Is your business missing out on the benefits of onsite generation?

March 2019

A recent study has found that 80% of businesses believe a quarter of energy needs will be generated onsite by 2025 – but why do businesses want to invest in onsite generation?

Our energy system is becoming increasingly decentralised, with both domestic and commercial customers installing their own generation assets. This has some benefits for the grid, which is ageing and becoming increasingly stretched as demand grows. Onsite generation can support the system operator in regulating grid frequency by demand side response (DSR) schemes and in the future may be used more by distribution network operators (DNOs) as they transition to become distribution system operators (DSO). The subtle difference in name means that they will have more responsibilities for balancing local networks and will be looking for help from anyone able to self-generate or manage their site load.

But what’s in it for businesses? Here’s just a few reasons why you might consider investing in onsite generation…

Mitigate rising energy prices

In 2018, we saw volatility return to the wholesale market, which pushed prices up to levels that we hadn’t seen for almost two years. At the same time, non-commodity costs were also rising – last year the Contracts for Difference (CfD) levy, Renewable Obligation (RO) and Feed in Tariff (FiT) all rose at rates well above inflation, raising prices on both sides of the bill.

This year, we’re set to see even more non-commodity cost hikes. When the Carbon Reduction Commitment (CRC) ends in April, those without Climate Change Agreements (CCAs) are likely to see their Climate Change Levy (CCL) costs rise dramatically. While gas intensive users should expect to see their energy bills rise as the Government moves to rebalance the Climate Change Levy so power and gas levies are equal by 2025.

Switching to onsite generation could mitigate the impact of rising energy costs on your business. You could also explore whether you could participate in demand side response (DSR) schemes to boost the value of your generation assets. There are a range of schemes available depending on your capacity and ability to respond quickly, and if you’re successful in joining a scheme then you could see some significant returns simply by being available to provide power to the grid when it’s required.

However, you should be aware that the increases in CCL will affect gas more than electricity and by 2024 the CCL is expected to be the same for both commodities. This means that there will be significant benefits in ensuring that you recover heat from your generator and register it under the Good Quality CHP scheme.  If you recover and use enough of the waste heat then you can get exemption from CCL charges on the gas used.

Secure your supply

As Brexit negotiations continue, and a ‘No Deal’ Brexit remains a possibility, a key concern for many in the energy industry is how we will ensure security of supply once we leave the EU. But it’s not just Brexit that is causing concerns about how we’ll meet future demand. With ongoing delays to new nuclear plants like Hinkley Point C, and coal power stations closing earlier than expected (by 2019, we’ll only have six coal power stations in operation), there could be a real generation gap in the near future.

In this environment, it’s crucial for businesses to be resilient – and onsite generation could help you to ensure business continuity if we face power shortages in the future. If your business requires a constant power supply, then an outage could have a substantial effect on your operations and your bottom line. By investing in onsite generation – particularly if you combine it with a battery storage solution – you can have peace of mind that you’ll always have an alternative power source to rely on in case of emergencies.

Minimise your carbon footprint

Energy efficiency is high on the agenda for many businesses. In the public sector, for example, the Government has increased the 2020 greenhouse gas emissions target from 33% to 43% after the sector met their target three years early. In fact, it’s estimated that the NHS could save at least £130m every year by updating old energy systems with battery storage, onsite low-carbon generation and energy efficiency measures.

If you’re aiming to reduce your carbon footprint through onsite generation, however, it’s important to choose your technology wisely. Not all generation assets are environmentally friendly – the decarbonisation of grid electricity means that carbon benefits from CHP are now very small, for example, and generators that don’t recover heat are actually significantly more carbon intensive than the grid supply. This means that some organisations are still considering renewable energy generation (mainly from solar PV) despite the end of the Feed-in tariff scheme at the end of March this year.

Where can I start?

The benefits of onsite generation are not always clear, it can be complex to find a solution that’s right for your business. There are various technologies on offer, from CHP assets to solar panels. Deciding which one is right for your business will depend on several factors, from how much upfront capital you can provide to which technology your site can reasonably accommodate.

At Inenco, our expert team have years of experience in the energy export marketplace, and long-standing relationships with suppliers, which means we’re perfectly placed to help you make an informed decision about whether onsite generation is right for your business, and maximise the value of any investment you make in onsite generation.

Talk to one of our energy specialists today on 08451 46 36 26 or email enquiries@inenco.com.