Headlines: December 11th, 2012

The Cabinet Office is to offer pilot contracts for the supply of renewable energy generated from biomass and waste in a move to cut costs and boost the UK energy industry. If the pilot is successful, up to half of the Government’s energy portfolio will be bought from renewable suppliers.

The pilot will provide for contracts to be offered direct to renewable generators for a set proportion of their capacity for up to 25 years. This will appeal to new projects which can bank on the guaranteed business to attract investment. A small 10MW generator is estimated to return £5m a year to the local economy as well as creating jobs in the energy and construction industries.

As well as helping renewable generators, the pilot will save taxpayers around £155m over fifteen years by agreeing the best price in return for the financial security offered. Also, diversifying suppliers, contract duration and pricing mechanisms will protect taxpayers from volatile prices.

The Government Procurement Service, which is part of the Cabinet Office, is the UK’s largest energy customer, spending £1.5bn a year on gas and electricity. GPS buys energy for 75% of the entire public sector which accounts for 3% of total UK energy demand. Other parts of the public sector including NHS Trusts and councils are not required
to purchase through GPS, but most do so because of the savings it generates.

Government energy buying is one of the most successful examples of aggregating spending to get the best deal. In 2010 all central government departments were mandated to source energy through GPS, saving £51million. By acting as one customer buying IT, travel, property, energy and other commodities, central government saved £357m in 2010/11 and £422m in 2011/12.