Energy resilience roundtable: Paving the path to a clean energy future
Energy management experts from some of the world's biggest manufacturers and retailers recently came together for an exclusive roundtable hosted by edie and Centrica Business Solutions to explore some of the biggest challenges and opportunities when it comes to building energy resilience.
Energy resilience is about ensuring a business has a reliable, regular supply of energy and contingency measures in place in the event of a power failure. Ensuring your business is energy resilient and therefore insulated from any potential price increases or fluctuations in supply is therefore critical to maintaining operations.
While historically the UK is used to stable supplies and relatively stable prices, resilience is moving up the agenda as the energy landscape undergoes a radical transformation from large centralised coal plants to an increasingly renewable and smaller-scale gas-fired world.
The benefits of energy resilience are palpable, as illustrated by a recent study by Centrica Business Solutions which revealed that businesses are 13% more likely to have a good brand reputation and 34% more likely to have strong financial performance if they adopt a dedicated resilience strategy. But that same report found that many businesses are missing out on these opportunities. In fact, it is understood that British businesses could be risking 17% of their annual revenue by failing to adopt an energy resilience strategy. This equates to £2.8m each year in damages and lost opportunity for the typical medium-sized British business.
So, how do you know if your business is energy resilient? What levels of investment are required to build resilience? How are future price increases and concerns about supply reliability motivating businesses to source and use energy more wisely and become more efficient? And how can technologies and solutions help to make an energy resilience strategy more holistic and future-proof?
Those were some of the crucial questions that edie sought to answer during last month’s roundtable, which brought together 10 energy management experts. The hour-and-a-half discussion covered the potential solutions to some of the biggest challenges facing the sector, and the energy management opportunities that will allow businesses to continue moving forward despite a turbulent backdrop.
The scale of the challenge
Fate dealt a heavy blow on the day of edie’s roundtable discussion on energy resilience, which took place in the midst of one of the worst storms to hit the UK in recent memory. Freezing temperatures and heavy snow wreaked havoc on travel plans as the polar vortex dubbed ‘the Beast from the East’ spiralled in from the Arctic. These extreme conditions served as a waving red flag for the majority of roundtable attendees – most of which represented industrial energy users.
Worries around energy price fluctuations and interruptions to gas supply would have only been accentuated further the following day when National Grid warned that the UK would not have enough gas to meet public demand. Last month’s crunch was the biggest energy security test since the country’s largest gas storage facility was closed by Centrica in 2017. The Rough site in the North Sea had accounted for 70% of the UK’s gas shortage, and its closure has prompted warnings of increased volatility of winter gas prices.
Fears became reality on the day of the roundtable discussion, when news circulated that the big freeze had caused wholesale gas prices for same-day delivery to soar to a 12-year high. Experts have long-cautioned about putting too many eggs in the same basket. Many point to declining domestic production which means that 60% of the country’s gas is now imported, a level of dependence which National Grid believes could reach 93% by 2040.
It seemed an apt place, then, for roundtable chair and Association for the Conservation of Energy chief executive Joanne Wade to begin proceedings with a question around the scale of the challenge faced by each member in their energy resilience journey. For some, the response was straightforward: security of gas supplies in the UK.
“That is one area where we have concern,” said Ian Knight, global sustainability senior manager of Mars, who was participating in the discussion through a conference call due to the adverse weather conditions. “Extreme weather events or geopolitical instability are increasingly going to be a significant risk to supply and the price.”
This view was echoed by Charles Sainsbury, energy manager of Landsec, which owns and manages major commercial property including London offices and major shopping centres. Sainsbury pointed out that growing exposure to air pollution in urban areas is adding the dynamics towards moving away from gas. He mooted a potential shift towards electric heating - as commonly used in France – as both economical and less subject to sudden surges in price than gas and oil.
“Air quality is taking over as the major environmental issue in major cities,” Sainsbury said. “We are slowly moving away from gas and move towards electrified heating, which will be great I'm sure. The challenge now from the carbon efficiency perspective is for the power people to manage at peak times with everyone suddenly using electric heating.”
So, if security of supply is the number one issue, what is the answer for big energy users?
An immediate solution is the potential procurement of renewable gas. In recent times, UK companies have benefitted from the Green Gas Certification Scheme (GGCS), which tracks biomethane through the supply chain to provide certainty for those that buy it.
This was identified as a particular opportunity by Sainsbury, who noted that, at present, green gas makes up 15% of Landsec’s gas purchases. Meanwhile, Maria Spyrou, energy efficiency manager at M&S, explained that the retailer is now well on the way for 50% of the energy used in its buildings to come from certified green biomethane sources.
But most participants agreed it was likely that, in the long-term, big businesses would need to move away from gas. An element of reputational risk is at play here: companies are under increasing pressure from their stakeholders to deliver low-carbon solutions that are also cost-effective.
“Customers will benchmark for our costs on electricity and gas with other landlords and service providers,” Sainsbury added. “If Landsec comes in at the most expensive then we are going to be held to account and asked why that is and what our purchasing strategy is, are we taking enough risk, are we balancing supply and demand, where is our energy coming from?”
Blips and batteries
At this point in the discussion, Centrica Business Solutions’ customer solutions & strategy manager Lucy Simpson noted that the most effective way to reduce risks is through a diversification of energy sources. “Gas will have a role in the mix, but ultimately we need to reduce our use of conventional electricity and gas in order to reduce the risk of both,” she said.
A diverse energy supply, Simpson said, will inevitably involve an increase in renewable sources. With costs in solar and wind falling dramatically over the past decade, the proposition of onsite renewable generation is increasingly attractive for energy-intensive businesses.
Indeed, many roundtable members claimed to have already taken this route. Mars, for instance, has shifted to 100% renewable electricity at all 8 of its UK factories, while Landsec’s White Rose shopping centre in Leeds recently became the ninth asset to have solar PV installed across the company’s estate.
The growth of renewables, however, is not without its challenges. As renewable penetration rises to far greater levels in coming years, grid operators will have to account for the costs of curtailment, network reinforcements, maintaining system inertia and the reduced efficiency of thermal generation. Intermittency on the grid means that transmission and distribution costs are set to take up an increasing proportion of bills.
This is where the role of energy storage comes in. Developments in the storage market are reducing its cost significantly, and it is believed the solution could soon mirror how conventional fossil fuel power plants store energy in high-mass rotating equipment, such as steam turbines and gas engines.
For Mars, which suffers from brownouts at some of its manufacturing plants, batteries can provide the twin function of protection against the drop in supply and the cost-benefit of load shedding associated with stored energy.
Knight explained: “When we think of our most severe resilience problem, it's not large periods without supply, it's very short blips. If you are coating some minstrels, and squirt some syrup on, and then all of your air plants turn off because there has been a blip in the electrical supply, instead of a tonne of individual minstrels, you can make a one-tonne minstrel. And that can take a lot of digging up and clearing out.
“So, this is why you would bring in the battery solution to manage demand, and also to provide protection against brownouts... it can be very attractive to some of our factories.”
Batteries are also a good option for businesses that operate in locations of high energy consumption. This is the case at the Birmingham office of Mondelez International, the UK’s largest branded food manufacturer, which is situated in a busy residential area. Electricity at the site is directly connected to a nearby hospital, potentially a much bigger risk area. As such, Mondelez’s site energy and sustainability lead Pierre Pineau is exploring ways to guarantee resilience in the worst-case scenario of his company’s supplier switching off the power.
While Pineau believes that storage would go a long way to help ease the problem, batteries are still in their infancy, raising doubts around the short-term business case.
“As a business, are we prepared to do some investment that is longer than the usual return on investment (ROI)?,” Pineau asked. “What is the risk for the business? That is what we are looking at and trying to answer.”
M&S’s Spyrou shared Pineau’s concerns, admitting that uncertainty on revenue streams around storage meant she had so far been unable to convince her board to invest in the solution.
Spyrou said: “I am not willing to go to my chief financial officer and say I want a specific amount of money with a specific return on investment, because I don't know what that return is, and no one can guarantee it. I am not going to try and convince the board about something I am not confident about.”
Confidence in policy
Spyrou pointed towards uncertain market prices caused by instability in the Capacity Market, which was originally intended to provide security of supply and help de-risk power station construction. Longer-term contracts and forecasts are needed to give a better indication on ROI, Spyrou said.
This anxiety touches upon a much wider issue around a lack of confidence in policy. Some roundtable participants lamented Feed-in-Tariff reductions, while others, such as Accolade Wines’ renewables project engineer Akshan Jirasinha, aired concerns around Ofgem’s decision to reduce the Triad payments, a measure which rewards businesses that use small generators. It has been oft-stated that the latter move could burn deep holes in the pockets of energy managers of large industrial manufacturers.
When it came to listing the opportunities for greater investment in energy resilience, the roundtable was virtually unanimous in its call for better Government support through financial incentives. Landsec’s Sainsbury urged for an increase in the amount of technologies eligible for the Enhanced Capital Allowance (ECA) scheme, which provides businesses with tax breaks for energy-saving equipment.
“If you are expecting big business to invest in this area, you are going to need some more policy confidence,” Sainsbury said. “We are thinking about EVs in our shopping centres. We can't support the EV infrastructure quickly enough, and that means our energy is going to start going up. There are elements of energy that should have tax relief and we should get credit as part of the ECAs as well.”
Holistic thinking from Government – particularly in light of the new Industrial Strategy – can certainly help advance energy resilience plans but, in many cases, energy management teams are moving from compliance to competitive edge.
“Most of the time, we feel we are ahead of regulation,” Spyrou added. One of the ways that M&S has looked to stay ahead in recent years is by moving into the area of demand response.
By implementing demand response either through an aggregator or direct with National Grid, firms can make a useful contribution to the UK’s overall energy resilience. In the case of M&S, this means pre-heating or pre-cooling stores so that it can effectively switch off certain non-critical loads – specifically, heating, ventilation and air condition (HVAC) – during peak demand.
M&S began connecting back-up generators to the grid nearly three years ago. The company is now working through the connections process at around 15 other sites for phase two of its demand-response programme, which Spyrou hopes will deliver greater savings next year. Once completed, phase two will give M&S around 20MW of flexibility.
Spyrou said the investment is starting to pay off. Last year, M&S’s electricity consumption was 10% lower than the previous year. Spyrou insisted that, in the quest to achieving energy resilience, businesses must be brave.
“In the process of becoming energy resilient you have to take risks and that's what I keep going back to my board and saying. If I hadn't found about certain problems, it would have caused a bigger problem further down the line. I am finding more problems, but I am also making the business more resilient.”
The discussion then progressed with members asked to identify the key components of a successful energy resilience strategy. The table arrived a consensus that, while new technologies and processes will help to push the agenda forward, the achievement of employee engagement through increased energy resilience can also make a big difference.
Rebecca Dilks, environmental manager at British chocolate brand Thorntons, is looking to gain ISO 50001 accreditation over the next two-to-three years. This achievement will be made significantly easier by bringing employees along the way, Dilks said. She explained that an internal ‘going for green’ rewards scheme is encouraging Thorntons employees ‘on the shop floor’ to save energy by briefing them on performance. Voluntary champions drive action in each department and a financial payback is given in proportion to the savings made.
Dilks said that measuring energy performance can boost competitiveness among teams, and in turn, foster energy-efficient behaviours among the wider workforce.
“While the influence they have might be a drop in the ocean when we think globally with the issues on energy, for us, if everybody in the business and everyone on the shop floor is doing their bit then we are becoming more efficient as an operation,” she said. “If we have 20-something plants, then that starts to make a big difference.”