Opinion

THE TRANSMISSION NETWORK IS THE LIFELINE OF ANY ENERGY SYSTEM WHY INVESTMENT IN THE GRID WILL UNLOCK EUROPE’S ENERGY TRANSITION

Ariel Porat, Senior Vice President Siemens Energy, Head of Europe

Polar ice caps are melting.

Climate change is very real: We are experiencing heightened temperatures like never before. This week I’m at CIGRE in Paris and conversations are focused on the readiness of our industry to deliver a zero-carbon energy system in Europe. We need to work together to deliver affordable and resilient decarbonisation. The rest of Europe can learn a lot from France in terms of their investment and security of energy supply strategy. The French government have prioritised home-grown low carbon energy for some time, primarily in nuclear form, and have remained steadfast on their commitment to societal benefits. Key to their national energy strategy has been the need to combine climate ambitions with social ambitions, in order to ensure a “just transition” that delivers green jobs as well as sustainable energy. The ElecLink interconnector between Great Britain and France expects to avert 6.1 million tons of carbon emissions in its lifetime but will also bring 640 million Euros in socio-economic benefits through job creation and supply chain investment.

The energy industry in Europe accounts for around 80% of carbon emissions, of course that varies from country-to-country, but it is no secret that to tackle climate change we need to remodel the entire energy system. Our industry is key to reaching net zero, we must clean up our act.

The challenge is not just about decarbonisation. With energy prices sky-rocketing and the threat of fuel shortages this Winter we have to properly consider the ‘energy trilemma’ which is the challenge of providing affordable, sustainable and reliable energy.

Too often I hear political rhetoric that inaccurately portrays renewable energy as expensive, it’s true that investment is needed in the short/medium term to grow new green energy markets and technologies, but in the longer-term data shows us that energy from renewables is cheaper. After all, it is the price of fossil fuels that is, for the most part, driving up consumer energy bills across Europe.

A shift to renewables can offer a myriad of benefits, not just greener electricity, but more stability in prices, security of supply, and the potential to reduce geopolitical insecurity through a greater distribution of resources.

A common problem in many European countries is that grids are creaking under the pressure of our changing energy landscape.

Managing the strong fluctuations that result from intermittent renewable energies is complex. Wind and solar sources complicate management of the grid because they vary with the weather conditions. You can’t ramp them up and down as we do with fossil power plants. This vastly increases the complexity of matching supply to demand in real time and creates an urgent need for flexibility.

As we vary energy sources and look for new, innovative ways to generate energy, it’s essential that we don’t forget our grid and transmission network.

Most European transmission networks were built primarily in the age of coal. Upgrade work and changes may be on-going in many countries, but full system upgrades are costly and laborious. Infrastructure affects network voltage, frequency and load flow so we need grid stabilization and storage in order to prepare our grids for the future.

I believe the industry is ready to build up renewable capacity, especially offshore wind, but if we want a successful energy transition, we need to invest in and build our transmission grids.

The challenge we face is not limited to connecting renewable energy to the grid. We must also improve grid transmission quality and efficiency. Due to the intermittency of renewable energies, grid stabilisation technologies will play an increasingly important role. We must look at supplying reactive power to the grid and ensuring stable grid voltage to avoid dangerous voltage drops.

This will require investments in flexible alternating current transmission systems (FACTS). Such systems increase the power transfer capability of

transmission lines and help to make grids more reliable by increasing voltage stability and regulation.

With the removal of rotating equipment – like gas and steam turbines – from the grids of the future, we need to address the missing inertia. Grid inertia is the factor that protects our grids from sudden blackouts so it must be substituted to ensure grid stability. One solution providing reactive and short-circuit power, is the so-called synchronous condenser which is basically a large rotating generator connected to the high-voltage transmission network via a step-up transformer. Synchronised condensers built into existing plant, or specially designed plants like those Siemens Energy has provided in Estonia with Elering, provide a defensive barrier in power systems.

The transmission network is the lifeline that connects everything.

When I describe European energy networks, I often compare the connected cables, pipelines and converter stations to the veins and arteries in a human body. Power sources are the vital organs, but in order for the entire system to function properly energy has to be transported, safely and reliably through the transmission network. Leaks, blockages flow issues all spell disaster for any energy network.

Today’s grids are not prepared for the challenge ahead. To unlock the true potential of the energy transition we must invest in infrastructure. Without a robust, resilient and stable grid, we could falter in our combined goal to deliver a low-carbon energy system throughout Europe.

And will less than one billion seconds to reverse the worst impact of climate change, we don’t have a moment to spare. www.siemens-energy.com

TAKING CONTROL OF ENERGY IN CHALLENGING TIMES

Today’s energy market is volatile to say the least. Small and medium sized businesses have seen their gas bills rise by anything from 250% to 500% in the last year and it’s getting more challenging for organisations to know how to best procure energy. Here, Michael Dugdale, MD at Trident Utilities, discusses how businesses can navigate today’s market and mitigate the pressures they face through managing risk, saving money and reducing carbon.

Energy market volatility is impacting us all and if it’s your role to manage energy for your business, then you’re probably facing challenges you’ve never experienced before. But, there are steps all businesses can take to gain control of energy and help ride out the storm.

Firstly, it’s important to understand what’s causing the unprecedented energy price rises. It helps with perspective and confirms that we are facing a perfect storm here, one we haven’t faced before and hopefully won’t face on this scale again. The factors causing wholesale price increases include, energy demand rising as countries emerged from the Covid-19 lockdown, increased demand in winter 2020/21, dwindling North Sea gas reserves, low winds leading to less renewable generation and the war in Ukraine.

Looking ahead, we don’t expect to see a huge amount of change in energy prices any time soon. Although day-ahead prices for gas and electricity have seen some short-lived drops, rolling average prices support suggestions of an expensive winter ahead for business energy users. While it’s impossible to predict every eventuality, energy market signals suggest that wholesale price volatility could be around for a further 12-24 months. But through being proactive, businesses can manage their risk and make a positive difference to their energy costs.

MAKING THE RIGHT ENERGY CHOICES

It’s vital all businesses make sure they’re on the right energy contract. Unlike for consumers, businesses aren’t protected by Ofgem’s energy price cap, so if your contract is coming to an end, it’s time to take action so you don’t roll over onto an expensive standard variable rate tariff.

When choosing an energy contract try and balance short-term needs with long-term benefits. We may be facing price hikes today but no one knows for certain what the picture will be for the duration of your contract. The most effective approach is to look at your likely consumption profile over a three year period and break it down by the various elements that make up your bill. For example, can you reduce non-commodity charges?

In fact, non-commodity costs are one area that is often overlooked. These costs are all charges aside from wholesale energy costs, such as Transmission Use of System (TUoS) charges, Meter Operator (MOP) charges and Capacity Market (CM) charges. There is the potential to make thousands of pounds of savings every year through negotiating fixed or pass through terms and taking advantage of energy policy incentives and subsidies available to your business.

Finally, when it comes to energy contracts, have you considered whether you are better off on a fixed or flexible contract? Many SMEs are likely to have opted for fixed contracts for budget certainty but with the help of the right partner, and innovative purchasing framework solutions, flexible contracts and the benefits of increased purchasing power aren’t just for bigger businesses. A proactive energy partner will be able to group businesses with a similar level of energy demand and risk approach into a single purchasing framework, allowing them to negotiate contract terms with suppliers as if they were one single larger consumer. An expert will be able to help with all of this and advise which is the best solution for an individual organisation for today and for the longer-term.

At least annually revisit your energy contract terms to check they meet your current usage profile, business plans, working patterns and approach to energy efficiency. You don’t have to wait until it’s about to expire.

EMBRACING THE BENEFITS OF NET ZERO

While it may feel like there are bigger energy related topics to tackle, decarbonisation makes commercial sense now and is one way businesses can help manage overall energy costs. If businesses can optimise their energy costs, not only is this going to put them in the best possible position today, when we do see energy prices settle, it will help their business thrive.

Many organisations have embraced basic energy efficiency measures but there’s almost always more that can be done to cut consumption. A good place to start is with an energy audit so you have a clear picture of where you’re using energy and then how you can reduce it. Organisations can then look at whether they can lower their energy use from the grid further and increase energy resilience with on-site generation. This includes measures such as solar PV, air source heat pumps, LED lighting and combined heat & power.

TAKING A JOINED UP APPROACH

As we look forward none of us – unfortunately – can foresee what is going to happen with energy market volatility but I can say with certainty that it is possible to make a difference to how a business is impacted through embracing measures to take control of energy. To reap the most benefits in terms of reducing energy risk, businesses should take a more holistic approach to energy management, that aligns to broader business objectives. Make sure your organisation’s energy strategy is a board level concern and that everyone is engaged. Then measures such as getting the right energy contract, reducing consumption and installing on-site generation will have the maximum impact when it comes to reducing energy costs and helping weather the current energy market storm. The future is a bright, more energy efficient one.

For more information visit www.tridentutilities.co.uk

WINTER OUTLOOK AND SECURITY OF SUPPLY: EVERYTHING YOU NEED TO KNOW

There’s a lot of uncertainty at the moment around energy prices and if there is enough supply to meet demand in Great Britain (GB), particularly for businesses. We’ve been in close contact with our business energy customers to keep them updated on the action being taken by us, as well as the wider energy industry, to protect them and minimise the impact of energy imbalance.

The GB energy market has a diverse supply base and is well set up to cope with the current global uncertainties around physical supply. Nonetheless, the risks around supply are materially higher for this winter than in previous years and so understanding and preparation is key. We are confident that the GB market can continue to call on a variety of supply sources to minimise the risk of physical interruptions to customers’ energy supplies, but to do this is likely to require much higher prices than in previous years.

WHAT BUSINESSES NEED TO KNOW RIGHT NOW

The current energy situation is volatile due to the ongoing conflict in Ukraine and the relationship between Russia and Europe. Although we generally only get a small percentage of our gas from Russia, supply concerns across the Continent and the subsequent price rises can impact the price in the GB gas market through competition. Increased volatility in global energy markets is also having an impact on liquidity, i.e. the ability to easily transact volumes of energy on the wholesale market. It also means that there is a larger risk premium commanded by sellers to sell their energy on the market.

It’s important to remember that the current supply of energy to GB is well managed, but we understand the concerns businesses have, and we’re working hard to keep in touch and provide all the necessary information and resources.

WHAT TO EXPECT THIS WINTER

As the gas crisis threatens security of supply across Europe, National Grid is stepping up its preparations for any potential energy shortages. As part of its emergency planning, National Grid prepares and updates strategies so it has policies in place for any crisis scenario from the pandemic to major supply disruption. Here’s the process if that were to happen:

GAS

In a Gas Deficit Emergency (GDE), gas transporters (the licensed operators of the gas transmission system) follow a four-stage process. The GDE continues until it is decided the gas network can return to normal operation:

Stage 1: if the potential for a gas deficit is identified, suppliers (through the companies that ship gas for them) will be asked to voluntarily drop demand or source supplies elsewhere

Stage 2: if the situation becomes more complex, then National Grid takes full control as coordinator and the largest sites will be instructed to reduce their load. If these steps prove to be inadequate, gas transporters will instruct a wider range of consumers to bring down their gas usage

Stage 3: involves phased isolation of parts of the gas network to keep pressure in the remaining sections, as planned by the Network Emergency Coordinators. There will be gas rationing within the Local Distribution Zone (LDZ) managed by transporters

Stage 4: restoration. Following the shortage, National Grid will begin to restore the areas of the network which had been shut down, with full safety checks at each offtake

POWER

The GB power system operator, National Grid Electricity System Operator (ESO), will use all of its available tools to avoid shortages occurring in the first place. For example, using the balancing mechanism to contract with generators who have spare capacity available; calling on frequency response providers and using their precontracted reserve contracts to manage any power imbalance before it reaches the point where power cuts or voltage control are needed.

If the system operator identifies a potential shortage, it will issue warnings to the market in increasing severity to reduce usage.

If an imbalance or shortage remains, Distribution Network Operators (DNOs) will begin to carry out steps to reduce demand – which consists of voltage control or load shedding, starting at around 5% of national demand curtailed, up to a cumulative 60% of demand.

COULD MY BUSINESS BE EXEMPTED FROM INTERRUPTIONS TO SUPPLY?

Gas customers may apply to be classified as a priority customer in the event of a GDE, but this does not guarantee it will be exempt from load-shedding. Applications should not wait until a GDE is imminent, but be made during normal circumstances.

For power supply, the immediate control of the system to protect the network is handled by the ESO as mentioned above. For protracted periods of limitesupply, the concept of ‘protected sites’ may enable power import to be maintained. However, your business must meet several criteria to be considered a protected site. Your supply can only be maintained if:

• There is a national or regional critical need

• Public health and safety would be impacted

• There is the potential for catastrophic damage to high-value plant You must also show that your site does not have standby generation and it’s not feasible to install standby generation.

To apply for protected site status, you should contact your Network Operator in writing. Depending on the situation, you may still be asked to reduce your consumption.

You can read the full criteria for protected sites and power supply here for power, and here for gas.

WHAT CAN YOU DO TO PROACTIVELY LOAD MANAGE?

If you are able to shift your consumption load then you could make additional revenue or savings through participating in grid balancing schemes in both power and gas markets. Or, if you’re a customer of ours, you could benefit directly from wholesale market optimisation, where our Trading Team can monetise your voluntary demand response in the wholesale markets.

To participate, you must be able to either turn down your energy consumption in response to external signals or increase generation on-site.

WE’RE HERE TO HELP

If you’d like to capitalise on utilising or turning down assets, apply for protected site status or are just looking for advice to mitigate any impact of energy shortages, get in touch with your Account Manager today https://npowerbusinesssolutions.com