Ask an expert: Is on-site generation worth investing in?
How and when can on-site generation benefit businesses?
As we move towards a low-carbon future, businesses must consider not only how much energy they are using, but also when and how they are using energy.
At Inspired, we’re getting more requests for support from businesses that are looking to optimise their energy usage – because it can be complex to ensure that you’re using energy in the best way for your business. This week, we talked to our Client Optimisation Manager Laura Clare Davies, about how and when on-site generation can benefit businesses.
Q) Have you seen an increase in businesses choosing to generate their own energy on-site?
“In recent years, as more organisations have committed to net-zero emissions targets, we have seen a real increase in the number of businesses installing on-site generation. They are doing so for a number of reasons. Many are switching to on-site generation because they want to become more sustainable, and they’re aware that they need to take action in order to avoid being accused of ‘greenwashing’. Signing up to a green tariff is relatively easy – installing renewable on-site generation shows an ongoing commitment to sustainability.
However, price is also a key motivator for many businesses. On-site generation prices are becoming more attractive, particularly in light of the record high wholesale prices we are seeing today. Many organisations are also conscious that green energy contracts come with a premium – which means that investing in a renewable on-site generation asset can reduce their energy costs as well as their carbon emissions.”
Q) If businesses are thinking of installing on-site generation or already have their own generation asset on-site, should they invest in battery storage too?
“It’s definitely worth considering, but it will really depend on how the business pays for its energy. If their costs are fully passed through, then they’re likely to benefit from battery storage more than those that are on a fixed contract, because they could avoid higher TNUoS costs by utilising stored energy during peak demand periods.
Those that are on fixed term contracts will see less benefit, because they will be paying a premium to fix their price. And although battery technology has come down in price significantly, it’s still very costly. For businesses that are concerned about improving their energy resilience and ensuring they can keep their operations running in the event of a power cut, the costs of a battery may be worth it. We’d recommend that businesses work with external experts to determine the ROI they’re likely to receive before they invest in a battery.”
Q) We know that consumer flexibility will be key in supporting our transition to a cleaner energy system. Are we seeing demand response schemes changing to enable more businesses to get involved?
“Demand flexibility can involve one of two things – in response to grid signals, a customer can either turn their demand up or down or buy or sell power on the market in order to help the grid to balance supply and demand during periods of stress.
National Grid is currently modernising its set of Balancing Services, which is opening up the ‘turn up/down’ element of flexibility. The Balancing Services are moving to Day Ahead or real-time pricing, so businesses can choose to participate when the price suits them. The Dynamic Containment market, which is dominated by businesses with batteries, is open to any provider who is fast enough and who can provide 1 MW capacity. And the Reserve markets are moving to real-time pricing, which means participating businesses need only respond when it’s worth their while.
We’re also seeing suppliers offering flexibility products and services that enable businesses to get involved in demand response. A number of suppliers now offer schemes that make it easier for businesses with electric vehicles and/or batteries to access National Grid’s Balancing Mechanism, and flexible tariffs that give organisations the ability to consume at the cheapest times of the day. With Ofgem and National Grid working towards a future in which all businesses will be settled on a half-hourly basis, even more businesses will be able to profit from being more flexible in their consumption going forwards.”
Put your on-site generation questions to our experts
Our optimisation experts are always on hand to advise you on how on-site generation could work for your business – from carrying out a site assessment to determine which technology would be best suited to your needs, to carrying out ongoing service and maintenance to ensure you’re getting the most out of your asset.
To talk to one of our experts today, call us on 01772 689 250 or email [email protected].