Tag Archive for: Energy

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.

Guidelines to save energy this Christmas

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During Christmas holidays, one of the most energy-consuming elements, for everyone, is the lighting of the house.

It is usual to use bright ornaments at home, which often use halogen technology, high drain. The best option is to progressively replacing it by LED technology, which preferably incorporates solar collector to run, so we are eliminating electricity consumption completely. The same happens in residential buildings with landscaped communal areas. However, in apartments we can only use LED decorative lights to save energy.

On the other hand, the most energy-consuming element during the cold months inside a home rarely focuses on lighting. Put the focus on the elements designed to heat the house, water heating, etc. such as air conditioning, the heat, central heating, etc. In that sense, it is advisable to regulate temperatures as the highest consumption occurs when there are large jumps and systems have to work twice as hard to reach the desired temperature at a given time.

  • Set the temperature between 17 and 18 degrees although we are not inside the house.
  • Set the temperature between 21 and 22 degrees when we are inside the house.
  • Set the temperature of the heater thermostat to 50 degrees in air conditioning
  • Close grids of rooms which don’t need to be heated
  • Each degree reduces consumption by 5-8%
  • With programmable thermostats to save heat, you do not need the entire volume of hot water 24h.
  • Take into account the simultaneity of consumption to avoid peak.

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.

The energy self-consumption: reality in sight

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Over recent years, the term “self-consumption” in the energy sector has become more common in colloquial language, not always in a positive sense and sometimes with scepticism. Successive changes in legislation have led to confusion on the part of businesses and residential users that, either by conviction or by economic interests, were potentially interested. However, today we can say that we have reached the point where an energy production installation is equal to or less expensive than the same energy contracted to the public network. Photovoltaics, as it says Vozpopuli in its post written by Antonio Muñoz Velez,

“has ceased to be a teenager, much less a spoilt child.”

The self-consumption in Spain is finally a reality in sight.

However, some people are sceptical about real energy savings of a photovoltaic installation, or even if the return on investment makes it interesting to consider this technology. It is shown that a facility today can run completely autonomously through the different systems that exist, but it is true that pretending to supply 100% of the energy demand of any facility can still be somewhat expensive and lead to periods of more distended amortisation so users would be willing to assume. So the question must be asked: do we really need to supply 100% of our energy demand? To see a specific case, if your house is in an area of difficult access to public electricity supply you will need to produce the energy it consumes fully your own way, so it will end up producing 100% of what you need to consume. On the contrary, if you do have access to the public network, it would be possible to establish a project of photovoltaic energy consumption by only provides a part of the energy demand. That way you can save a significant amount in the initial project cost and even significantly reduce the return period.

The same would happen in an industry or a services facility. If further installation requires more energy during the day, its consumption occurs primarily during daylight hours, it is much easier to get this cheaper because it does not need to store energy using batteries that considerably increase the project cost as a whole. In fact, as national legislation is today, according to RD900/2015 based on an earlier draft, the known Net balance which in theory allows pouring into the public network surplus energy produced is not allowed in Spain. This is an additional argument when considering how to maximise the energy produced, if we decided on photovoltaics instead of producing surplus and stored in batteries.

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.