Inspired PLC for Procurement for Housing
Whilst energy costs have fallen recently, wholesale prices are still up 72%[1] against where they were pre-invasion of Ukraine. Social housing providers have been trying to tackle rising costs in the face of upcoming renewals and increased pressure to decarbonise.
Here we explore how to lower energy consumption across your portfolio to mitigate soaring energy costs, with advice from Inspired PLC’s energy experts.
Securing the best procurement contract for your organisation
We have witnessed record high energy prices over the past 12 months, pushing many organisations’ budgets to the limit. Many social housing providers have been working to better optimise their procurement process to achieve the lowest price possible in the current market.
Many are also facing upcoming renewals and with the market price still high, what is the best route to choose?
Fixed vs Flex
Traditionally, social housing providers have always secured a fixed procurement contract to provide budget certainty to tenants for the duration of the contract, and a flexible contract might not feel like the right option — especially whilst the market is volatile.
However, there is a way social housing providers can enter a flexible energy procurement contract under Section 20 of the Landlord and Tenant Act. To enter a contract of more than 12 months that contributes more than £250 for a works contract and more than £100 for a service contract, housing providers will need to enter a consultation.
This would allow housing associations to benefit from longer-term energy contracts (QLTA’s), but the process must stay open for 56 days. However, being able to hold an energy price for 56 days in a volatile market is challenging.
It is, however, possible to get dispensation from the requirements to consult by applying to the first-tier tribunal. Whilst this may seem like more administrative work on the surface, there are many benefits to obtaining a longer-term contract for housing associations and their tenants.
Unless a housing provider’s internal governance states that they must buy a fixed energy procurement contract, a flexible contract provides the flexibility to buy volume when market prices are more favourable, and thus taking advantage of subsequent market movements.
Whilst the market is still inflated, Inspired’s experts recommend that housing providers look into flexible buying options. This gives greater control of energy spend but knowing when the right time to buy is, can be difficult.
Inspired’s specialist procurement team can help to ensure you can make the right purchasing decisions with confidence.
Standalone vs Collective
Larger organisations who have enough volume requirement, usually over 20 GWh often secure standalone energy contracts and can take advantage of lower pricing. But for smaller organisations who don’t have the volume required for a standalone contract, usually under 8 GWh, it can be difficult to access lower pricing.
A collective enables an energy consultancy, like Inspired, to group the volume of several housing associations to purchase on the wholesale market. This allows those smaller organisations to spread risk without the need to have their own large trading volume.
Procurement for Housing have partnered with Inspired PLC to create a tailored buying strategy for housing associations. The wholesale energy and industry costs are fixed in annual intervals whilst still spreading the risk of those purchases over time, and delivering before each annual period begins. This means Procurement for Housing members can deliver budget certainty and avoid risk within the year of the contract by working with Inspired.
Reduce your consumption
Reducing your consumption is a key part of lowering costs. But you can’t manage what you can’t measure and there may be opportunities to reduce consumption by eliminating unnecessary energy use.
For some organisations, energy wastage can be identified through monitoring and analysing demand versus usage over a period of time. If your usage is much higher than what is ideal, you should look to find ways to reduce this. Implementing energy management software or looking into monitoring and targeting (profile alerts) to identify excess consumption and wastage is a good place to start.
Recovering historical overcharges and bill validation
Many organisations do not have the time or resource to review their energy bills every month. This could potentially mean thousands of pounds is being incorrectly billed. A bill validation service can be the first step to recovering any overcharges as it’s understood that up to 20% of energy bills are incorrect. An investigation into historical invoices can also uncover up to 6 years’ worth of overcharges on energy bills. Both can ensure bills are correct going forward and any errors can be recovered leading to significant refunds that you can use to reinvest into your housing portfolio.
Improve your energy efficiency
There are also much easier and cheaper ways to improve energy efficiency from installing LEDs, which use up to 90% less energy than traditional lighting, to conducting a site audit to highlight any areas of high consumption.
On-site generation can also help to tackle rising energy costs whilst supporting cleaner operations. Whilst the initial cost may be high, the long-term benefits far outweigh the initial cost. Solar PV coupled with battery storage is just one way that can have a significant impact on your carbon emissions and energy costs.
Have you started reporting on your Scope 3 emissions?
Businesses and organisations in the UK are required to report on their Greenhouse Gas (GHG) emissions, in particular their Scope 1 and 2 but many are choosing to voluntarily report on their Scope 3 emissions to take advantage of the benefits the recommendations bring including influencing and supporting suppliers to implement sustainability initiatives.
Scope 3 emissions are the emissions created throughout the supply chain and whilst it is not yet mandatory to report on them (unless you are captured by ESOS), many businesses choose to as pressure to decarbonise from customers, government, board members and investors increase. But Scope 3 will likely become mandatory in the future and is now the biggest area of emissions for many businesses. In fact, the Carbon Disclosure Project (CDP) has suggested that Scope 3 emissions account for 75% of companies’ greenhouse gas emissions on average [2].
However, gathering all the data required to accurately report can be complex which is why it’s highly beneficial to work with a seasoned professional.
Partner with one of the UK’s leading energy and sustainability consultants
“Our partnership with Inspired PLC has brought our social housing providers added benefits and flexibility when it comes to their energy. We understand that navigating the energy market can be difficult which is why we’re so pleased to have Inspired at our side, supporting our members to achieve their budgetary and risk requirements.”
Procurement for Housing
Inspired PLC is the preferred consultant for over 30 major housing providers. We help ease the burden of energy management so that you can remain focused on what’s important – your stock and tenants. For more information, talk to us today on 01772 689 250 or email energy@pfh.co.uk.
[1] Market Insights from Inspired PLC
[2] Carbon Disclosure Project (2022) CDP Technical Note: Relevance of Scope 3 Categories by Sector https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/504/original/CDP-technical-note-scope-3-relevance-by-sector.pdf?1649687608
