Rolls-Royce braced for 10 years of energy price rises

18 September 2013

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19 September 2013 | Will Green

The chief energy buyer at Rolls-Royce is expecting gas and electricity prices to continue to rise for the next 10 years.

Energy currently represents 5 per cent of the aviation and aerospace company’s cost base but Tim Sullivan, global energy and health, safety and environment director, told a conference last week he struggled to get senior managers to appreciate its importance.

“Energy prices in the UK are a significant concern to Rolls-Royce,” he said.

“We have seen the costs rise significantly over the past few years. The work we have done shows prices will rise for the next 10 years.

“When I talk to business unit leaders the costs they are most concerned about are labour, quality and the cost of materials. We are constantly having discussions about future prices and what the future will look like to grab their attention and consider energy in much more detail.”

Sullivan was speaking during a debate between members of the Major Energy Users' Council at The Energy Event at Birmingham’s NEC.

“We try to reduce the amount of volatility, we buy ahead as much as we can,” he said. “Electricity and gas – both of those are needed in large quantities. We are constantly concerned about how we buy electricity and how we consume energy.”

Darren Bowkett, technical director at construction material manufacturer Ibstock Brick, said energy taxation, including carbon taxes, was placing an unfair burden on UK companies. 

“Gas prices have doubled in the past five years,” he said. “It’s very difficult to plan a business not knowing what that cost is going to be. We want some stability on prices.

“The government wants to be all green. Some of that’s fine, but it’s a UK-based tax and we think you need something more even across Europe.”

Meanwhile, consultants EnergyQuote JHA predict carbon taxes will increase energy prices by 40 per cent over the next five years.

Manging director Gary Worby called on the government to slow down the timetable on the measures, which aim for an 80 per cent cut in the UK’s carbon footprint by 2050.

“It may be we need to take longer to do it, with less price penalties to customers and allowing more investment in new technology to make improvements,” he said.

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