Five key takeaways on the emerging energy flexibility opportunity

For businesses grappling with rising energy costs, there is some positive news on the horizon.

While the government’s ambitious clean power targets are increasing the subsidy burden added to invoiced energy costs, the same targets are also increasing the need for energy flexibility – and this brings opportunities to offset some of your energy spend.

The ‘need to know’ insight behind this bad news/good news dynamic was the topic of a webinar my colleague Claire Caple and I presented on today for members of the Cold Chain Federation.

Here are five key takeaways to bring you up to speed:

1. Clean Power 2030 is bringing huge changes to Great Britain’s electricity sector

The UK government has committed to generating 95% of the country’s power from low-carbon and renewable sources by 2030. Over the past year, we achieved around 62%, so rapid and significant investment is required to facilitate this ambition.

However, the government has pledged to "go faster" on its clean power plans, particularly due to the situation in the Middle East. For example, bringing forward the next annual Contracts for Difference (CfD) renewables auction to July and reaffirming its commitment to fast-tracking nuclear power.

2. Non-commodity costs are set to significantly increase

The cost of the Clean Power 2030 investment is being recouped via electricity consumers. As a result, the renewable subsidies and network charges added to invoices are set to increase dramatically.

For example, Transmission Network Use of System (TNUoS) charges – which pay to maintain and expand the UK’s main electricity grid – have increased by over 60%, the biggest ever year-on-year increase in the history of non-commodity charging.

Overall, business consumers are paying £26 more per megawatt hour (MWh) in non-commodity charges from April – with more to follow in the run up to 2030 and beyond. (To forecast how much your business will pay, use our Energy Cost Calculator.)

3. Energy flexibility can deliver six-figure savings

As we increase renewable generation, the need for greater flexibility in our energy system will increase too.

Opportunities for consumers to engage in Demand Side Response (DSR) activity – via load shifting, ‘turn down’ and even ‘turn up’ initiatives – are therefore expanding. Together, these can generate attractive returns for organisations able to manage energy-consuming assets effectively. For some larger sites, this could equate to six-figure sums each year.

4. But preparation is key

Before unlocking these benefits, it’s important to audit a site’s flexibility potential to understand what assets can load shift and by how much. Suitable assets could include refrigeration plant, lighting, on-site generation, electric vehicle (EV) fleets, and Heating, Ventilation, and Air Conditioning (HVAC) systems.

Granular asset-level monitoring is also important – for example via sub-metering or smart sensors. And for full participation in flexibility markets, transitioning to a flexible purchasing contract with pass-through non-commodity charges is essential – otherwise you cannot recoup the financial benefits.

5. Flexibility stacking can unlock additional value

Once you have the capability in place to effectively access flexibility benefits, you can then open the door to participating in as many schemes as viable – from time-of-use tariffs (suitable for any size consumer) to wholesale market arbitrage (to release pre-hedged volume). Plus there are opportunities for direct or aggregated participation in national or local balancing and DSR schemes such as Firm Frequency Response (FFR) or even the government’s Capacity Market (CM). This is how you can generate the most income.

You can learn more by watching the full webinar: 'From unavoidable costs to controllable assets: the cold chain flexibility opportunity'. Although it was delivered to the Cold Chain Federation members, the content is still applicable to any business sector.

Finally, if you have any questions about flexibility opportunities – or non-commodity costs in general – please get in touch with our flexibility experts.