New energy risk forecaster allows businesses to project costs for next ten years

The forecasting tool, developed by SMS Plc, aims to assist business energy users in developing long-term investment, procurement and efficiency strategies to mitigate the risks brought on by rising costs.

Major UK energy services and smart metering company, SMS Plc, has launched an innovative new energy risk management tool, allowing British businesses to project their potential electricity and gas costs for up to ten years in advance.

The free-to-use Energy Risk Forecaster, available here, aims to raise awareness about the impact of increasing business energy bills over the next decade, particularly as a result of cumulative network and policy charges associated with Britain’s ongoing low-carbon transition.

Not only does the Energy Risk Forecaster set out to highlight the effect of these growing ‘third-party charges’, it also accounts for harder-to-predict wholesale energy prices using a sophisticated model that examines the underlying fundamentals of supply and demand, the economics of generation and the expected impact of legislation.

How it works

The Energy Risk Forecaster provides a projection of your organisation’s annual energy costs until 2027-28. Simply choose the energy type (electricity or gas), enter your tariff and latest annual consumption rate, then let the Energy Risk Forecaster generate your results. Your estimated ten-year energy costs allow you to easily envisage the potential future financial impact on your business and can be used to inform an energy strategy that helps mitigate this risk.

Rising costs, greater risk

For both electricity and gas, the primary drivers for increased costs in the next ten years are the non-commodity elements of the bill, with the largest rise coming from new subsidy elements introduced earlier this decade to promote sustainable generation and greater grid flexibility. As a result, SMS Plc expects electricity costs to rise by 55% between now and 2028, while gas is forecast to increase by 21% over the same period.

Within this environment, it has become essential for British businesses to get a clearer picture of their future energy costs, and particularly how this affects the different aspects of energy risk they will face if a fully-mitigating energy strategy is not put in place.

As such, the intention of the SMS Plc Energy Risk Forecaster is not merely to point out the direct price impact on businesses (and how this can be influenced by a smarter energy-buying strategy), but also call attention to the ripple effect of these extra costs on energy billing and consumption.

In order to minimise risk of higher costs in coming years, organisations will need to take greater care over how they are invoiced for their energy (through comprehensive bill validation), and perhaps most pertinently, find ways to reduce the amount of energy they use through the implementation of monitoring, efficiency and flexibility solutions.

A benchmark for long-term energy strategies

Commenting on the Energy Risk Forecaster, Paul Jarvis, Head of Energy Markets at SMS Plc, said:

“We’ve created this tool in response to the demand from energy users who need to better manage their long-term price risks. As the tool provides a complete picture, building up both non-commodity costs and wholesale price forecasts, it’s been extremely well received by our clients.

“The UK energy market will see dramatic changes over the next decade as we plan for grid decentralisation and decarbonisation in line with increasing demand from households and businesses. These factors have all been taken into consideration in our models.

“Using our forecast as a benchmark, we help energy users develop much longer-term investment, procurement and efficiency strategies to not only mitigate the risk, but to also unlock the benefits that the new market is creating for those willing to plan ahead and adapt quickly.”

You can use the free Energy Risk Forecaster to project your 10-year costs here.

Specialist energy services and smart metering company SMS Plc aims to help businesses become completely #energyconfident in face of rising risk. Offering the complete energy management service, SMS offers an integrated approach to risk management across procurement, billing, consumption and delivery. Be #energyconfident – get in touch today.

*This article first appeared on BusinessGreen.com