Following our recent webinar: A Definitive Guide to Energy in 2019, we had an influx of questions both during the Q&A session and after. Your questions were diverse, some high-level and some granular, all interesting. Which is why we thought we’d share a few of the questions and answers with you.
Energy expert, electricity market professional of 20 years, host of the webinar, and MD at GridBeyond, Wayne Muncaster answers your questions below. Interested to hear the live Q&A, and see the on-demand webinar that these questions came from? Request access here.
Question 1: How do the new market realities affect the value of energy efficiency investments?
– Tim | Consultant
WM: Energy efficiency is still critically important. Continuing to replace old assets with evermore efficient assets and reducing your overall energy demand should always be the first thing you look at. Often, GridBeyond sits behind a SCADA investment or compressor upgrade project. Obviously energy efficiency is a very broad church, as is demand management. Energy efficiency will continue to be important, while demand management, or flexibility, will become just as important. In essence, energy efficiency is reducing the overall levels of energy you use, whilst flexibility is being more prescriptive about when you use it.
It’s important to understand that more efficient assets don’t affect the level of flexibility. If you’re putting in things like VSDs to drive efficiency, then by their very nature they have the potential to give you more variability and more flexibility. So variable assets are able to play in the energy markets in different ways than interruptible assets. I see them as common bedfellows, I don’t see one as a detriment to the other, I see them as just as important, and the difference to me is that energy efficiency has been important for a long time, while flexibility or demand management has been a side show. I see flexibility as being just as important as energy efficiency and ultimately, maybe even start to become more important.
Question 2: What do you think Brexit will do to opportunities in the markets you’ve discussed?
– Adrian | Logistics and AD Plant
WM: Most of the markets won’t be impacted. That’s not my view, that’s National Grid’s view. Project TERRE is the European view, but there’s already work underway to see what that looks like post-March. Our problems are due to the fact that we have an island network. Yes, we have interconnectors, including the 2GW interconnector to France, which creates other issues all on its own, and the interconnector to Ireland, but that’s effectively an exporter. Our problems are dictated by the nature of our network, and the nature of our network won’t change post-Brexit. Most of the services that we’ve talked about today will still be required. The value of those services and the changing energy mix, whether it continues to be with investment from European utilities or potentially Chinese infrastructure investments within the UK, whether that goes away or increases, I don’t know. Whether some opportunities are accelerated, or some of them are slowed, I don’t know. But the opportunities we’ve discussed with you today, I don’t see a fundamental impact one way or the other.
Question 3: What impact do you see from the potential removal of triad charges?
– Chris | Consultant
WM: The ultimate impact is that it’s going to put £100-125 million worth of cost back onto the bottom line of UK businesses; that’s not something we expect businesses to sit back and take lightly. So, if we assume the Ofgem “minded-to” decision is what happens, it will drive business to look at recovering their increased costs in other ways.
We see it driving a real push and acceleration of those wholesale products, in other words: “If I can’t do a simple thing to avoid peak charges at triads, I’ll have to have a contract that enables me to look at the day ahead market and avoid peak charges within that market.” I.e. businesses will look to optimise production within the wholesale market on an ongoing basis, not just passively through triads. I&C will have to engage with a supplier and have a contract that enables them to do it, and rebalance their production to optimise consumption against market pricing. We see that really accelerating.
Question 4: Managing production is fine, but if your factory is full and you have short order lead times, then what are the next options? Into batteries and generators?
– Chris | Flour mill
WM: So yes, we’re talking about degrees of flexibility, and flexibility is not a fixed thing. Your site might be flexible on certain days, times or even seasons. For example, food production might be completely inflexible in the Winter in the lead up to Christmas with peak orders, but generally more flexible in the Summer.
The move from month-ahead markets to week ahead markets provides an increased ability to change your mind. Markets moving closer to the point of production increases the opportunity potentially for guys like you who have short order lead times. When production is potentially not decided until the day before or a couple of days before, the gradual move towards near real-time procurement increases the opportunities for you.
But you’re right, where production is really really difficult to predict, short order lead times mean that production guys are just unwilling to commit to anything, even to the point of within day. This means that self-generation or batteries could become a real option for you.
Question 5: Could you elaborate on how change is managed within clients? For example, when assets need replacing.
– Chris 2 | Consultant
WM: I’ve been in this market place a long long time, and I’ve operated as a supplier as well and the reason why I push this from a DR angle rather than from a supplier angle, is predominantly the level of understanding that’s required at a customer level. Not saying suppliers are terrible at that, but it is often more difficult for suppliers to have that kind of relationship with a client.
An example of this is with Brakes, but there are hundreds of others where this is not a transactional sale or process where we sign a contract together, we come and install our kit and then we walk away and 2 years later we come back when the contract needs renewing. This is a continuous process. We invest increasingly heavily in account management and putting people on the ground to have constant dialogue with our clients either on a monthly, quarterly or sometimes even fortnightly basis, but that understanding of how operations change is important.
So, it might not just be replacing or updating assets, it might be that production of a product has shifted from site X to site Y, so now site X consumption has gone down, but site Y has gone up. We need to know that to enable us to place those assets in the right programme and get the maximum value. I think it is critically important and it’s something we continually have to do through our account managers. We also have our NOC where we have 6 energy managers who manage our existing portfolio. This can be anything from alerts and alarms, to where we see something on site that’s gone wrong, when an asset suddenly goes down, but also looking at month ahead, week ahead production schedules where we need it.
One of the frequency response schemes we do requires us to submit week ahead forecasts to the grid, so we work with some clients to do that, some clients are comfortable for us to work those out ourselves. It’s a collaboration, and that’s only going to become more important as we go into wholesale markets, where the delivery of the value you’ve prescribed is even more important. In other words, if you don’t deliver in the wholesale markets and it results in an imbalance there are potential costs. In FR non-delivery only results in lost revenue.
Question 6: What is sleeving?
– Anthony | University
WM: There are multiple different meanings. An example of sleeving would be if you have 2 sites with different incomers, connected at the same distribution connection point, you can potentially use the generation from site A to net off the generation at site B as long as you have the cooperation with the DNO and the supplier.
This is something that we’ve looked at with ENW. It provides benefits to ENW in effectively balancing off the network at a local level, at a sub-station level, and provides benefits obviously to the consumer in enabling them to net off the import for the site that doesn’t necessarily have its own generation with excess generation from another site.
So, that’s one example of what we can actually do. It’s not something you can do on your own, you’ll need some collaboration. You might have seen some of our recent press, where I’ve spoken about collaboration and the need for parties, system operators, distribution operators, suppliers and platform providers (like GridBeyond) to get together to deliver these things. This is a really good example of that collaboration.
Question 7: Is there any skills shortage to deliver this new energy landscape? What recruitment demands will be necessary in the market?
– Jason | Consultant
WM: In terms of development of assets, if we’re talking about solar, wind, generation on the renewables side, I think we’re fairly well structured within the UK. We’ve seen a proliferation of both over the last 10 years or so. In terms of the development and implementation of those generation assets, I don’t think we have a particular problem in this country.
To me there’s not a skills shortage in resource terms, however I think at the other end, within consumers I think it’s a behavioural change and a cultural change in understanding what we’re talking about and the different ways of looking at production and energy consumption.
Most businesses, whether a flour mill, feed mill, food processor, furnace or otherwise, will look to optimise production against key input costs. i.e. raw materials, labour. Already production is already optimised to keep those as low as possible. What we’re increasingly saying is that energy will start to feed into that as a key driver for how you produce and when you produce too. Electricity is no longer just the interest of the procurement person and the energy person. Suddenly, electricity consumption as a raw input cost starts to be the responsibility of production managers, operations managers, engineering directors, and that’s where I see more of a cultural shift and behavioural shift than a resource shift.
Wayne’s next academy webinar will be taking place in April 2019. In the meantime our CEO, Michael Phelan, will be conducting a webinar on the Irish market in March.
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