Energy procurement represents a significant percentage of public sector expenditure, accounting for some £3.25 billion ($5.3 billion) annually. Clearly, an effective approach to collaborative purchasing offers the scope for real savings for the public purse.
The public sector is potentially a very powerful purchaser and is uniquely placed to play a leading role in sustainable procurement and in helping the UK to meet its targets of reducing CO2 emissions by 80 per cent by 2050. Furthermore, with the UK public sector faced with a growing need to provide greater operational efficiencies as well as demonstrate their commitment to be among the leaders in the European Union (EU) for sustainable procurement, the need to secure best value through collaborative working has also become ever more critical.
Sustainability was recognized by the former government as a core component of good procurement, and in 2008 significant steps were taken by the Office of Government Commerce (OGC) and other departments to improve their leadership and governance on the issue. A number of developments since 2008, such as The Pan Government Energy Project (PGEP), have kept sustainability at the forefront of current issues in procurement practice.
It is schools and higher education establishments that have been one of the last sectors to actively move from a fixed price, fixed term contract to a flexible, risk managed contract as recommended by government. The Energy Consortium (TEC), whom contract for over 70% of the higher education sector, are actively working with the PGEP to help educational establishments understand the benefits of moving from a fixed price contract to a government recommended flexible solution. As a result, the PGEP have an excellent understanding of a school’s energy requirements, and allow schools the opportunity to access increased benefits when following their recommendations and working with a central purchasing body. The PGEP, sponsored and chaired by the Ministry of Defence, has developed best practice recommendations for energy procurement in consultation with customers and public sector buying organizations.
If done incorrectly, energy procurement can cost a school thousands of pounds that could have been avoided. For schools, the cost of employing an energy specialist is often not feasible, and this can leave schools open to higher supplier margins and increased costs. In light of this, schools are currently being urged to access the benefits of using this government recommended solution for energy procurement.
By following the two recommendations outlined in the PGEP, schools can firstly benefit from making substantial financial savings through aggregation, for example, because a central purchasing body can purchase larger portfolios of energy and attract lower supplier margins, some by up to 5%. In addition, schools that follow this government recommendation can also take advantage of market prices throughout the duration of the energy contract and have access to greater transparency of costs that make up the delivered energy price.
My colleague at Allen & York, energy group manager Mark Vidler, comments that purchasing energy in this way could also see organizations and schools mitigate against price rises and deliver savings. Organizations can further benefit from the advice of skilled Energy Managers, who play a vital role in ensuring sustainable cost savings throughout the energy procurement process.
The second recommendation of the PGEP highlights how schools need to reduce their energy consumption. If the purchasing of energy is carried out by experts in energy procurement then schools are able to benefit from experienced team management of all portfolio needs as well as have access to new products and initiatives, which include tools such as Automated Meter Reading (AMR) and advice, guidance and tool kits which can also assist with their Carbon Reduction Commitment (CRC).
In fact, 15% of public sector carbon emissions arise from activities in the English schools system and about a third of this is directly from energy usage in school buildings. In light of this, the Government aims to make all schools, sustainable schools, by 2020, by not just promoting sustainability through teaching methods but also by encouraging schools to participate in local authority carbon reduction commitment opportunities and other initiatives in order to reduce their energy consumption. There is a clear need for public sector organizations, such as schools, to seek the support of energy professionals and consultancies in order to work towards sustainability targets.
At Allen & York, we are witnessing a large increase in the demand for sustainable energy professionals and the growing variety of roles within this sector.
It is increasingly necessary for schools to recognise the importance of sustainability and its application in every aspect of energy management. In particular, the renewable energy sector plays a vital role in this, it is now more important than ever before that we look to alternative sources of energy to meet our demands. By embracing and fulfilling its renewable energy potential, the UK’s public sector has the opportunity to not only demonstrate strong leadership domestically, in the fight against climate change but it also has the opportunity to set the standard for public sector organisations to follow globally.
It is clear that sustainability and environmental considerations are playing a bigger role in outsourcing energy procurement decisions. Looking at the economic reasons for the move to sustainable energy procurement, large cost savings can be made by establishing a robust and effective energy management policy. In addition, the development of the CRC scheme and PGEP stresses the importance of reducing carbon emissions and encourages public sector establishments to improve their energy efficiency, and ultimately save money, something which is particularly relevant today, as the public sector cuts begin to take shape.
Victoria Kenrick is a specialist at Allen & York, a leading international Sustainability Recruitment consultancy, offering jobs in Environment, CSR & Sustainability, Renewable Energy and Carbon Management, plus Health and Safety Management. To explore the latest career opportunities and Allen & York’s services to employers, please visit the website at: http://www.allen-york.com.