What's behind the numbers?
It's time to cut through the noise
When it comes to comparing power providers, cost is nearly always top of the list. Aggreko recently conducted a global survey to better understand the priorities of decision-makers.
Of those surveyed, 50% said that cost is their primary consideration. But the biggest barrier to better costing, and better decision-making from energy purchasers, is transparency.
“Transparency is key”, says Aggreko’s Managing Director, Global Products & Technology, Dan Ibbetson, who adds: “The levels of complexity involved in decision making is greater than ever before. We want to equip our customers with the right tools and the right information to make good decisions, balancing cost, efficiency and performance.”
The question is, why has decision making become so complicated? And as an industry, how should we be breaking down barriers to enable more informed decision making?
The Context: Changing Tides
The world’s energy system is going through a profound transformation, driven by decarbonisation, digitalisation and decentralisation. Demand for lower carbon solutions is changing the energy mix, while digital innovation is enabling disruptive change in the way energy systems are operated.With global populations continuing to grow and increased migration to urban hubs, the need for decentralised energy solutions is influencing the production and distribution of energy.
Pressure to reduce emissions now also plays a pivotal role. 57% of decision-makers surveyed think the fuel they use to generate electricity will change in the next five years. When asked for what they thought the main driver for this would be, environmental considerations came in as a close second to cost.
While switching to renewables can contribute to hitting lower emissions targets, it can also have a positive impact on the balance sheet. With fuel accounting for more than 75% of the cost of electricity, once the renewable energy source, such as a wind turbine or solar panels, is up and running, there is minimal ongoing cost to a business or organisation.
However, the lowest cost and the cleanest options cannot consistently meet the demand for reliable output. Balancing the two is a constant challenge. Any insight which can support more informed decision-making can have a huge impact on businesses from both a cost and efficiency perspective.
The Challenge: Many moving parts
Cheap energy is a priority for energy purchasers. However, no single type of power generation can currently fulfil all criteria:
- The lowest fuel cost and the cleanest options cannot consistently meet the need for reliable and stable supply
- The dynamics between different fuels are not static over time due to changes in availability or other factors which impact price
- The climate and location can have a significant impact on the performance and cost of the chosen energy solution, so what works well in one region might be a very poor choice in another
- Even if all of the above were to remain fixed, the performance will also vary according to how the solution is run, the load factor, running hours per day and the number of starts and stops over a given period.
No one-size solution will ever fit all. Every project, business, factory, mine or national government has unique variables that will impact its operation. From remoteness, climatic conditions, energy demand profiles and differing demand priorities – the variables are endless.
Far too often, customers are presented with a recommended solution, without visibility of how the conclusion has been reached or whether the specific variables for their project have been taken into consideration. There is a complete lack of transparency, which we want to help our customers overcome.
As an industry, we are not doing enough to equip businesses, governments and organisations with the information they need to make the most informed decisions.
Without the necessary information, it is impossible for decision-makers to know whether they are deploying the solution which best reflects their priorities.
So, what can we do to help energy buyers make a choice which works for them?
The Solution: Empowering decision-makers
At Aggreko, we understand that customers must be equipped with the information they need to make the decisions which will improve their operating efficiency and performance. That’s why we’ve created a new Cost of Electricity Calculator.
All variables, such as fuel type, climate and time horizons, can be inputted into the calculator and then layered with the specific energy data to build a complete and unique picture of every project and the most efficient solutions available.
“Using the proprietary tool, we can input different parameters to give numerous comparison points for customers. For example, we can look at different fuel types over varying project lifetimes to give customers a much clearer picture of the best option for that particular project profile and at what operating point the benefits switch between the different options to help them make more informed decisions” says Noreen Howat, a Senior Strategy Manager at Aggreko, who has been part of the team that created the calculator.
She adds “While there are lots of longer-term benefits of the Cost of Electricity Calculator, such as potential cost savings, in the immediate term, it also saves decision makers so much time and effort.”
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The Future: Going greener
While we know that cost is a key priority, we also recognise the need to compare solutions based on other variables. Implementing measures to proactively reduce emissions is a requirement in most developed markets and increasingly in developing markets. We want our customers to stay ahead of business, regulatory and consumer pressures and support them as they adapt to the rapidly evolving energy market.
Later this year, the calculator will be expanded to include emissions calculations. This will allow customers to make direct comparisons between solutions on both a cost and emissions basis.
The Goal: Building foundations for a more transparent future
A new calculator is not going to solve an industry-wide, global problem about the lack of transparency around energy options.
What we hope is that our proprietary tool kick-starts a conversation that will see more information offered to energy customers, taking into account the multiple pressures they are under and equipping them with the knowledge to make informed decisions.
The transformation around us is easy to see. Now, we must recognise the discussions, debates and actions which need to take place if we are to navigate this period of transition, finding opportunities and benefits for customers, consumers and society at large.
SPEAK TO OUR EXPERTS TODAY WHO CAN GUIDE YOU THROUGH THE OPTIONS AVAILABLE FOR YOUR PROJECT.