The concern for any business is for an energy supply that is not only secure and clean, but also responsive to changing needs such as expansion–and that the energy comes at a price that is both as low and as predictable as possible over the long term.
But the energy industry is changing. Can business customers benefit from a move from centralised fossil fuel plants to one that is decentralised, de-carbonised and distributed? They can best respond by becoming active customers. That means generating their own power if they have the financial and natural resources, flexing their demand when rewards are on offer from the grid operator and managing their power flows to make the most efficient use of power on site to minimise the size of the necessary grid connection.
The most energy-intensive companies have done this for a long time, offering stable and–crucially–predictable demand, or by running specific jobs during the night when power is often cheap. Now digitalisation extends that opportunity to the smallest users.
What are the actions companies can take? Some have already worked to reduce the fraction of their electricity bill that pays for the electricity network (which is incorporated in power unit costs for the smallest customers, but separately identified on most business bills). They understand that their share of the cost is calculated from their share of usage on the three so-called ‘triad’ days of highest demand. As these are identified retrospectively by the system operator, companies manage their bills by proactively reducing power use at peak times, benefiting the system as a whole because it does not have to call on more expensive power generation.
Regen chief executive Merlin Hyman told MPs on the BEIS select committee at a recent evidence session that “I&C customers have played a role for a long time via triads. In many cases they are huge users of power and can respond by using less.” Hyman also noted that companies have been installing storage on their sites. Businesses benefit from this because they can make that storage or existing backup generators available to the system operator at key times and be paid by the capacity market.
What has now made this possible for smaller users is more data about their use, from smart meters and building management systems, and the ability for economic, large-scale data communication and processing.
Schneider Electric is a technology supplier to businesses and to the electricity industry, with interests from process and building control to grid management. Frédéric Godemel, EVP power systems and services, says that the company follows its own advice on being an active consumer: “The example is Schneider Electric offices,” he says; “a new building with state-of-the-art technology. Our return on investment is below five years on the energy bill.”
Godemel says that large scale wind and solar are “by nature variable, and in order to manage that you need to use digital capability to balance demand and supply ... This is the concept of what we have called the grid of the future.”
He states that active customers “are an essential part of this active grid”.
In some cases that means a small shift in usage, such as delaying charging an electric vehicle for 15 minutes. Already “we have many examples in UK, Germany and France where people are asked to turn off appliances.” Domestic customers have been taking this action during the winter, he says, but “this has been done through social media and not really in an automated way.” In his grid of the future, a user will decide which are their priority loads and non-priority loads. “When the grids are stressed, those non-priority loads are offloaded and when the grid is stable and perhaps there is abundant wind or solar, then the automation can bring on the load. Eventually the consumer will receive a better price for doing so. The user doesn’t want to take care of that – he [or she] simply wants automation and to benefit from a better tariff.”
That also applies to businesses, although they are likely to want more control: “They will be large prosumers [that is, with some generation as well as demand] and those people will play a major role in balancing the grid of tomorrow, because they can be the one where the potential offloading on a single site is big. On the other hand, they can be the ones who create local energy generation.”
As well as balancing, relieving other system stresses also may offer a positive revenue stream for business customers. Godemel notes that local distribution network operators (DNOs) look for active customers to help manage the low voltage network, and “at a regional level those I&C sites can play a key role.” That is because if a section of grid reaches its limit occasionally, and customers can reduce demand instead at those times, the DNO and its customers need not incur the cost and disruption of upgrading the grid.
Godemel notes that taking an active approach offers resilience, especially generating power on site. He explains that European users are now very aware of energy security and some companies are simply afraid that they will not have access to the power they need. He says: “Energy security plays very differently into the criteria of decisionmaking. You are not so interested on the return on investment – you are simply protecting your operation.”
But he draws a distinction between companies that have invested in on-site power and those that are truly active. “If you produce but you are not active, your consumption will be less, but you will be a normal consumer.” But what is interesting for the national system operator and the local DNO is “flexibility and visibility. Then you bring value to the grid.”
MAKING THE LINK
A particular concern in Great Britain is the long waiting period for a new or upgraded connection to the electricity network. As Merlin Hyman informed MPs with an element of rhetorical hyperbole: “If you talk to anyone in the clean energy sector, it is all they want to talk about. Apply with a new solar farm, a battery or hydrogen electrolysis, and in most parts of the country you will [be offered] a connection in 15 years’ time.”
As well as being a concern for renewable developers, companies who want to significantly increase power import or export are also stuck in the connection ‘queue’ for necessary upgrades–which is likely to be a concern for expanding companies, but also those who want to switch to electric heating or install electric vehicle charging points.
Being an active customer responds to that pressure. It is likely to involve as much as possible of the site power management being carried out ‘behind the meter’. Godemel notes companies where this has happened: “In Sweden, [supermarket] Lidl was using heating, lighting, cooling and heat pumps, and a micro grid is allowing it to completely reconfigure its connection to the grid.” Because users are able to optimise their significant loads onsite, “their connection to the grid is very easy and simplified and is just for ensuring the refrigeration and safety lighting at the point of time.”
Third parties that can help companies investigate whether they can offer those services and manage them when they do, have seen an uptick in interest. At Inspired Energy, for example, chief executive Mark Dickinson said in a recent market update that there was a ‘notable acceleration’ in the company’s optimisation business. He added: “The ongoing energy crisis has significantly sharpened clients’ focus on the economics of investment in energy reductions, combined with the drive for delivering net zero, and this has translated into a significant step up in demand and activity for the optimisation division.”
DOES IT PAY?
Can this really pay back for companies? It certainly allows for some risk management. Schneider works across Europe and Godemel says that price uncertainty “has never been as big. We have seen what has happened in Europe in terms of electricity and gas prices–volatility has been huge. Forecasting that is probably extremely difficult.” Installing renewables can allow at least part of the company’s electricity priced to be fixed, albeit by incurring the capital cost of installing equipment like solar panel arrays (see article. pp8-9).
A return on investment for a more active relationship with the system operator “depends on the flexibility schemes of the country. If you are in a country where the flexibility scheme is non-existent, your return on investment will be longer,” says Godemel. The good news is that the GB market leads Europe with its flexibility options.
However, UK organisations say there is still some way to go here. Sarah Honan, policy manager at the Association of Distributed Energy (ADE) says this is “a massive transition and one the system operator is starting on.”
Although the system operator has moved on from accessing flexibility by calling up a control room in a central power station, it is still developing systems that will give it access to millions of decentralised assets.
Will Mezzullo, head of hydrogen at Centrica, says that to access millions of flexible assets in future “needs IT, and how we move information around the system is essential to that. We are used to dealing with a few large gas plants; we are not used to dealing with loads of small megawatt assets all around the system participating in these services to help the grid. That has to go at a much faster pace.”
For example, the system operator is relatively familiar with batteries, which it can manage rather like a large generator because they are often in portfolios managed by an aggregator. Hogan said ADE is “very supportive of some of the ESO’s [electricity system operator’s] new markets,” but “at the moment the design of those markets and services is very battery-focused, and bringing in some more diversity there would be good, because there are a lot of industrial and commercial plants that can respond at a very fast pace.” They are waiting for new markets that enable them to meet the system operator’s needs.
The markets are coming, but when it comes to the enabling technology Godemel stresses that the ‘grid of the future’ is available today. He states: “The technologies are now completely mature for PV and local production and local storage and the interface with the grid,” even without benefiting from grid flexibility.
For companies moving in this direction, the return on investment is shrinking as the price of electricity has increased and the technology has matured.
BOX: SITE SHARING TARIFF
Octopus Energy launched a new tariff to help businesses with renewable generation to share the green power they generate on one site with the rest of their sites–and lower bills as a result. The new ‘Max Power’ tariff allows businesses with two or more sites to send any excess renewable energy they are generating to their other locations in the UK. Octopus estimates it could save businesses like these up to 25% off their annual electricity bills. This utility says that this new tariff can help businesses across sectors including agriculture, retail, logistics, warehousing, supermarkets, FMCG, and many more. Octopus says that the offering is made possible by its ‘Kraken’ proprietary tech platform, which bills multi-site businesses as one, making it easier to understand and manage their consumption.