O'Keefe Trending Topics - ‘Fuel Duty with Ronnie Cusack’.

The energy crisis is affecting us all – directly and indirectly. Across the O’Keefe Group, we are reliant on heavy oil or red diesel that has a much reduced tax levy, but all of that is about to change in April with the scrapping of the use of red diesel or rebated fuel as it is correctly known. There will be some exceptions, but construction operations is not one of them. Our very own, Derek Gilburt, posed some questions to our Plant Fleet Manager, Ronnie Cusack, to get a feel for the impact on our business. 

“Good morning Ronnie, can you tell everyone what your role at the O’Keefe Group is?”

“Good Morning, I am the Plant Manager for the O’Keefe Group, I oversee the Procurement, Maintenance and Sales of our Plant, Tools & Vehicles, I also oversee the buying department.”

“How long have you been in the role?”

“I’ve been working for the Group since November 2002 in several roles so 19 years so far. I started as an Assistant Buyer, worked my way up to Buyer and then with the retirement of the Plant Manager in 2010 I went into the role of Plant & Procurement, where I was working under the Operations Director at the time, and my initial role was to liaise with the Plant Yard Team which was remote from the rest of the business, and co-ordinate the internal and external plant hire from head office. We then moved to our new facility at Cricketts Farm in November 2018, where I was briefly reporting to the then Plant Director in the role of Plant Manager overseeing the Plant Team. In November 2019 the Plant Director moved on and my role evolved into overseeing the entire Plant & Buying operations, reporting directly to the Managing Director.”

“What kind of plant and equipment do you manage at O’Keefe and how big is the fleet?”

“We have over a hundred items of heavy plant, including a fleet of Excavators from 1.7t up to 37t, Dumpers from 1t up to 9t, Rollers from Remote Trench Rollers up to 16t Self Propelled, a full suite of Soil Remediation equipment including Soil Stabilisers & Silo’s, we also own two Tower Cranes. We also run a fleet of hand tools, including the latest Battery operated tools and we have a large stockholding of Non-Mechanical equipment including Formwork, Falsework, Propping, Edge Protection & Scaffolding Equipment. Our Plant & Equipment is strategically purchased to compliment the services we provide as a business, along with the Contracts that we have secured.”

“Typically, what was our monthly spend on ‘red diesel’ and what volumes are buying?”

“In the last calendar year, the prices fluctuated between 0.53ppl to 0.84ppl, we averaged circa. 60,000 litres per month at 0.67ppl, meaning a spend of £39,000 per month. In the first two months of this year, we have seen the average price rise to 0.84ppl and although our average usage has dropped to 56,000 litres, our average monthly spend has risen to £47,000. This trend is continuing on a steep upwards curve with current prices around 123ppl, however we have now transitioned to the purchase of a mixture of White Diesel & HVO, which will add around another 35-40% to our Fuel costs.”

 “And what do we currently spend on ‘white diesel’ for our commercial road going vehicles?”

“In the last calendar year, the prices fluctuated between 1.13ppl to 1.27ppl, we averaged circa 7,300 litres per month at 120ppl meaning a spend of £8,700 per month. Already this year with the changeover and increasing costs, we are averaging 9,666 litres per month at 147ppl, meaning a spend of £14,194.65. Again, this is on an upward curve due to the changeover and the current market with prices recently increasing to 170ppl.”

 “When did the department first starting planning for the HMRC change in fuel duty?”

“It has been on our radar since it was announced in the 2020 budget, we gathered information as it became available and we started preparing for the implantation of the change in Q4 2021.”

“What have been the challenges in preparing for the change?”

“The main challenge has been the fact we have to balance our own aspirations with our stakeholders’ expectations and information received from our supply chain. Each Client, Manufacturer and Supplier have their own stance on how they believe and would like it to work, and we need to ensure we are able to comply with everyone’s needs. We also have to think about the Security concerns around the fact there will now be non-rebated road legal fuel held on our sites.” 

“I’ve seen the ad on TV by McDonalds that claims ‘their trucks run on used cooking oil’. Is this correct? and is it something O’Keefe could consider?

“This is true, they have actually been doing this since 2007, and it is now becoming more common in the food industry as they have a waste product that they can use to produce their own Biofuels, although O’Keefe do not produce the waste product we can certainly utilise Bio Fuels that are readily available on the market.”

“I’ve heard of something called HVO, is this similar to waste vegetable oil? what is this? and does any of our plant run on HVO?”

“HVO (Hydrotreated Vegetable Oil) is a Biofuel made from 100% renewable waste materials, it is advertised as a direct drop-in replacement for Diesel and can offer up to 90% reduction in CO­2 Emissions, up to 30% reduction in Nitrogen Oxide Emissions and up to 86% reduction in Particulate Matter. It is also Odourless and Biodegradable. As part of our research when planning the changeover, we contacted all manufacturers of our current plant fleet and as a result of the responses we are confident 90% of our plant is compatible with HVO Fuel.”

“The crisis in the rising costs of energy has hit domestic consumers hard, how has the rising cost of fuel affected your sector of the business and are you able to pass the costs on?”

“If we take the basic figures, I mentioned earlier the recent crisis coupled with the changeover, means our Fuel cost has effectively tripled since the beginning of last year, which has had and will continue to have a major effect on our business. As far as I am aware, we cannot pass this cost on to any of our current contracts and can only try and mitigate the increases in contracts we are tendering for. It’s worth bearing in mind that there has already been a knock on effect from Brexit, Covid and now the Russian invasion of Ukraine, whereby almost all material prices & transport costs have increased and lead-in times for deliveries of even standard ‘off the shelf’ products have been extended.”

“Will running on white diesel affect the performance or output of our plant? Or indeed the warranties?”

“There will be no difference in performance or emissions by changing from Red to White Diesel, and it will not affect any warranties as they are chemically the same product. Some warranties could be affected by the use of HVO which we just need to be careful of, but emissions will be cut by using it. With regards to performance, we know in the short term the performance should remain at a similar level and we have conducted our own trials to back this up along with the published results, however long term effects are still to be determined.”

“Will it reduce emissions, or is the change just to raise revenues?”

“From my understanding, the idea of the change is to ‘encourage’ the use of alternative options because of the increased costs (similar to the ‘sugar tax’ we see on soft drinks). However, I personally do not necessarily agree with this method, especially in the short term. I question the fact that not all industries have to make the change with a list of exemptions, and I also question why alternative fuels such as HVO are also being made Non-Rebatable at the same time. I believe most businesses are already putting together their own Carbon Reduction Plans (CRPs) to coincide with the UK Governments ‘Net Zero by 2050 legislation’, and I’m not sure how this particular change assists in that process.”  

“Fuel theft is an issue for contractors, do you anticipate a rise in the theft of fuel now we are running on white? How do we go about safely store large volumes of fuel on construction sites?”

“I think there will be an increased risk of fuel theft from external entities for sure, but our biggest concern will be controlling the use of fuel on-site to ensure it is only used for the plant that it is intended for. We have put together some site procedures that will assist our site teams in protecting, measuring and managing their site fuel usage to reduce the risk of both ‘misuse’ and theft.”

“What emissions code does our plant currently comply with?”

“As we continually invest in our plant and fleet, the majority is either ‘Euro Stage IIIB’ or ‘Euro Stage IV’, with our next planned investment of a mixture of ‘Euro Stage V’ and ‘Electric’.”

“I’ve heard of something called the ‘NRMM’, what is it and can you tell people how we operate under it?”

“NRMM stands for ‘Non-Road Mobile Machinery’ and is specific to construction sites in London. It is a London Wide Government Initiative working with the construction industry to deliver cleaner air. The NRMM LEZ applies to plant with both ‘Variable Speed’ and ‘Constant Speed’ engines across construction and demolition sites, with a power rating between 37-560kW. This includes Excavators, Dumpers, Telehandlers, Generators, Crushers amongst others. Although the requirements do not apply to all sites (there is a specified difference between a major development and a minor development), it is considered best practice to apply to all sites in London. All plant that is within scope required has to be registered by upon delivery to site, which is the responsibility of the Principal Contractor.”

“The requirements are changed at defined periods, with the current period running from 1st September 2020 until January 2025. There are currently 3 Zones, Greater London Zone (currently minimum Euro Stage IIIB), Central Activities Zone (currently minimum Euro Stage IV) and Opportunity Areas (currently minimum Euro Stage IV). Constant speed engines should be Euro Stage V throughout all zones. From 1st January 2025, the standard will be Euro Stage IV throughout London; from 1st January 2030, the minimum standard will be Euro Stage V throughout London; and from 1st January 2040, only Zero Emission Machinery will be allowed.”

“Can you explain to people the kind of ‘tech’ we have got on our plant to manage fuel use and idle time?”

“The majority of our large plant either comes equipped with its own telematics system provided by the manufacturer (such as JCB Livelink) or has been post fitted by O’Keefe (such as Trackunit). All of these systems give us an amazing amount of data which assists us to be able to run our fleet as efficiently as possible. The technology has improved so much over the last few years, from originally mainly tracking where plant, is to now, where we can pull data and reports on almost any aspect of the machines use including fuel levels, idling time, utilisation, performance, weekly/daily/hourly usage, machine hours, service countdowns, and I’m sure a lot more that we haven’t discovered yet!” 

“What other means and initiatives are we looking at to cut emissions and our carbon footprint?”

“We have recently set up a self-appointed ‘Green Team’ which consists of key employees from different parts of the business, including myself. We are tasked with measuring, monitoring and improving all aspects of our Carbon Emissions across the Group, to ensure we are not only compliant with legislation and our Clients needs, but go above and beyond with our own standards. We are currently putting together our Carbon Reduction plant, which we do not want to be just a ‘tick box’ exercise, but tangible and achievable targets that are specific to us as a business. Once complete, we will publish on our website so watch this space!”

“What about the electric revolution? What are the main manufacturers looking at in terms of electric plant?”

“From the research we have done, including visits to various Manufacturers factories, we are almost already at the pinnacle of what can be achieved with battery powered plant, with the maximum size machine to be capped at a 3t mini excavator & 3t dumpers. These are due to be released in late 2022/early 2023. The cost and emissions to produce anything larger would outweigh any potential benefits. Our understanding is that alternative clean fuels such as Hydrogen are the way forward for larger plant and the race is on to develop this technology.”

“And finally Ronnie, wind and solar are the future for renewable energy – are we looking to implement either of these sources for any of our site operations and supporting equipment?”

“Yes, as part of our ‘O’Keefe Carbon Reduction Plan’ and becoming Net Zero, we would need to look at all technology available to us. We are already seeing solar powered tower lights and generators becoming readily available on the market, and as the technology advances there will be more equipment to assist us in achieving our targets.”