On the Open Access Government website, Chris Rason, Aggreko’s Managing Director of Northern Europe, provides his thoughts on bridging the gap when it comes to a decentralised energy future in the UK.
Bridging the gap to a decentralised energy future
UK industry is operating in a highly competitive world in which the price of energy can have an enormous impact on our ability to be competitive on the global stage. However, attempts to reduce energy consumption can run into familiar road-blocks, such as the UK’s ageing and inefficient asset base and capex constraints associated with implementing potential solutions.
Energy bills can constitute 20 to 25% of a plant’s overall operational budget, often making it the largest expense for site owners and operators. Reducing costs in this area is a key concern across the industry, yet the low-hanging fruit of energy-efficiency measures, such as LED lighting, have largely been picked. As a result, there is now a need to explore new and innovative technical solutions, including decentralised energy, if UK industry is to remain competitive.
With the market for decentralised energy and storage systems continuing to grow year-on-year, it is worth evaluating the technology’s benefits and its viability as a solution to these issues. A decentralised energy solution can involve harnessing solar power, combined heat and power (CHP), gas generation or wind power technology to produce energy on-site. Through the adoption of energy-efficient decentralised solutions, companies can have more control over their energy costs and usage. Because of this control, these businesses can realise cost and efficiency savings that may not be possible importing electricity from the national grid.
Consequently, an increasing number of key energy decision-makers across the industry have considered on-site energy generation, taking into account concerns about energy costs and sustainability. As such, decentralised energy technology may be ideally placed to resolve anxieties around rising energy prices impacting the competitiveness of UK manufacturers abroad and the national grid’s ability to cope with snowballing demand without stunting growth.
Yet though larger manufacturing organisations can turn to decentralised energy as an independent source of power, it is not a viable option for all businesses. Some companies are often unable to afford the initial investment required to take advantage of the technology. Indeed, it is common for energy decision-makers to have their request for new equipment to reduce energy consumption turned down because of capex restrictions.
With this in mind, some manufacturers are now considering more incremental strategies and solutions such as demand side response (DSR) to lower their electricity bills. Many organisations who have engaged with DSR are now enjoying lower electricity tariffs due to the flexibility it allows, yet uptake remains limited in the UK. However, this enthusiasm, even on a smaller scale, definitely shows that there is interest in moving to a decentralised energy future, provided financial obstacles are overcome.
Finding funding to finance large-scale installations will always be a concern for businesses, where the financial bottom line is a priority. While implementing a decentralised energy solution may seem attractive, many plant owners and operators often simply do not have the capital to allow this. However, by hiring the necessary plant equipment instead of opting for the traditional outright purchase option, energy decision-makers can avoid capex constraint concerns which may otherwise deter them from implementing decentralised energy technology.
Furthermore, this off-balance sheet option has no requirement for depreciation of tangible assets, meaning it can provide a bridging gap solution between industry’s current overreliance on the national grid and a future where electricity is mainly generated on-site. By doing so, companies can more easily access innovative, secure and environmentally-friendly technologies that could offer immediate savings.
“Decentralised energy solutions enable more flexible demand and reduce energy consumption, allowing industrial and business users to participate more fully in the UK energy system,” says Caroline Bragg, Senior Policy Manager at the Association of Decentralised Energy. “Users can increase their competitiveness, reinforce their security of supply and help towards meeting their sustainability and low carbon targets.
“The next few years hold exciting opportunities for industrial users. Power markets are opening up with flexible generation and demand-side response, offering the opportunity for the industry to earn significant revenues in new markets – including reformed balancing services, the Balancing Mechanism and the new pan-EU platform called Project TERRE. We need to continue this progress and put industrial, commercial and domestic users at the heart of the energy system.”
In conclusion, the capex crunch affecting the UK manufacturing sector shows no sign of easing, while energy prices continue to rise and the national grid comes under increasing strain. These concerns are continuing to hamstring growth and manufacturers can find themselves in a position where they cannot be as competitive abroad and unable to afford the technology to change this. However, hiring could potentially provide a bridging gap solution to allow companies to take advantage of the benefits offered by decentralised energy, without significant capital outlay.