On Wednesday 15th March, Chancellor Jeremy Hunt announced that the CCA scheme will be extended for two years and will open to new facilities currently not in the scheme.
During the past 18 months, we have seen wholesale electricity prices rise from approximately £75 per MWh to over £700 per MWh and fall back to around £250 per MWh. In between there has been half a dozen major spikes and countless upturns in the price as the markets react to both physical and political changes. Gas prices have followed an almost identical trajectory throughout the same period.
While energy prices have fallen back from the peaks we saw in recent months, prices are unlikely to fall back to the lows we saw previously. This puts the prospect of investment in on-site generation in a new context. For many organisations – even those who have explored it and ruled it out on commercial grounds in the past – it is now a viable option to secure its energy supply in a more cost-effective way.
On-site generation can reduce dependence on grid electricity and fossil fuels, improve security of supply, and create an income stream from selling surplus energy back to the grid.
When beginning to consider on-site generation, the overall impact needs to be assessed:
- Are government financial incentives applicable?
- Will there be an impact on any UK ETS participation?
- What will be the impact on any Climate Change Agreement discounts or carbon reduction targets?
- What will be the impact of removing the baseline from a consumption profile on future grid pricing?
Selecting the right technology for you
The use of on-site generation and renewable technology needs to be planned carefully. It is important to identify the appropriate technology. A review of the existing energy consumption profile would be a good place to start.
- Is energy use mainly electricity or heat?
- Is the demand profile constant, or perhaps fluctuating between day and night, at weekends or seasonal?
- How much consumption will be replaced?
Some common technologies, for example solar PV and wind, just produce electricity. Whereas, solar water produces heat, and CHP (renewable with biomass fuel), as its name implies, produces both heat and power.
Overview of key technologies
The economic feasibility of installing a wind turbine is highly dependent on wind speed. For an initial assessment, UK Met Office station data may be adequate but site wind conditions should also be measured. Wind power is intermittent, therefore all sites will need to maintain existing supply arrangements. It may also make your load profile less attractive to grid energy providers.
Planning permission for installing the turbines will most likely be required and you should seek advice from your local council before proceeding. For building-mounted systems a structural survey, to ensure the building can bear the additional load will be required.
Solar conditions are less varied and volatile than wind conditions, so general returns on investment are more appealing. Despite the reduction of government support a typical return on investment would be 5 years. For larger installations Power Purchase Agreements (PPA) may be a viable alternative to outright purchase.
Solar PV panels generate Direct Current (DC electricity) and have a life expectancy of 20 to 25 years, although their performance will decline over time. The Invertors installed within the system to convert the DC to Alternating Current (AC electricity) for use typically have a life expectancy of 10 to 15 years, so the cost of their replacement, at least once, should be factored into the financial evaluation. Otherwise, systems are relatively low maintenance and generally only involve electrical checks and cleaning of the panels.
New build sites are ideal for PV installations, since they can be integrated into the building process. Retrofitting PV to existing buildings is also a viable option. For roof mounted installations a building survey will be required to ensure the roof can take the additional load. Your local Distribution Network Operator (DNO) will need to approve the installation, even if the expectation is never to export electricity, don’t assume you can export as much as you can import through your supply.
Larger installations may need planning approval and getting your local council and DNO involved at any early stage is recommended. In our experience, rather than economics, grid connection, structural integrity and planning consent are the main reasons Solar PV installations don’t proceed.
This technology absorbs energy from the sun, using heat exchangers, to heat water. There are three main types:
1) Flat plate collectors – a sheet of black metal, enclosing a system of water pipes, absorbs the sun’s heat. Water is fed through the pipes, which conduct the heat to the water.
2) Evacuated tubes – absorber glass tubes are held in a series of outer glass tubes. Light passes through the outer tube heating the inner tube which in turn heats the water travelling through it.
3) Solar matting – extruded black tubular matting is used as a solar collector. Again, water is passed thorough the hollow tubes collecting heat from the sun.
Systems should be roof-mounted and ideally face between south-east and south-west. Typically, the other system equipment would be within the roof void, and as close as possible to the collectors. Retrofitting systems can be relatively expensive because of the need to integrate with existing systems.
Combined Heat and Power (CHP)
CHP is the simultaneous generation of heat and power (electricity) in a single process. Generation on site enables the capture of waste heat for site applications. The viability of CHP is usually determined by the demand for the waste heat generated. Typically, it will need to run for at least 4,500 hours per annum and ideally 6,000 hours or more per annum.
CHP makes more efficient use of primary fuel than generating electricity and raising heat separately. For 100 units input, a CHP would typically create 30 units of electricity and 45 units of heat. To achieve this conventionally would require approximately 139 units of fuel. When considering the installation of CHP an initial survey should be completed to decide if it is both technically and economically feasible:
- Determine energy profiles
- Calculate heat to power ratio
- Select the best technology for your site – this is usually determined by the electricity baseload demand, but there should be an appropriate coincidental heat demand.
- Make basic financial calculation
As with other on-site generation you will need the permission of the DNO, so check with them at an early stage, as well as exploring planning permissions required with the local council. If you are planning any other energy saving measures, you should consider CHP with these, not in isolation. If you implement any energy saving measures after installing a CHP unit, you may find you change the economics of the CHP plant.
Talk to our specialists today to determine the feasibility of your on-site generation ambitions.
Triad Charge replaced by Targeted Charging Review
28th February 2023 marked the final day of Triad charges as we know them. Business energy users can no longer take action during peak times to significantly reduce their energy costs.
UK Energy Markets Monthly – Our review of energy markets, plus TCFD: is your business ready?
Join Envantage on Tuesday 7th March for our monthly update of the key drivers affecting the UK energy markets. Hosted by our Energy trading expert, Richard King, we outline how and why the markets are moving, and the issues that will affect your energy prices.
This month we have extra special content which sees us also explore the Task Force on Climate-related Financial Disclosures (TCFD): What does standardising climate-related disclosures mean for your business?
Why should you attend this webinar?
- Listen to expert market insight into gas, electricity and oil price movements and what’s influencing them
- Understand the driving forces behind energy prices and the decisions needed to mitigate risks
- Learn about TCFD and how standardising climate-related financial disclosures might affect your organisation.
Join us Tuesday 7th March at 11am – 11.45am.
Act now to secure the benefits of flexible energy contracts. There are opportunities right now to maximise the benefits of falling energy markets for businesses with risk-managed flexible energy contracts.
At Envantage, we don’t advocate a ‘compliance only’ approach to regulatory schemes. We use them as a framework to help secure maximum benefits for your business.