Consumers and businesses alike are increasingly demanding that their suppliers operate responsibly, says Ashley Phillips, from Ørsted (formerly Dong Energy). He discusses energy strategies that can generate revenue and improve green credentials.
For businesses operating critical sites, ensuring a constant and secure energy supply is a must. For many organisations, this means having at least one source of backup generation onsite for contingency purposes, such as a diesel generator or combined heat and power (CHP) unit. At the same time, the UK is progressing towards its 2050 carbon target of reducing carbon emissions by 80%, compared with 1990 levels.
Our electricity infrastructure is decarbonising to support that target, with more and more renewable generation sources being connected to the system. In fact, 21 April this year saw the widely reported first zero-coal day since the industrial revolution and BEIS reported a year-on-year increase in renewables of a significant 4.4GW capacity for the second quarter of 2017, within its Energy Trends Report, published in September.
However, many businesses may not realise that backup facilities are also a means of generating new revenues, in addition to securing supply and hitting those all-important carbon targets.
The business of balancing
As well as becoming much greener, the generation mix is also decentralising. Electricity is now generated from more sources and we no longer rely on a handful of large coal-powered plants to provide the bulk of the country’s electricity needs. This makes balancing the electricity system a much more complex task, creating a need for new and different levers.
One such lever is the business consumer. Because businesses use large volumes of electricity, they can make a significant difference when actual demand for electricity is higher or lower than forecast. If a business can turn down – or switch to onsite generation when demand is higher than expected – it negates the need to source additional power; and vice versa, where there is a surplus of electricity on the system, a business that can increase its consumption is valuable.
The need for greater flexibility in business consumption, to support system balance, has led to a focus on developing schemes to encourage as many businesses as possible to get involved with system balancing. Many of these demand-side response (DSR) schemes are operated by National Grid. There are different features associated with different schemes but essentially businesses are paid for their consumption flexibility. For mission critical sites, this is likely to mean switching to onsite generation when needed, to balance the electricity system.
Earnings vary depending on several factors. For instance, larger volumes and quicker reaction times are rewarded with a higher price per unit delivered. Some schemes offer a payment for making flexible volume available, with a further payment when businesses are called upon to change their usage and participate in the scheme.
It is a part of the energy industry that is evolving quickly and it is important that businesses stay ahead of changes to ensure they maximise any new opportunities that may arise.
Because business flexibility is so critical to the smooth operation of the electricity system, some schemes have penalties if a business fails to switch down when asked, so it is important to choose the right one. For mission critical sites, this may be an important factor, as avoiding any downtime is vital for your operation.
With this in mind, we developed our renewable balancing reserve (RBR) scheme. RBR helps to keep the system in balance, by using business flexibility to counteract any changes from our forecasts, known as ‘imbalance’.
Each day energy suppliers disclose their anticipated volume for the day ahead. Imbalance occurs when generation does not match the demand. When this happens, National Grid takes action to balance the network by asking generators and consumers to change generation or consumption to counteract the difference.
This incurs costs, which are passed on to suppliers. RBR works by reducing imbalance costs for Ørsted, as well as providing a revenue earning opportunity for businesses.
The resulting savings or earnings are then shared with participating customers. In fact, one of our customers increased its energy export revenue by 4% through RBR, earning an additional £273 per hour, on average. For many businesses, RBR is attractive because it can be operated in conjunction with other DSR schemes, providing further opportunity to maximise the earnings from existing on-site generation.
A sustainable future
Harnessing business flexibility is vital for the energy industry. By working together, we can keep the cost of transformation down while realising our low carbon ambitions.
The Government recently announced that emissions are already down by 42% on 1990 levels so we are making good progress, but there is a lot more work to do. BEIS launched its Clean Growth Strategy on 12 October, which sets out its approach to reducing emissions, tackling climate change, creating high-skilled jobs and developing world-leading green technologies. As a country, our commitment to a low carbon economy is here to stay and for those businesses ready to embrace it, there are opportunities to grow.
At Ørsted, we recognise the importance of embracing a better energy future. As a result, we have divested our oil and gas assets and changed our name from Dong Energy, which stood for Danish Oil and Natural Gas.
On 6 November we became Ørsted, named after Danish scientist HC Ørsted, who discovered electromagnetism. His discovery helped lay the foundation for the way we produce power today, and his curiosity, dedication and interest in nature are qualities we believe are essential to creating a world that runs entirely on green energy.
Consumers and businesses alike are increasingly demanding that their suppliers operate responsibly. We have made it easier for businesses to adopt an environmentally conscious approach by removing the premium associated with renewable electricity, enabling businesses to ‘go green’ without commercial disadvantage.
Because our electricity is entirely generated from offshore wind, it can be reported as zero carbon in greenhouse gas reports, which our customers find can be attractive within tenders. By providing premium-free renewable energy as well as innovative ways to balance the UK’s evolving electricity system, we are enabling an increasing number of businesses to act responsibly while reaping commercial rewards.