Talking about my generation: Five good reasons to plug into the power of onsite generation

Published on 9th September, 2016

In the immortal words of The Who, the iconic sixties rock band, there’s people ‘talking about my generation’. No, not my age group, but the onsite electrical power that British business is producing today. Why? Because suddenly producing your own power is a hot business topic. Two recent developments are going to make this an even hotter subject.

The first is the Government’s announcement that it is to delay a decision on Hinkley Point. This could potentially deny the National Grid of the 3,200 MW capacity it so desperately needs as coal-fired stations and old nuclear plants come off stream. With the energy capacity margins already tight, many UK-based businesses are wondering how they are going keep the lights on.

The second is the disappearance of the Department of Energy and Environment (DECC) which has now been merged with the Department of Business, Innovation and Skills (BIS). All these slightly Orwellian acronyms are all well and good, but it begs the question: What actually is our national energy strategy? A question which has probably not been properly answered for over half a century.

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One thing DECC used to do, and surely will continue with even in its new manifestation, was to publish annually its Digest of United Kingdom Energy Statistics (DUKES) which among other things lists the companies producing power in the UK today and how much power they generate.

The list is revealing in that it names the usual suspects you would expect to find playing the generation game including the major players like Centrica, E.On, EDF, RWE,npower and Scottish Power. But let me introduce to some names you might not expect to find in a list of electricity generators such as British Sugar, Glaxosmithkline, Jaguar Landrover, Nestlé, Tata Chemicals and Swansea University.

British business and public sector organisations like hospital trusts and universities are all now looking to invest in onsite generation. There are compelling reasons to do so and here are my five good reasons a business should look at onsite generation:

Security of supply

A recent survey, carried out by the Major Energy Users’ Council (MEUC), found that nearly nine out of every ten (88%) UK businesses are worried about the security of their energy supply. Of these companies, 50% say they are investing in renewable energy sources (wind, PV, ground source heat pumps, etc.) and 43% say they are installing onsite power generation such as biomass or gas-fired CHP as a result of these concerns.

There is growing concern amongst British businesses about this issue, not helped by the fact that Ofgem, in its first Electricity Capacity Assessment Report published in 2012, warned that the UK generating capacity is nearly at it limits. With the planned closure of some coal and nuclear power stations, it said that spare capacity could fall from 2012’s 14% level to just 4% in three years, with a risk of ‘brownouts’ and ‘blackouts’ likely in coming winters. Its subsequent report revised this capacity downwards to just two per cent.

However in its last report, Ofgem was more optimistic and said that “with the balancing services it has procured, National Grid forecasts a margin for this winter at 5.1% which it considers manageable.”  Part of these ‘balancing services’ depend on the ability to persuade businesses to ‘switch off’ supply from the grid for agreed periods. These are commonly known as demand management services.

Demand management

Demand management services are largely based on financial incentives offered to businesses to ‘switch off’ their supply from the National Grid for pre-agreed periods.

The National Grid offers its STOR service that gives organisations the opportunity to provide active power from generation/and or demand reductions. Similarly, through its Frequency Control Demand Management (FCDM) programme, the National Grid offers availability and utilisation fees to demand customers prepared to accept an interruption to supply by entering into a Frequency Response Contract that offers the business the ability to earn money by accepting interruptions to its energy supply.

These options are designed to be attractive to companies that both generate and consume energy because they can easily plan periods when they can reduce their dependence on energy supply from the grid.

Tax incentives and the business case

There are a number of tax incentives put in place by Government to encourage businesses both to reduce energy consumption and to make an investment in its own onsite generation. It helps with security of supply and enables the business to earn money by taking advantage of the demand management services mentioned above.

This makes the business case for onsite generation really compelling as a company can both reduce energy costs and look for new revenue-earning opportunities through its investment in its own power source. In addition, at a stroke, it protects itself from the vagaries of sharp price movements in the wholesale energy market, especially price rises.

The environment

All companies want to be seen as green and environmentally friendly. It helps project a positive corporate social responsibility message and plays well with consumers. Just look at how much importance M&S is placing on its Plan A initiative in which it says it will help protect the planet by sourcing responsibly, reducing waste and helping communities. The company now boasts the UK’s largest single roof-mounted solar panel array on its distribution centre in the East Midlands capable of generating 5,000MWh per annum, enough energy to power 1,190 houses.

Companies with extended property portfolios and large estates have the opportunity to follow this example, using space to install renewable energy sources like solar and wind which will produce green energy at relatively little cost and further reduce their dependence on the grid.

Offsetting

Finally, companies with onsite generation can look to ‘offset’ any exportable energy they produce against the energy they purchase elsewhere in order to improve their overall energy portfolio returns.

In our experience, six-figure annual savings can be achieved for businesses with the right ratio of electricity consumption to generation that adopt the Offset Supply strategy, even at exported power levels as low as 1.5 megawatts (MW).

An offsetting approach is one which works best when a business operating at multiple premises is in a position to meet most of their electrical load from their own generation sources, or even better when that generation capacity exceeds the consumption requirement. The generation asset/s may be located at a single site or dispersed over multiple locations, but in either event the generated power can be used to offset the consumption at any number of other power-consuming properties.

EnDCo has recently launched its Offset Supply service and IGas Energy, a leading British oil and gas explorer and developer, is already using this service and the EnDCo facilitated approach has delivered 10% savings in its overall energy bill.

So those are our five good reasons for business to plug into the power of onsite generation.

For further information, please email me at: les.abbie@endco.co.uk

Les Abbie, CEO, EnDCo