alfaenergy recently presented at the All Party Parliamentary Group on Energy Costs in the House of Common committee rooms. Their talk, entitled “Turning cost into revenue,” was presented by alfa’s CEO, Damir Ahmovic and its Head of Renewables, Latif Faiyaz. The audience consisted of MPs, Lords, energy users, advisers, and consultants.
Damir started the presentation and discussed the concept of businesses looking at energy as an asset class, not just a cost. Historically, energy has been seen simply as a cost, a liability on balance sheets. A clear case was made when comparing traditional investments such as cash, bonds, and equities, rarely providing more than 5% yields, whilst renewables are averaging 10-30%.
“There are a number of metrics on evaluating an investment. Our favourite is to use the cash flow-based metric known as annual yield. In simple terms, it shows how much income an asset produces on an annual basis in relation to the size of investment. The yield may vary within an asset class based on the type,” noted Damir, highlighting the attractiveness of investment in any organisation needs to pass an internal rate of return (IRR) test
Latif discussed the breakdown of the bill and how policy costs were the major reason for increasing electricity bills. The Electricity Market Reform is a major concern, adding an expected 0.125p/kWh next month, rising to over 1p/kWh in 2018. He highlighted certain technologies that would make excellent investments which also help reduce costs, such as CHPs, and the rising case for solar as it reached grid parity in 30 countries to date. Concerns over biomass due to lack of transparency in the price of wood chips were also raised.
The talk was well received with several questions and observations to back it up. There was a particular focus on energy efficiency, the necessity of it, and how to best engage businesses at various positions of management to invest into renewables and energy efficiency.
