How changing energy market dynamics impact the drive for energy flexibility
Energy flexibility is becoming more important than ever. Find out why, and the steps your business should take to respond.
Discover how the energy market is changing and how businesses can turn energy flexibility into revenue.
The energy landscape is currently experiencing unprecedented levels of transformation attributed to:
- The introduction of new environmental policies to reduce emissions
- Rising transmission and distribution costs
- The growing adoption of on-site energy generation and distributed energy resources
- A change in consumer habits and expectations, with many wanting to buy from sustainable businesses
- New technologies, such as the increasing use of renewables, digitization and blockchain technology
These changes to the energy market are leading forward-thinking businesses to step up how they optimize their energy to reduce waste, improve efficiency and reduce emissions, while new technologies are helping businesses to source and use their energy in smarter ways and achieve their wider business objectives.
For years, businesses have managed commodity cost from a supply side, decreasing or stabilizing spend with fixed or managed energy buying strategies. Increasingly, transmission and distribution costs are becoming a factor in energy budgets as the need to upgrade aging infrastructure grows in importance. These rising non-commodity costs present an opportunity for businesses to leverage energy optimization, to further control costs and even identify new potential streams of revenue.
The main non-commodity costs affecting price rises include:
- Fuels utilized in power generation
- Construction and maintenance of generation infrastructure
- An aging transmission and distribution system
- Weather conditions
- State and Federal regulation
Continually rising non-commodity costs
While a kW rate for energy may seem simple, it masks the rising cost of non-commodity charges with wholesale energy costs. For many businesses, non-commodity costs currently make up a growing percentage of energy bills, reflecting the growth in System Operator delivery costs as well as investment in infrastructure. Energy optimization helps businesses reduce their exposure to increasing costs and future-proof the business.
Recent analysis completed by the U.S. Energy Information Administration (EIA) lays out some of the causes of increasing energy costs. Between 1996 and 2016, investment in transmission infrastructure has increased by around 600%, as aging transmission and delivery systems come to the end of life, need to be extended, or are no longer efficient enough.
Tracking the continuing rise of delivery costs in North America
The EIA also tracked the continuing trend of increasing delivery costs across a ten-year period leading up to 2016. The EIA’s data shows a significant rise in delivery costs from 2006 to 2016, 14 percentage points to 36% of spend, a rise that is projected to continue. Rising delivery costs mean that it is more expensive for System Operators and energy companies to deliver power to end users. This coupled with the immediate need for investment in upgraded infrastructure means much of this cost is passed on to consumers and businesses, increasing their energy spend.
Realizing the value of energy flexibility
The dynamics are changing. Businesses want to generate greater revenue and save costs in all available areas. Energy optimization gives businesses the power to flex their energy in a way that suits its wider business needs and objectives.
Forward-thinking businesses understand that rising non-commodity costs are unsustainable and are looking to future-proof their business against continually rising costs, with many looking at energy flexibility solutions, such as Demand Response (DR). Access to renewable and low-carbon technologies are also changing the way businesses produce and consume energy.
Adopting energy flexibility solutions can help businesses significantly reduce their non-commodity costs, as well as their overall energy bill, by reducing the amount of power needed from the grid. Energy flexibility helps businesses to flex demand, allowing them to deliver energy to the right place and at the right time to meet demand, accessing more energy in periods of high demand and storing energy at times of lower demand. Flexing demand helps to avoid an overloaded network and times of low voltage and frequency.
Businesses are also playing a role in overall energy imbalances, where energy usage exceeds production. Energy flexibility using Demand Response helps to balance the grid and creates new revenue streams for organizations by curtailing energy use at times of high demand. Businesses earn revenue for their willingness to participate in Demand Response in the form of financial incentives from System Operators.
The drive for energy flexibility and optimization is essential for businesses to maximize the reduction of non-commodity costs, improve operational efficiency, realize new revenue streams and strive for a sustainable future.
Unlock flexibility and gain greater revenue with Demand Response
Centrica Business Solutions offers Demand Response (DR) to help businesses take control of their energy and access greater revenue opportunities. We understand the role energy flexibility can play to unlock new value, reduce costs and power business performance. DR is a way for organizations to unlock value by being flexible in how they use their energy for commercial advantage. DR services are relied upon by the electricity System Operator to ensure they can balance supply and demand.
Combining our DR solutions with our sophisticated device-level sensor technology, we can help businesses identify even more flexibility, further enhancing performance. All our DR solutions come with our market-leading approach and access, meaning you have more options to pursue value; be it through lowering energy use at peak-price times, accessing financial rewards for providing support during grid stress events, or even selling energy back into the wholesale markets.
Unlock the value of DR for your business
The benefits of DR are not only cost reduction, they also include reduced environmental impact, lower carbon footprint and with it an improved security of supply. As we transition to a distributed energy system, the volatility of the grid is increasing and businesses that make flexibility a part of their energy strategy have the most to gain. Choose a supplier who can help to navigate the DR programs available to you and to maximize your potential for participation.
Paper and pulp plant doubles Demand Response payments
Prior to teaming up with REstore (now part of Centrica Business Solutions), a Paper and Pulp Plant in Belgium had participated in a reserve program that yielded low returns. Since the partnership, the plant has doubled its payments from Demand Response.
The paper industry is a very energy intensive sector, so it was important for the plant to lower its electricity costs through continuous improvement actions. Participation in Demand Response (DR) programs enabled the plant to reduce overall energy costs with zero impact on production.
A flexibility audit was performed and found that the flexible pulp plant could be leveraged within a fast response reserve program (Primary Reserve). Two major challenges needed to be overcome to participate in this reserve program that requires a response time of 30 seconds: poor availability of the pulp plant and avoiding any impact on daily operations.
Centrica Business Solutions’ patented technology enables ultra-fast portfolio effects with response times of a few seconds. Inserting the paper mill’s flexibility within this portfolio provided the solution to reduced availability.
Want to know more? We’ll help you make the most of energy flexibility to reduce your energy costs, increase revenue and lower your carbon footprint. Contact our experts who will help you realize the power of power, with straightforward solutions that put you in control.