Tag Archive for: Technical and Energy Consulting

The energy price rises

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We are on the January blues and suffer a new increase in energy prices, but this time it seems to be abnormally high.

Apparently, according to some medium-sized suppliers not as well-known as frequent (Endesa, Gas Natural Fenosa, Iberdrola, etc) “the circumstances that cause this transitional situation are:

  • The cold wave that is affecting Europe is increasing the electric demand and heating using fossil fuels.
  • The stop of an important part of French nuclear park is increasing the electric exportation from Spain to the neighbouring country.
  • The absence of renewable resource – mainly hydraulic – and its deflator effect on prices is forcing producer to use more non-renewable thermal generation process – such as gas or coal – in the auction.”

It seems this situation is atypical for this time of year and as we go, electricity prices should return to values ​​close to the average recorded in previous years.

For more information, consult this page:

“Extraordinary rise in the price of electricity: a perfect storm”.

To avoid market volatility and the price at current rise, a customer may choose to hire a fixed price, considering that historically indexed prices have always come out cheaper over a year, the normal term of a contract of supply. Therefore, we continue to recommend the hiring of variable supply prices, unless the customer is very reluctant to minimal risk, which in any case would be covered in all likelihood because after the year you can return to renegotiate the terms.

Save on the wrong side is to spend more for the same

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In a previous post, we talked about the cost overruns in which we could incur trying to lower the price hiring our energy with a trading company. In this post, we would like to focus on raising consumer’s awareness about the importance to make the right decision when he renews, extends or replaces any system or subsystem or any element which contributes to the consumption of an installation.

SMEs struggle every day against all types of external and internal problems, subsisting in increasingly competitive and aggressive environments, where often the only element of concise comparison is the price. As energy costs have increased exponentially in recent years and is expected to continue to do so despite the steady trend of recent months, it has become one more element to consider. It is necessary that purchasing decisions take into account efficiency criteria when implementing corrective measures as well to obey technical needs, as extensions motivated by an expected production growth. If the businessman only wants to give priority to the “cost” of different offers during the purchase process over the energy consumption of those once implemented he will be mistaken, considering that when turning on the switch of what he has installed, he will have to pay the kWh consumption arising. Neither the installer responsible for the execution, nor the engineer who has designed the project, nor the manufacturer of the equipment that has sold him, will pay for him the increase in the invoice. Everyone has a different role and selection criteria should note that the above is met, but none of them will hold what we consume or pay afterwards per unit of production since only an adviser with engineering and technical advice capabilities can do this.

Applying efficiency criteria in any purchasing decision we will obtain clear advantages:

  • Ensure the return on investment by reducing consumption in the case of renovations or improvement of facilities.
  • We will have a clear forecast of energy consumption that allows us to compare between different alternatives.
  • We will reduce maintenance costs since usually selected equipment based on efficiency criteria includes the entire set of items to install: equipment, design, control elements, etc. Increasing energy efficiency means increasing productivity.
  • For every € invested we will recover a part in every kWh consumed. Therefore it is essential to apply efficiency criteria in investment over one year.

Energy efficiency is not a theoretical concept as many believe, it starts from the time when we have to undertake daily costs to upgrade facilities that use are deteriorating. The sooner we understand it, the sooner we will save energy.

Buy at a fixed price or indexed

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Recently the electrical trading companies are betting on offer an indexed price, as there is a growing demand for this type of offer. It is not surprising since traditionally indexed price has always been a way to hire the most economical electrical energy.

Why is that?

To understand we can make a comparison with the banking sector. The fixed rate offered by a bank when hiring a mortgage includes detours costs and the risk of fluctuations involving loss to who sells. Indeed, a fixed price is a risk for whom provides it, such risk, let’s call it warranty, is included in the price we finally pay as an additional cost, as well for the fixed interest in the banking sector or the rate of fixed prices in the energy sector. When buying indexed price, we assume that risk. Therefore it is conceivable that it will be cheaper in the medium term. Given that contracts are signed for one year, the risk is negligible.

There is no free lunch

However, the indexed price is interesting whenever we do not charge commission high costs, also called operating costs or fee. The reasonable cost for SMEs is between 3 and 4 € / MWh hired (estimated consumption from consumer or trading company reading). Naturally this is always subject to consumption. Usually, the greater the consumption, the better trading offer.

We don’t need to understand the energy market. Let’s search a good adviser to tell us and ensure that we are paying the right price and, specially that we are optimised over our competitors.

Cheap can be expensive, like energy

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The energy market is currently one of the most dynamic. Since its liberalisation in 1997, with the first Aznar’s term in office, it has become a business for many companies that have decided to invest in energy trading, reaching a considerable turnover, taking into account the business life-cycle of the sector since then.

Today there are more than 420 trading companies located throughout the Spanish territory, whose scope varies depending on their size. Only 80 of them operate nationwide. Good judgement when choosing between this wide range is essential, even if hiring energy is a commodity and has a high cost “the price is not everything“.

When we talk about buying and selling energy we refer to its commercialisation. A final consumer does not buy and does certainly not sell. In colloquial term, he hires energy with one or another company. Hiring a fixed price implies generally to guarantee a price for a year. We often receive annual discounts on fixed prices, but to think that a discount on a fixed price necessarily means a lowering of our current costs in the same proportion as implying the discount itself is a mistake: on the one hand, the discount only applies on the unregulated part, the part set by the commercialisation company represents approximately between 25 and 30 percent of the bill; on the other hand, to determine the actual extent of the discount, the rate on which it will be applied should be at most the same rate we have now hired, otherwise, we could be incurring extra costs.

We have also heard about hiring indexed prices, which implies buying the energy matching the market price adding a sales fee charged by the distributor. In this case, we will not have a fixed price during one year, but our price will vary according to market fluctuations. There’s a lot to talk about this and many ways to compare, but no guarantee to have a specific price since we subject it to daily market fluctuations. So for now, if you decide to hire the indexed price we recommend to order a comparison with past prices and simulated bills, ie, asking the vendor or distributor that simulates us our recent bill with prices he would have said applied during the period we choose to compare.

Notwithstanding the above, it is important to note that, as in all sectors, not all existing deals are equally reliable. Biggest traders provide continuity, but not necessarily a low price. However, we can not choose a small one only for bid price, because the business of buying and selling is complex and any problems arising from poor management by who we hired the energy with can bring us indirect problems. It is therefore better to look for a combination of reliability and price, asking for referrals, finding out the history of the company and finding out if in the recent past has incurred problems. CNMC and BOE pages are sources of useful information.

Energy efficiency sernoven-eficiencia-energetica-centros-deportivos-2 Energy efficiency

Sernoven, cornerstone for sports centers energy efficiency

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As a result of the experience accumulated on energy efficiency over 5 years, Sernoven has achieved the following excellent results in sports centers energy optimization:

  • Continuous improvement in the performance of Technical and Energy Consulting Service provided for Sports Centers; energy monitoring, changing usage habits, technical management of facilities optimization, maintenance facilities providing optimization, technical adequacy of obsolete or poorly maintained facilities, etc.
  • Through detailed analysis of telemetry data provided by each of the main equipment responsible of the sports facilities consumption, we have achieved to prioritize, according to the guideline customer, measures with less impact on investment and lower amount of savings over those of greater impact on investment and greater amount or vice versa. We reduce up to 40% in electricity bills and as much in thermal bills (gas, oil, etc.) by consulting detail, without necessarily having to take major investments or changes. It should be remembered that funding is provided against cost savings, however small may be the investment.
  • To acquire a deep understanding of the financing models that fit the reality of the sector that has made possible the implementation of energy efficiency measures that require a major investment.
  • Continually increase CUSTOMERS portfolio in this Sector.

sernoven-eficiencia-energetica-centros-deportivos

 

Some important milestones:

  1. Air/water cooler replacement project with a hight efficiency cooler with heat recovery for preheating the ACS (hot water for sanitary uses) and semi-Olympic pool water. ESEER> 5 (cooling and thermal energy)

Investment = 241,000 €

Savings = 50,000 € / year

PRS = 4,8 years

  1. ACS production system replacement project of electrical resistance by high efficiency heat pumps (COP> 4)

Investment = 105,000 €

Savings = 24,000 € / year

PRS = 4.3 years

  1. Implementation of remote monitoring system (TELEMETRY) of electrical energy and natural gas consumption for trading variables and consumption habits optimization.
  2. Adequacy of variables instructions and facilities operation (ACS accumulation temperature, flow pumps, pools seasonal temperature, etc.) to optimize consumption.

Investment = 0€

Savings = 15,000 € / year

From SERNOVEN we offer all our knowledge and experience to improve the management of their facilities, to reduce energy costs and improve service quality to its users.