Farmers: Act now to reduce energy costs in 2017

2017 heralds significant change in the British energy market, and farmers should act now to protect against higher power costs, warns rural property consultant Butler Sherborn.

This past winter has shaken the energy markets with some of the highest wholesale power costs on record, reaching over £1,000/MWh in November. Market volatility is nothing new to those in the agriculture sector, but ahead of Brexit and potential loss of income support, British farmers need to concentrate on improving business efficiencies and reducing risk, says Richard Palmer, head of energy and estate business management. “Farmers will add most value to their businesses by focussing not just on how much energy is used but also when and where it comes from.”

So what changes are rural businesses likely to see in the year ahead? “The constraints of the UK energy system mean the Government is encouraging customers to think differently, leading to the introduction of a Capacity Market Levy and the roll out of smart meters,” explains Mr Palmer. “By 2020, every home in Britain will have a smart meter, but some farmers will have to upgrade to this system by April 2017, depending on the classification of their energy use.”

These changes will increase meter operating costs and mean prices at winter peak times between 4pm and 7pm – a busy time for many dairy farmers – will be more than double compared with other periods, he warns. To avoid peak rates as seasonal time of day tariffs (STODs) become more common, farmers will need to rethink their management strategies. Opportunities to reduce costs include introducing demand management techniques and battery storage, as well as generating renewable energy on site.

More than a third of UK farmers are already using the sun, wind and energy crops to produce low-carbon energy, says Joanne Ragdale managing director at The Energy Manager. And as big businesses increasingly buy from renewable energy sources, there are opportunities for farmers to promote their low carbon production, potentially using online tools which allow consumers to identify exactly where their energy comes from.

Despite a drop in government subsidies, generating renewable energy is still economically worthwhile, she explains. “In the coming year, government levies and taxes, distribution costs, and network charges will make up over 60% of your electricity bill. Generating renewable energy on site and using battery storage could be the logical move to avoid these peak and indirect charges.”

Encouragingly, the Government is still committed to the decarbonisation of heat following its consultation on the Renewable Heat Incentive (RHI), says Mr Palmer. “Three approaches stand out; electrifying heat with heat pumps, replacing methane with green gases such as biomethane from Anaerobic Digestion (AD) plants, and developing heat networks or district heating schemes.”

Many rural businesses also generate income from residential and commercial rental properties, and should be aware of the minimum efficiency standards coming into place on 1 April 2018, he adds. “Now is therefore an ideal time to implement benchmarking, think strategically, and deliver innovation and efficiency gains through better energy management.”