be wary of this clause if you’re unsure how much energy you will use or have plans to substantially reduce/change your energy requirements.

The energy price is vulnerable

One thing that we all fear – both as consumers and suppliers – is a dramatic shift in the wholesale price of energy. Of course, we feel the change most keenly at the petrol pumps where we can see changes on a regular basis in bright lights. Whether it is political uncertainty, a breakdown in infrastructure or an accident such as an oil spillage, there are many factors that can influence energy costs.

Again, you would expect that as a fixed contract customer your supplier has weighed up this risk and calculated your business or domestic energy prices accordingly. But the truth is that some suppliers still include contract clauses that enable them to change the Contract Price if the wholesale price goes up by a certain percentage – usually 25%. But is it likely to happen?

Over the course of a contract with your energy supplier it is unlikely to see such a huge increase in a short period. However, with such uncertainty in the world currently it is important that both businesses and households are aware that price changes are possible.

So fixed doesn’t always mean fixed. What should I do?

It may sound like obvious advice but it is always important to review the terms and conditions of your utility contracts in detail. Fixed contracts can hide some nasty surprises. A possible option is to opt instead for a Pass-through contract if you’re a half-hourly metered customer, which breaks down all of the non-commodity charges and helps businesses to understand precisely what can and cannot change during the lifetime of a contract.

But it is worth pointing out that just because there are clauses mentioned in your contract doesn’t mean the supplier will automatically enforce them. And with the help of an energy consultant you can work with suppliers to get a wholly transparent deal that offers you genuine security.

If you want to ensure that unforeseen energy costs don’t creep up on you and upset your financial forecasts, the team here at The Energy Check can help you every step of the way. As I have often said, it isn’t always about switching from tariff to tariff – often it is about understanding how you are being charged for your energy and what can be done to manage costs and consumption in both the short and long term.

Get in touch with the team here.

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