Lorien Energy Index

The Lorien Energy Index (LEI) monitors the overall cost of energy for business users, and it enables companies of all sizes to make sense of their current energy use and look at ways they can make savings in the future, possibly through the use of energy efficient technologies, and making productive use of waste streams and other resources. The data is derived from information supplied by DECC, and energy source information from Lorien's clients, to reflect the situation for users in the manufacturing and commercial sectors.


Q3 2016 results

Lorien is advising firms to embed energy resilience as UK enjoys a breather from rising costs, but as we also prepare for Brexit.

  Businesses should take advantage of stable energy prices and invest in sustainability now, according to Lorien Engineering Solutions.

 The latest Lorien Energy Index (LEI) shows that prices increased by around one per cent between quarters two and three of 2016. This is four per cent lower than the same period in 2015.

 Sustainability consultant Tom Jordan said: “Now is the time to embed sustainability, energy and resilience into strategic planning whilst the delay from the upward trend in energy costs has given the sector a breather.

 “The precautionary principle taught in environmental economics is that ‘doing nothing’ is a gamble. Once the energy markets have rebalanced, it is expected that the overall costs of energy from fossil fuels will realign with the upward trend previously seen.”

 Burton-based Lorien Engineering Solutions, which produces the Index, said there was an element of ‘the boy who cried wolf’ for energy customers looking to manage future costs.

 Before the dramatic fall in oil wholesale prices, the Committee on Climate Change (CCC) warned that business energy costs were predicted to rise by around a third by 2030.

 Even with historically low wholesale prices, there were also warnings from Utilitywise last year that although the wholesale cost of electricity to industry will remain static to 2021, this could more than double when the additional factors of climate change mitigation, network and transmission charges are factored in.

 This is echoed within Energyst’s 2017 Directors Report, which states that non-commodity costs will soon make up two-thirds of energy bills.

 Tom said the food and drink manufacturing sector faced a major challenge due to its high reliance on energy for processing, product chilling and cold chain logistics. He said many facilities were also struggling with ageing plant, the constraints of old buildings and the lack of available space to develop.

 He added: “It is pleasing to see the Government’s Green Paper ‘Building our Industrial Strategy’ placing emphasis on energy innovation. This presents a great opportunity in the medium to long term, althou gh there is much that can be done now to enhance business resilience to energy costs. ”

And with Brexit round the corner, many manufacturers in the UK are looking sceptically at the current low energy prices.

 The "Lorien Energy Index" monitors the overall cost of energy for business users. It enables companies to make sense of their current energy consumption and look at ways they can make savings in the future through energy efficiency and using low carbon and renewable technologies to boost energy security.

Samples of previous reports (visit our News Archive for a complete list of reports):

Q1 2014 results.

Energy prices have slipped a further 2% in the first quarter of 2014, sitting marginally higher than they were 12 months ago, latest data from the Lorien Energy Index (LEI) has revealed.

The Lorien Energy Index, which is produced by Lorien Engineering Solutions, monitors the overall cost of energy for business users. It enables companies of all sizes to make sense of their current energy consumption and look at ways they can make savings in the future, by being energy efficient and utilising low carbon and renewable technologies to boost energy security.

Concerns over wider wholesale energy prices have not been realised over recent months with stockpiles and reserves for both oil and gas smoothing out ripple effects from geopolitical instability in crisis zones. The IEA has attributed the nine-month low in the price of oil to the current ‘glut’ in the market, with sharps falls in demand against rising production. They describe the current outlook as ‘eerily calm’.

With positives to report on fossil fuel prices, recent wider energy news shows the overall contribution from renewable energy production in the UK has increased during 2013 to stand at nearly 15% of total.

While this is an encouraging statistic, the UK is still languishing with more than a third generated from coal-fired power plants, around 30% from gas and the remainder from nuclear.

“What should make those ‘on the fence’ take notice is the large sums of money – more than £3 billion a year – being spent incentivising the growth in green ‘home grown’ energy,” noted Lorien’s sustainability consultant, Tom Jordan. “Negative press for large scale generation such as the now scrapped Celtic Array, and uncertainty over the second biomass conversion at Drax, does not marginalise the fact that now is an excellent time to be investing in your business’s energy resilience.

“Lowering resource use is not just about energy” he concluded. “There has never been a better time to widen the scope to focus on overall resource use, matching up wastage with opportunities for further minimisation and re-use.”
Lorien Engineering Solutions has recently become part of GP Strategies Corporation, a global performance improvement solutions provider of training, eLearning solutions, and management consulting and engineering services.  The acquisition of Lorien Engineering Solutions adds to GP Strategies’ growing coverage of the sustainability sector.

Q2 2012 results, published 31 August 2012

The Lorien Energy Index (LEI) data for the first six months of 2012; finishing Q2 at 4.28, down 2.7% from 4.40 in Q1, with an underlying upwards trend that has seen the LEI increase by 250% over six years.

The preliminary findings for the 2nd quarter of 2012 are;
• Electricity prices fell 1.22%
• Gas prices fell 1.24%
• Gas Oil fell 4.82%

The underlying trend however is that over the last 12 months electricity has risen in price by 5.15% and gas has risen by 9.82%, whilst gas oil has fallen by 0.57%.

The LEI shows that towards the end of 2011 wholesale energy costs rose sharply, falling back overall to date, although there are indications of mounting pressure in the market that will see rises over coming months and into 2013 on commercial tariffs. Crude oil prices remain volatile, with the Brent Crude price per barrel starting the year at $112, peaking in March ‘12 at $126, and currently at $116/barrel and rising. This current rising price trend is despite concerns over Euro Zone debt and flagging energy demand in China.

The Lorien Energy Index (LEI) was launched at the beginning of 2012 with a value of 4.40, a 250% increase since early 2006 (from a value of 1.75).  The recent update sees a small drop to an average of 4.28 demonstrating little significant movement over recent months.

Derek O’Neill, director of Lorien Engineering Solutions said, “What is worrying is that whilst we may see inflationary level increases in 2012 for energy, this is on the back of subdued world demand for oil and gas. If economic growth returns in 2013, we could see substantial price increase again in the cost of energy for businesses.”

Background Data for Q2 2012:
Demand for oil and gas has slowed in 2012 as industrial output has slowed and it is pleasing to see the price increase trend businesses suffered in 2011 is abating. Both gas and electricity prices to businesses declined in Q2 of 2012, electricity prices fell by 1.22% in Q2 bring the YTD reduction in prices to 2.16%. Gas prices fell by 1.24% in Q2 although not enough of a fall to wipe out the Q1 increases leaving Gas 0.7% higher than it was at the beginning of the year.

The picture for the last 12 months is that Electricity prices are up 5.15% and Gas is 9.82% higher.

In the domestic market, one of the big six energy providers has announced a 9% increase to its domestic customers for both electric and gas.  This goes against the pricing stability seen since prices decreases late 2011 and early 2012.