How UK businesses can use microgrids to dodge rising energy costs

Since the government's 'Smart Power' push in 2016, the cost of entry for local energy generation has fallen sharply

The nature of how we generate energy in the UK has changed dramatically over the last few years. Renewables now make up nearly 30% of all electricity generated in the UK according to the Department for Business, Energy & Industrial Strategy.

But that's not the whole story. We live in a newly emerging world of microgeneration and microgrids, where local energy economies are starting to flourish.

Business as buyer and maker

Microgrids are discrete energy setups capable of generating and storing energy either as an isolated system or in parallel with a national grid. Essentially, microgrids can provide a means for dedicated power supplies that are designed to be protected from issues of high demand that may plague the wider energy network. They're also usually situated far closer to their primary consumer, which drastically reduces the cost and complexity of energy transfer.

This emerging economy is something that business can tap into, with contributions to a local energy grid increasingly forming part of a company's income generation.

Dr Matt Wood, energy innovation manager at Bioregional, a company that supports regional and local energy economies, tells us that organisations have started leasing their roof space or excess land to support the growth of energy generation, whether that's through another company setting up a local grid or as part of community initiatives.

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"They will then purchase the energy from the generator," explains Wood. "This is usually called a 'private wire', and is the simplest form of local energy grid."

"Unlike home energy bills, businesses are usually billed on a half-hourly basis, and the price changes through the day," he adds. "By avoiding the high-cost periods (using batteries or renewable generation) costs can be reduced. Renewable energy usually has fixed costs as well, so a company can mitigate against future electricity price rises by signing long-term contracts with generators."

Cost factors

In 2016, a National Infrastructure Commission report entitled 'Smart Power' argued the case for microgeneration and local grids, which it claimed could help save customers up to 8 billion per year by 2030. It also suggested that these efforts would ensure the UK met its 2050 carbon targets.

Since then much has changed both in terms of the cost of entry to local energy generation and the technologies available to those wanting to use such energy. Mike Wilks, head of UK energy networks at Capgemini told us that since that report we have seen "the continued improvement in commercial viability of small-scale energy storage/batteries and the proliferation of digital/IOT based solutions", something which has been essential to ensuring effective real-time operation of microgrids.

Dr Matt Wood thinks businesses are more open to these kinds of ideas these days. "Businesses like Kingfisher, M&S, Sainsbury's etc. have direct experience installing and maintaining these systems, as well as the legal and contractual issues around them, so the leap to a local energy grid is not as big as it would have been five to ten years ago."

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While interest in microgrids is still largely confined to the largest organisations, and has yet to spark among business more widely, we're almost certainly going to see broad adoption go up as traditional energy costs inflate.

Mike Wilks argues that "deployment of microgrids remains wrongly perceived as a complex and expensive initiative", and that "awareness of the potential benefits from active participation within the energy system is limited".

"The key to driving increased uptake in this area will thus be a combination of continued energy price rises and increased awareness of the potential provided by local grids to enable businesses not only to reduce their energy costs but indeed to be able to earn revenue from provision of energy specific and other services to the energy system beyond their direct needs."

Taking the long-term view

In some respects, we have a chicken and egg situation here. The more businesses that install and use smart energy systems both as generator and customer the more supply there will be, and economies of scale mean that equipment, installation and maintenance costs fall.

However, we're still heavily reliant on non-renewable energy. "Businesses currently all need natural resources, it's impossible to move away from that principle," explains George Adams, director of energy & engineering at SPIE UK. "We currently use 50 to 60% more than nature can replace. No resources means no business. This is a critical area for R&D, Government policy and Corporate Social Responsibility."

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Adams argues that in order for businesses to be viable in the future, they need to help create a future to be viable in.

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"If businesses want to be sustainable in the long term, then the issues of climate change must be included in their economic analysis," he explains. "The benefits are whole life, social and business. As we progress to cities taking the lead on sustainability and efficiency, it makes sense to create localised energy solutions that are flexible and more efficient."

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