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The Current and Future Cost of Energy Part 2 (Industry Insight)

Introduction

Energy is a growing cost to businesses, whether an office building or largescale manufacturing facility, minimising its impact is something that all businesses strive to do. In part one of the current and future cost of energy Industry Insight the factors that have made up the current cost, and those with will influence the future cost were assessed, part two will cover:

Consequences for businesses

It is currently hard, if not impossible, to summarise exactly what impact on the future cost of energy the factors discussed in part one will have. It is fairly clear, however, that the significant costs resulting from the switch to new, cleaner technologies, zero-emission power generation, and carbon capture will be, at least in some part, shouldered by business.

As highlighted in the current cost of energy section, the UK’s prices are higher than that of many of its competitor economies. Additionally, the costs of upgrading network infrastructure will affect all countries worldwide but countries will take different approaches and implement change at different speeds. For example, whilst the UK has a legal commitment to zero-carbon by 2050, Germany has committed to ‘pursue’ the same target but not enshrined it in law, and the USA on the other hand, which already has significantly lower energy costs and resources, has signalled its intent to withdraw from the Paris climate agreement, and continues fresh oil and gas exploration. There are also countries pursuing more ambitious targets than the UK such as Sweden, and Norway’s goal is just over 10 years away.

The long-term efficiency benefits may bring advantages to firms operating in the UK, but international competitiveness is an area of concern for some, remaining competitive in these challenging times will require investment into innovative solutions.

How the uncertainty and costs can be mitigated

Many businesses have implemented methods to reduce consumption in areas including lighting and heating, alongside engaging in sustainability practices. To attain further savings, businesses will need to find ways to ensure they have a flexible, resilient, and efficient energy management strategy that delivers insights for continual improvement.

Uncertainty in many cases can detract from the willingness to make investment. However, as with action to achieve zero carbon, the cost of not acting is likely greater. The cost of electricity is already relatively high, and is likely to rise further, meaning that organisations who are proactive in the management of their energy stand to benefit the most.

Smart energy technologies such as Voltage Optimisation (VO), battery energy storage systems, and efficient distribution transformers can bring substantial consumption and cost savings, as well as various other benefits to businesses, especially when deployed as part of an integrated smart energy strategy.

Voltage optimisation systems such as Powerstar’s LITE, MAX and HV MAX offer advantages including increased equipment lifespan, on top of energy savings of between 8-12% by reducing the incoming voltage to a site to a more optimal level, closer to that required by electrical equipment. This reduction in kWh converts to monetary savings and as costs increase, so too will the benefit of the system. The same is true of carbon emission, as a site will reduce its electrical consumption, the carbon emissions associated will also be less.

Smart distribution transformers like Powerstar SO-LO which utilise modern materials, such as the amorphous core, are markedly more efficient than older cold rolled grain-oriented (CRGO) transformers, delivering up to 75% lower core losses. With lengthy lifespans of 50 years, transformers have traditionally been a weak link in energy management due to their lack of connectedness and ageing technology. Crucially, smart transformers can be integrated and connected with other Internet of Things (IoT) assets to provide valuable insights to continually improve energy management, and streamline performance checks. The advantage of bringing a distribution transformer online with remote monitoring are numerous but above all, it enables key insights into asset performance and operation including oil analysis, core temperatures and efficiency reports to enable proactive maintenance and ongoing optimsiation to be undertaken to maximise return on investment.

Energy storage systems such as Powerstar VIRTUE bring a variety of applications and benefits for sites, including protection against power losses, which can cause severe disruption for organisations that rely on continuous processes, by providing Uninterruptible Power Supply (UPS) capabilities. Additionally, as the country deploys more renewable generation sources, which are intermittent, storage will play a greater role in balancing the energy network.

Another valuable application both for cost savings and meeting carbon targets is implementing battery buffered electric vehicle (EV) charging. By supporting EV charging with battery storage, businesses can avoid costly infrastructure upgrades whilst transitioning their fleet to low or zero emission vehicles. This use of energy storage will take on more importance as EV growth places even greater strain on the energy network.

For businesses that operate complex sites that need to cater to multiple needs, such as avoiding power failures, maximising on-site generation and partaking in grid contracts to generate revenues, an intelligent comprehensive Energy Management System (EMS), such as that developed by Powerstar is a necessity. Such a system will enable the automatic prioritisation of activities to optimise output for a whole site and its assets. This is achieved through utilising neural network-based AI, which analyses data.

Concluding on the impacts and solutions of the current and future costs of energy

With energy in such a dynamic position, it is difficult to draw too many concrete conclusions on the current and future cost of energy. What is clear, however, is that the uncertainty will continue for the time being, and that the general trend of the cost of energy is upwards until renewable energy is fully mature and the costs of implementation have been levelled, something that businesses will have to mitigate.

The conclusion to the BBC’s Briefing summary is equally elusive:

“Electricity prices are likely to increase as a result of the cost of the transition to low carbon generation, although international trends indicate that renewable generation costs will continue to fall. The impact on consumers will depend on how overall costs are split between households, industry and Government.” [2]

Whilst the outlook for costs looks to be quite bleak, the long-term advantages of the clean energy transition will be of benefit to many businesses, from more efficient vehicles, to improved air quality, to limiting the effects of climate change.

To effectively manage energy through the transition and beyond, and to limit the impact of rising costs, businesses of all sizes will need to ensure they have efficiency, flexibility, resilience, and insights within their energy strategy. This can be achieved through integrated smart energy solutions such as those provided by Powerstar.

Powerstar Case Studies

 Energy Optimisation and Efficiency

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10 December 2019

  1. https://www.energylivenews.com/2019/10/09/only-18-of-energy-managers-say-sustainability-is-their-priority/
  2. https://www.bbc.co.uk/news/uk-48186443
  3. https://www.gov.uk/government/statistical-data-sets/international-industrial-energy-prices
  4. https://www.telegraph.co.uk/finance/newsbysector/industry/11743806/Tata-Steel-to-slash-720-UK-jobs-in-Yorkshire-as-high-electricty-costs-bite.html
  5. https://www.current-news.co.uk/news/uk-net-zero-transition-to-cost-1-trillion-chancellor-claims
  6. https://www.bbc.co.uk/news/business-49823305

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