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NEW STRATEGIES FOR 21ST CENTURY ENERGY PROCUREMENT

In a Facilitate and Centrica Business Solutions webinar, our three presenters and host Martin Read took on a broad discussion ranging from energy policies to best practice for energy. 
© iStock
© iStock

30 March 2020 |  Facilitate Team

The global energy landscape is changing and the National Grid can no longer rely on large centralised power stations to meet demand. So there is an increasing fervour to move to decentralised renewable power. Businesses are rethinking their energy strategies with a focus on digitisation to innovate processes, minimise risk and increase flexibility.

Emerging technologies that make use of connected digital systems can enable companies to generate and consume energy more sustainably and interlock with the grid data.

Businesses are also considering their own reliance – and the reliance of their suppliers – on energy for operational purposes, and how new third-party suppliers, such as cloud infrastructure providers, could help ensure they are resilient against power interruptions.

The advent of carbon net zero roadmaps has led organisations of all sizes and types to introduce their own carbon neutrality goals, many setting targets much closer than 2050. 

The UK Green Building Council also recently published suggested energy performance goals for operators of commercial offices seeking net zero carbon solutions.

An overview

So what challenges face firms trying to decentralise and optimise their power?

Nick Blyth, policy engagement lead with IEMA: Considers the bigger picture, outlining the difference between setting net zero targets and carbon neutrality. He explains the regulatory environment, along with the ideas of net zero and carbon neutrality. IEMA has declared a climate emergency and has committed to carbon neutrality by using a scheme from the United Nations Convention on Climate Change. It has also signed up to the Climate Neutral Now programme.

Nick MacDonald Smith, principal energy and environment programme manager at NHS Property Services: Details how the NHSPS roadmap to net zero has been formulated.

Dan Connor, optimisation and battery sales manager at Centrica Business Solutions: Gives the view of a large energy provider that routinely assesses the evolving energy services market.


Theme A- A perspective on policy

It is helpful to think about regulatory changes as a “policy journey”, Blyth explained, as much has shifted in the past 10 years. Some of the major changes include:

  • Carbon Reduction Commitment;
  • Mandatory GHG reporting;
  • Energy Savings Opportunity Scheme – the UK energy scheme coming in from the European Directive;
  • Streamlined Energy and Carbon Reporting – has extended mandatory reporting to 11,000 businesses. 

 

There are also science-based targets that align with climate science advice to meet the goals of the Paris agreement such as limiting global warming to below 2°C above pre-industrial levels. Blyth said SBTs are “starting to connect in with net zero and the task force on climate-related financial disclosure”. 

There is also the Greenhouse Gas Protocol (GHP) Corporate Standard, which designates an organisation’s GHG emissions into three scopes:

  • Scope 1 refers to direct emissions from owned or controlled sources;
  • Scope 2 concerns indirect emissions from the generation of purchased energy; and
  • Scope 3 is all indirect emissions (not included in scope 2) occurring in the value chain of the reporting company, including both upstream and downstream emissions.

 

The GHG Protocol concerns electricity and other indirect emissions and requires compulsory reporting on a grid-average or location-based factors, as well as using a market-based mechanism such as renewable sources. 

The Pledge to Net Zero 

The Pledge to Net Zero is another consideration for companies as it gives them “the platform to achieve science-based targets to meet the UK’s 2050 net zero target”, Blyth explained. The initiative is led by the Society for the Environment, the Association for Consultancy and Engineering (ACE), IEMA and the Environmental Industries Commission (EIC), together with environmental consultancies WSP and AECOM.

The three commitments in the pledge include setting science-based GHG targets, publicly reporting progress each year and publishing one piece of thought leadership each year. Companies committed to the pledge should consider:

  • GHG-related standards;
  • The energy management standard; 
  • UK Government Guidance; and
  • GHG Protocol.

 

“Lots of people are now purchasing ‘green type’ electricity, but there is an issue to be aware of in terms of how that is taken forward,” Blythe warned. He noted compensation measures such as outsourcing direct energy reduction measures as key considerations. 

Positively, Blyth said that the “policy landscape has settled down at least for businesses and organisations, public sectors… And hopefully that will give some really good consistency moving forward”.

Most crucially, said Blythe, companies should focus on any tool available to them to reduce carbon or GHG emissions. The goal is to tailor approaches that match an organisation’s goals and abilities.


Theme B- The NHS example

The NHS Property Services (NHSPS) was established in 2013 in response to absolving the primary care trusts and united 161 different bodies. It manages a portfolio of more than 3,000 properties with 7,000 tenants across England at a total value of more than £3.8 billion, equating to around 10 per cent of the total NHS estate.

The property services team was revamped in December 2018, when the head of energy and environment joined to drive change and deliver real savings across the business. 

MacDonald-Smith, who joined NHSPS in 2019 as principal energy and environment programme manager, is responsible for identifying and delivering energy and utility savings projects across the estate.

The property services team has drawn up an initial plan and set a three-year strategy to execute it. It’s a complex project, with a combination of quick wins and longer-term goals, such as following the roadmap to net zero. 

Environmental programmes the NHSPS is driving include:

  • In April 2020, NHSPS signed a new energy contract under a flexible procurement strategy with British Gas and Corona Energy. Electricity from British Gas will be from 100 per cent renewable sources – offsetting around 40,000 tonnes of CO2.
  • A large-scale national LED replacement protocol upgrade programme, in which the NHSPS has invested £1.5 million this year.
  • An energy audit to understand the opportunities for improvements across 50 of its top-consuming sites.
  • Reducing single-use plastics by removing plastic cutlery, plates and cups and providing frontline staff with non-plastic reusable water bottles.
  • Introducing sustainable urban drainage systems into our new and redeveloped developments – to reduce excessive rainwater run-off and flooding, and provide biodiverse spaces for wildlife and the general public.

 

NHS England, which oversees NHS operations, recently launched its campaign for a greener NHS and will develop a net zero roadmap. NHSPS is providing support, along with the Sustainable Development Unit, which “supports the wider NHS in terms of providing solutions and mechanisms to drive environmental change, such as implementing the NHS long-term plan, and also supporting the green NHS campaign”, said MacDonald Smith.

Developing the roadmap

An essential component of developing a net zero roadmap is reliable data.
 

“We know the data we hold is not as robust as we would like,” MacDonald Smith said, “but the first step is to try and get this data in order to make sure that we’re better informed about the volume of consumption.” 

Once the baseline data is accurate and in place, MacDonald Smith said the NHSPS will set the “quantum target”, defining local, regional and national-level action.

The process is nuanced and the roadmap cannot be built on a “simple sequential linear process” as the estate has many different building types.

Key priorities include:

  • Budget: How much will it cost and where is money best spent in the next five to 15 years? How do we decarbonise heat? Do we replace boilers? What impact do heat pumps have on electrical supply?
  • EV charging infrastructure: How does it affect capacity, where should it be located, what are the impacts on parking?
  • Building designs: How do we plan refurbishments and tie that to life cycle and maintenance planning?

 


Theme C- An energy supplier perspective

There is a lot of talk about organisations developing their roadmaps to net zero, but Dan Connor said it means energy suppliers are trying to determine what organisations’ energy consumption will look like in 2050. Of course, it will need to be environmentally and financially sustainable.

Connor explained that UK businesses currently spend about £20 billion on energy or 300 terawatt hours of energy a year – just for electricity.

“That’s obviously a massive challenge for us in the UK, with a huge amount of energy consumption that we need to juice and generate from more sustainable sources,” Connor said. “Estimated waste runs at about 15 to 20 per cent, which has a significant impact on our ability to hit the climate change or change targets that we’re looking at for the future.

“We see a real focus on energy, energy spend and visibility of spend within organisations. We see that as a building block to help organisations start on their journey to build their strategy towards net zero. You really need to understand what you are doing at the moment, what you’re consuming at the moment. There’s huge potential from distribution, energy and energy efficiencies.”

Yet organisations can cut their energy bills by trading and buying energy. As it stands, elements of energy costs that aren’t related to specific purchasing power comprise around 60 per cent of an energy bill, said Connor. “Over-5GW customers are increasing energy costs while consumption remains stable. This should help make the case to company leaders.” 

Towards decentralisation

Connor urged businesses to stop consuming energy passively in favour of active participation in the UK grid, which will help to increase the number of renewables on the network. 

“Instead of generation matching supply or what the demand is, we could move to a world where the demand and the supply match the generation that happens to be on the system from renewable sources. That’s a long way away from where we are now.” One of the ways to optimise energy use is to change when companies pay for power. Companies that can draw power from the grid at off-peak times at off-peak tariffs to use at peak hours will save money.

Supporting the grid can also generate revenues for companies that can be used for other projects. If businesses make this shift and more renewables enter the power network, Connor foresees that 2030 to 2040 will deliver cheaper solar and wind power. 

So optimising energy saves organisations money but also enables them to support the grid’s efforts to balance the energy network by keeping supply and demand matched as consistently as possible. 

Optimisation strategies

A tactical approach to energy optimisation is key and could include, depending on the particular business, building a solar project or a battery storage system. Perhaps more manageable projects could simply be to change suppliers to improve a site’s energy efficiency.

Gateshead Council has launched a battery storage scheme that provides flexibility but also supports the National Grid’s efforts to increase renewables. “This transition is not an easy one,” Connor said. “There’s definitely a challenge with many different technologies and how they can be used together.”

Battery storage options are improving. For instance, Connor said that three to four years ago when batteries first hit the market, the business case was hard to make because of capital costs. 

“As it stands at the moment, we tend to see business cases for grid-scale batteries stacking up reasonably well. Those are kinds of large already connected batteries to support the National Grid for batteries at specific sites,” he added. 

What’s important when building the business case for battery storage is using batteries for multiple purposes. “If you’re just installing a battery for revenue, then maybe it’s not the absolute best in the world right now. There’s still something to look at,” Connor explained. But if battery storage is also used to improve power resilience at a site or to support other vital operational technology such as EV chargers, the case for battery storage will be much stronger. 

Strategies, therefore, will need to consider whether the organisation has the necessary skills to deliver the energy optimisation project or whether new management and training are required. 


Nick Blyth, policy and engagement lead at the Institute of Environmental Management & Assessment (IEMA)

Dan Connor, optimisation and battery sales manager at Centrica Business Solutions


Nick MacDonald Smith, principal energy and environment programme manager at NHS Property Services Ltd

Emma Potter