The future of the UK’s energy sector rests on three critical elements: decarbonisation, decentralisation and digitalisation. The continued over-reliance on coal and other non-renewables is no longer an option. Government and industry alike have a responsibility to provide a solution.
The UK has already committed itself to the mass roll-out of low-carbon power generation by 2030 as part of the cost-effective path towards the statutory 2050 target. The Climate Change Act 2008 compels government to reduce greenhouse gas emissions by at least 80 per cent of 1990 levels by 2050. Notwithstanding the destructive headlines of some tabloids, these reductions aren’t something to be feared. Rather, they are an opportunity to manage our power more efficiently.
According to Energy Trends’ 2016 figures, power is directly responsible for 23 per cent of the UK’s total greenhouse gas emissions. There are many low-carbon options available and businesses can move to 100 per cent renewable supply for a very small incremental cost, typically below 1 per cent of delivered cost.
In order to achieve the necessary rate of decarbonisation, demand side response (DSR), battery storage and a fundamentally flexible approach to how we manage our electricity represent much of the road to becoming sustainable in the long-term. DSR comes into its own when the total demand for electricity across the country is at its highest – for example in winter after school when all the lights and heating are on in homes whilst businesses and industry are still hard at work. Rather than simply generating more to satisfy a short spike in activity, DSR lets us use electricity more shrewdly. This doesn’t mean your appliance will be switched off; instead, supermarkets might turn down their freezers or large factories might defer energy-intensive processes to another time when there isn’t so much pressure on the National Grid.
There are only a few periods throughout the year when demand is very high, so rather than building a new power station that will only be used sparingly, it is more economical to use existing resources and look to large energy users to occasionally reduce demand. In addition, we should also appreciate that at times of very high demand the grid tends to be at its most polluting. DSR limits the number of hours that older, less efficient generators are running and helps to maximise renewable generation.
Commercial batteries will also help. With around two-thirds of existing UK power stations expected to reach the end of their working lives within the next 13 years, battery storage can reduce the investment needed in replacement capacity. They are able to react quickly and correlatively to demands and help integrate intermittent generation such as wind and solar into the energy mix.
Digitalisation meanwhile, refers to the advent of big data. With the introduction of smart meters providing a wealth of data designed to inform and temper consumption. When the wind doesn’t blow or the sun doesn’t shine, both individuals and companies will need ways of keeping on top of their energy requirements. Smart meters record data for total electricity usage in real-time, allowing their owners to adjust their habits accordingly, courtesy of a user-friendly interface. Smart meters mean the end of estimated bills and a better understanding of consumption allowing action to be taken.
SmartestEnergy is a new type of energy company. We don’t own any generation facilities but are the leading purchaser of electricity from over 550 independent generators. These and many other independent generators are responsible for over 6,000 projects with a combined capacity in excess of 12GW. Decentralisation is taking place and will continue to grow in significance.
We are also a licensed supplier to large industrial and commercial organisations, and the first company in the UK to have a Carbon Trust-certified 100 per cent renewable electricity supply. We work with more than 1,000 business electricity customers from high-street brands such as John Lewis, to major manufacturers like Saint-Gobain.
Our bespoke DSR service (SmartDSR) helps businesses to find a flexible solution for their energy needs which suits them. With the right guidance, companies can stop viewing electricity as a utility and start regarding it as a revenue-creating asset, while avoiding costly peak charges and playing a part in the collective drive to relieve pressure on the National Grid.
With the government having introduced the Capacity Market to ensure there is always sufficient electricity supply, consumers who use DSR services are presented with two big attractions: they get financially rewarded for curtailing their consumption during periods of peak demand, and simultaneously, avoid the higher costs of consuming that power during that time. With energy price volatility increasing, those savings will become increasingly material. Already we see that a customer could save an additional £2,000 from peak charges for every £1,000 earned from offering DSR to the National Grid.
One customer that has benefited from shifting demand is Saint-Gobain. UK purchasing manager Linda Burgess said: “Saint-Gobain UK has been working with SmartestEnergy for five years because of its renewable product, relationships with independent generators and innovative approach.” Last year they saved £165k by reducing demand around peak periods. Engineering manager for glass, Michael Dickinson added: “As well as reducing our costs and helping maintain our competitiveness, it also ties in well with the wider aims of our company to minimise our environmental impact and contribute to the economic and social development of the communities we operate in. Reducing our peak demand plays a part in helping balance the grid, ensuring the UK’s energy supplies are maintained and reducing the need for more generation capacity to be built. It’s a real win-win.”
Ultimately, politics leads economics and the transition to a low-carbon economy signifies a rare point of consensus. If the consumers of electricity adapt to new technologies and new regulations, they face a real chance to create competitive advantage against those that don’t.