GridBeyond UK managing director Wayne Muncaster believes that flexibility is just as important as energy efficiency. So what trends can large energy users see in 2019 and how can they stay ahead of a rapidly changing market?
The energy landscape in the UK has been changing in the past 10 years, with a proliferation of large-scale solar, increasing penetration of wind power and, more recently, large-scale battery storage. These changes are bringing challenges, increasing complexity, as well as opportunities for businesses that are seeking to monetise their power assets.
“These energy sources have a very different profile to the large thermal generators of the past, which are coming off line at a rapid rate in the wake of the large combustion plant directive,” comments GridBeyond UK managing director Wayne Muncaster.
“This has created a very different energy mix. Energy users are also increasingly investing in self-generation, with roof-top solar in the residential market place and we are seeing the start of battery energy storage.
“In the commercial space, there is more rapid change with CHP and increasing penetration of behind the meter battery storage. All of this, added to the grid-scale energy mix, makes forecasting and balancing much more complicated and this creates problems for National Grid,” Muncaster continues.
Demand-side response (DSR) and the flexibility it provides is therefore crucial in supporting the UK’s transition to lower-carbon generation. Large energy users can benefit financially and this is going to become an increasingly attractive proposition in the wake of rising energy costs. According to Muncaster, a 40% increase in electricity costs is predicted over the next four years, making it essential for consumers to participate in the energy markets in different ways, using a holistic approach (see Figure 1.)
In a recent webinar (GridBeyond’s Definitive Guide to Energy in 2019), Muncaster identified a number of key trends for 2019 and highlighted the different costs associated with various types of generation. Nuclear power is expensive – for example, power generated at Hinkley Point C costs £92.50 per MWh, while offshore wind is as low as £57.50.
According to Muncaster, solar could be as cheap as £40 per MWh by 2030 and is likely to sit between £50-£60 per MWh in 2019.
He adds that batteries are expected to continue to reduce in cost, while behind the meter projects are likely to increase in number throughout 2019. High electricity costs and sustainability goals will drive deployments, especially collocated with embedded generation.
“We expect the change in energy mix to accelerate over the next 10 years,” Muncaster explains. “Sites that were allocated for solar have been shifting to battery energy storage.
“However, with potential problems in the DFFR [Dynamic Firm Frequency Response] market in terms of paying for batteries, they have been moving to gas peaking plants and are now looking to shift back to solar sites… There will be increasing renewable projects throughout 2019.”
Against a backdrop of rising costs and increasing complexity, a holistic approach is required to optimise energy strategies, according to Muncaster.
He advises that reducing demand is usually the first port of call, while asset and process efficiencies need to be looked at in tandem.
Consumers should start by looking at their demand assets and which of their assets have flexibility – ie what can be turned up or turned down? Users also need to be able to visualise how effective their consumption is within their processes – are their processes scheduled to take place to take advantage of cheaper power – through Triad avoidance, for example? Is production pushed either side of the Triad? What is the control strategy around this?
One question that is currently concerning consumers is how will the realities of the new energy market affect the value of energy efficiency investments? Muncaster believes that energy efficiency will remain critically important.
“Continuing to replace old assets with ever more efficient assets and reducing your overall energy demand should always be the first thing you look at,” he says, adding: “Often, GridBeyond sits behind a SCADA investment or compressor upgrade project. 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, while 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, it may even start to become more important.”
The blurring of the lines between consumer and prosumer, and the increasing complexity of the markets, can only be managed through sophisticated technology, Muncaster argues.
By gathering data, GridBeyond’s technology platform can identify and understand energy patterns to see where efficiencies can be made. The same platform uses operating parameters and schedules to further optimise resilience. Site and asset data can facilitate predictive maintenance, as energy consumption patterns can reveal a great deal about the status of equipment.
Predictive maintenance is important for ensuring that efficiency remains optimised and the system is designed so that any early signs of failure will generate alarms for review and action.
More and more businesses are choosing to add embedded generation to their site. Consumers need to optimise their current generation, as well as ascertain the potential for new generation opportunities. As such, it is imperative sites have the technology to optimise this.
Storage capacity, production schedules, market prices and export opportunities all feed into GridBeyond’s technology platform to ensure generation assets reduce costs, increase revenues and deliver environmental benefits. The technology monitors multiple market opportunities, operational parameters and asset status (such as fuel levels and battery state-of-charge), while also optimising decision-making.
Optimise energy use
On a basic level, reduced demand and increased generation can be delivered without particularly smart technology. However, to ensure the most intelligent and timely decisions around energy are made, while leveraging the opportunities available through demand-side response, storage, EVs and the wholesale market, a site requires a highly sophisticated platform.
With access to the wholesale market via Time of Use (ToU) optimisation and Power Purchase Agreements (PPAs), businesses can integrate ToU scheduling with process scheduling. Machine learning technology can be used to take into consideration all the various facets of electricity supply and demand to make intelligent choices around purchase, consumption, storage, generation and export to access the balancing mechanism (BM).
Unlike balancing services, the BM is an ad-hoc market with highly changeable prices.
Muncaster points out that the markets are rapidly evolving, but there will continue to be significant opportunities around the trading of flexibility in 2019.
He says: “Recently, I was speaking to a water company that was out to tender on their supply contract. One hundred per cent of the bids included some form of wholesale market access, with the ability to trade on the day ahead or even intra-day…This is going to become the norm rather than the exception. The ability to trade flexibility will increase in 2019.”
Some of the schemes available include fast balancing services such as static FFR and dynamic FFR. Enhanced FR and FCDM are no longer procured or about to disappear, while changes in the market will mean that fast reserve will become more accessible, having previously been the preserve of large power stations, until now.
Dynamic regulation, dynamic balancing, dynamic containment and static containment are all new services being discussed by National Grid. While these were originally tipped to be launched this year, they are now unlikely to be available until next year, according to Muncaster.
There are also slower balancing schemes available, which include STOR, demand turn up, capacity market and Project TERRE (Trans European Replacement Reserve Exchange). Project TERRE is an implementation project developed by a group of Electricity Transmission System Operators (TSOs), including National Grid, to fulfil an EU legal requirement imposed by the European Electricity Balancing Guideline. It is due to come on line in quarter four of 2019.
In addition, there are other opportunities around smart tariffing – such as Triad avoidance and DUoS avoidance, for example.
There has been a great deal of uncertainty around the potential impact of Brexit on market opportunities and this was evident in the questions raised during the GridBeyond webinar. Muncaster is optimistic and points out that National Grid believes that most of the markets will be unaffected: “Project TERRE is the European view, but there is already work underway to see what that looks like post-Brexit. 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 will still be required.”
Muncaster is less positive when quizzed about the impact of the potential removal of triad charges, however: “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,” he comments.
The removal of triad charge will accelerate the wholesale market, in his view: “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 – ie businesses will look to optimise production within the wholesale market on an ongoing basis, not just passively through triads.”