Future of Energy

The recent power cut that impacted large parts of England and Wales has brought security of supply into sharp focus.

Although the reasons are still not clear, businesses are understandably asking what can be done to protect themselves from such events in the future.

Of course, National Grid, Ofgem and the government are trying to answer the same question.

But while we wait for some answers, the truth is the pattern of energy generation is changing in the UK.

A new diversified model

We are moving towards less centralised large-scale power supply to more widespread, diversified and – we would hope – renewable generation.

And this in itself can aid energy security.

Having higher numbers of smaller generators up and down the country reduces the risk of widespread power black outs when one (or in the recent case, two) major power sources fail.

In this new world scenario, multiple generators could fail, and we’d still be able to manage the impact and keep the lights on.

Even more so with the growth of flexible approaches to energy use. Because as more consumers utilise initiatives such as Demand Side Response, this provides new ways to better support balancing supply and demand on the grid.

Early adopters more resilient

Certainly, those businesses that have already taken steps to embrace the new energy landscape were probably best able to cope with the recent black out.

As soon as the grid frequency dropped, firms who’d installed back-up generators or battery storage should have seamlessly switched to on-site supply to ensure continuous power.

Other companies that have already invested in onsite renewables – for example, solar PV on building rooftops, perhaps paired with battery storage to ensure 24/7 supply if needed – would also have enjoyed greater security of supply.

Regulation not supporting investment

But while many businesses might now be considering investing in similar assets, the problem is the regulatory landscape is not encouraging such foresight.

If Ofgem’s Targeted Charging Review comes into effect as proposed, any business who’s invested in onsite generation will be asked to pay higher charges for use of the grid.

That clearly will act as a disincentive to any organisation currently considering that route.

As the UK has now committed to a net zero carbon goal by 2050, encouraging greater investment in renewable energy is evidently important.

But until energy policy and regulation better support this – and the rules provide a clear long-term view – businesses are unlikely to invest in areas where they could be financially penalised.

Other routes to support security

Fortunately, there are still other ways to enhance security of supply as well as support the growth of renewable energy.

For example, many of our members are particularly interested in the rise in demand for corporate Power Purchase Agreements (PPAs).

This way a company can negotiate a private contract with a renewable generator direct – and then get a secure source of renewable power via a private wire agreement over a sustained period (eg 20 years) at a pre-agreed price.

That ticks many boxes, including price certainty and corporate sustainability objectives.

It also supports the move to more diversified generation on a national scale.

So times are certainly changing. And the new energy landscape looks set to support greater energy security for all…

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