Energy

Energy

Energy costs are often the second highest expenditure in schools (behind the annual wage bill). On average, schools spend £6 on energy and water for each square metre of floor space. Energy costs per pupil range from £26.28 to £64.75 in secondary schools and between £16.46 and £51.87 in primary schools.

 

How do you compare?

The chart below shows the range of performance for primary and secondary schools.

Range

Energy per pupil

Water per pupil

 

Primary

Secondary

Primary

Secondary

Highest 10%

£51.87

£64.75

£15.93

£15.77

Highest 25%

£38.98

£51.05

£11.36

£11.45

Average

£29.08

£41.00

£7.98

£7.84

Lowest 25%

£21.93

£32.79

£5.67

£5.38

Lowest 10%

£16.46

£26.28

£3.97

£3.72

 Source: Energy top tips (DfE , 2014)

 

Energy efficiency

With reductions in funding adding pressures to school budgets, energy efficiency savings need to be considered such as installing energy efficient lighting, upgrading heating controls, managing ICT loads, and eliminating unwanted draughts.

It has been shown that more than 20% of energy is wasted via uneconomical methods, but understanding your energy charges is another, and quick, route to making substantial savings.

In the long term, schools could save up to 10% of their energy costs through steps such as improving energy procurement, bill validation processes and contract management. See the DfE fact sheet: Energy top tips for more information

 

Energy market forces

Buying energy utilities for a school is not like buying for the home, as electricity and gas suppliers do not pass on the effects of short-term volatility in wholesale markets to domestic customers. However, for commercial decision makers, who buy on the wholesale market, prices can move +/– 20% within a month and major changes can occur even within a single day.

This means that if the market is moving upwards, an annual contract costing £10,000 on the first day of the month could cost £12,000 by the end of the month! The energy market is even more volatile than the stock market and uses many of the same complex financial instruments as the financial services industry. 40% of all authorities buy their electricity and gas on a fixed price basis, usually through an annual tender.

It can be a very expensive mistake if the prices are fixed at the wrong time, but if they are fixed for a longer term at the right point, it can secure budget certainty away from the volatility of ever-increasing power and gas costs. See the ISBL resource: Understanding utility contracts for more information.

 

Energy procurement

Energy procurement requires professional risk management skills, a thorough working knowledge of the energy sector and its trends, and a continuous analysis of the market. It is a specialist area and, just as SBMs would keep a watchful eye on an investment or pension funds to ensure they are appropriately managed, the same should apply to energy.

Controlling costs and managing budgets is critical, and the adoption of a structured energy purchasing approach means risk can be managed more effectively.