An Electricity Price Tsunami is on its way…
We have all been conditioned over recent decades to accept the perpetual increases in the cost of electricity. Some have chosen to turn a blind eye and accept them as they occur, others have taken measures to mitigate through procurement strategies, by monitoring and reducing consumption or by switching to self-generating technologies.
Apart from self-generation, all other strategies may seem futile in the wake of the electric price tsunami that will soon crash upon these shores. But this isn’t some bolt out of the blue, just like a tidal wave, the swell that occurs before the event has already been happening in the energy market… the figure below details 1-, 2- and 3-year electricity contract prices over the past year and in each case the resulting price movement has only been in one direction, upwards. For example, from £43MWh in June-20 to just under £79MWh for a one-year deal in June-21.
Source Yorkshire Gas & Power
An electricity price tsunami might sound a little melodramatic, but conditions are set to deteriorate in terms of electricity prices in the UK as we head out of the calmer waters of summer, into the higher demand winter period, and with the current shortfall in storage and the rising carbon markets, it could be argued the scene is set for the perfect storm.
The above chart provides an insight into the pricing window for the future wholesale electricity market and details projected electricity costs per MWh between December 2019 and May 21. In December 2020, winter-21 prices (red) were crossing the £50/MWh threshold, however, just six months on and the cost per megawatt-hour has taken the steepest hike with prices for this coming winter 2021 (red) smashing the £70/MWh. But unfortunately, the bad news does not stop there, similarly summer-22 (orange), winter-22 (green) and summer-23 (blue) prices are on course for a similar trajectory so more of the same can be expected.
So, with the pending tsunami about to strike, what will you do? Some may brace for impact, taking their chances with the higher levels, some may run for the hills and higher ground, but the smartest are preparing and putting infrastructure in place to protect their business against these volatile future conditions.
Alan Dodd CEO of GET Solutions UK said “what we are seeing in future pricing models is unprecedented. Companies that were originally paying 13p/kWh are now looking at 18p/kWh and with further increases on the way, these prices will jump again. As a business owner, you must decide to either absorb these costs or pass them on by raising prices, but both strategies are particularly risky, especially in today’s economy.”
“The only viable and future proof method to tackle this is to ‘flatten the curve’ so to speak, by reducing your demand from the national grid. You need to simply cut the amount of power you draw from the grid, and this can be done by switching off, or updating to energy-efficient technologies such as LED lighting which can reduce an organisations lighting costs by up to 80% when used in conjunction with smart controls. But reducing your consumption is only the start…
Self-generation is the tactic that will make the biggest impact and provide the most protection to business from spiking markets. Several technologies can be embraced such as wind, solar and CHP, but each is very different when it comes to cost, planning and implementation, and they offer varying degrees of consistency when it comes to generating power”.
With the UK being an island nation, the wind is something we are never short of, but it is never consistently windy, and you cannot afford to only power your business on a gusty day! Furthermore, the cost and planning restrictions around using this technology currently make it a less popular option.
In stark contrast to wind, solar is rapidly being adopted across the UK, harvesting free-natural power from the sun an obvious attraction to this technology. But again, consistency is an issue for solar in the UK and with our location in the northern hemisphere, the UK’s weather patterns can seriously disrupt the stable demand for the energy a business might need. To counter this, solar coupled with battery storage is a viable option, as batteries continue to provide energy long after the sun has stopped shining.
But when it comes to consistency, there is an ace up the sleeve, and that is combined heat and power or Chp.
Very basically a Chp is an electricity generator, as it generates power, it produces heat which is a natural by-product of the generation process. This electricity is fed directly into an organisations property whilst the heat is harnessed within their wet hot water systems, or conversely by way of an absorption chiller utilised within refrigeration or air conditioning systems.
Chp vs Grid supplied energy.
Energy supplied via the UK grid which includes power from nuclear, hydro, wind, solar farms is incredibly inefficient with up to 66% of the total generated power being lost from generating, transmission and distribution processes. To put that into real terms 74,700kWh’s would need to be generated to supply a small business that only consumes 45,000kWh’s of electricity from the UK’s grid. Move up to a larger organization that uses 350,000kWh’s per year, a staggering 581,000kWh’s would need to be generated to supply their electrical needs, that is 220,000kWh’s which is lost forever.
Cogeneration Chp’s are located on-site, so transmission losses are virtually non-existent and G-GEN™ Chp’s run with approximately 99% efficiency. Furthermore, as a Chp is run on gas, it is considerably cheaper to produce electricity on your site than it is to buy from the grid, typically 3 units of gas, would produce 1 kWh of electricity.
Some sceptics could argue that fossil fuels are being used by running a Chp on gas, and whilst this is true, if you have a heat requirement, then it is most likely you are already using this fuel type anyway, in this instance, a Chp is merely optimizing the use of this gas. But that does not have to be the case. The UK is already producing ‘Green Gas’ or biomethane gas on an industrial scale and this is something that is readily available from GET Solutions. Green gas is produced from “fresh” organic matter from landfills or biogas plants through anaerobic digestion and is added to the existing natural gas network.
A Chp run on 100% green gas, could not get any greener as it produces zero-carbon electricity, equally as good as solar, but in terms of consistency, reliability, and power per square inch, Chp takes prime place in today’s race to net-zero and should be the first technology to be explored when considering independence from the grid, or to provide a stable cost alternative to grid energy. However you choose to act, the time to act is now before the full weight of the electricity price tsunami bears down us.
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