Predicted growth of electric vehicles (EVs) means energy managers may also become fleet managers, according to Association for Decentralised Energy director, Tim Rotheray.
Meanwhile, changes to grid charging structures mean firms that take a ‘passive’ approach to consumption will be less competitive than proactive rivals.
Speaking at The Energyst Event in Birmingham, Rotheray outlined increases in network charges and incoming regulatory change, as well as the implications of the Clean Growth Strategy for industrial and commercial businesses.
While meeting the UK’s first four Carbon Budgets can largely be achieved by decarbonisation of power generation, the fifth budget (which covers 2028-2032) will require businesses to take an active approach to cutting emissions.
“All of the sections of the Clean Growth Strategy bar one relate to end users,” said Rotheray. For businesses, he said, “that means the Clean Growth Strategy is going to start to bite”.
Meeting the fifth budget will require significant decarbonisation of heat, which in buildings accounts for 32% of emissions, as well as transport.
How that will be achieved with heat is not yet clear, though government and the automotive industry appear to agree on decarbonising transport through electrification.
Rotheray said growth in EVs could lead to energy managers also becoming fleet managers.
“EVs will mean a whole bunch of additional power demand – and potentially, power demand you can return to the grid and provide vehicle-to-grid services,” he said.
“So at some point, the energy manager is going to have a significant role in being the fleet manager.”
Transmission and distribution charges make up around a quarter of business electricity bills, while policy costs, loaded onto electricity rather than gas, are also rising. By 2020, the wholesale electricity cost will only make up around a third of the bill, with the rest coming from non-commodity elements.
Meanwhile, the cost of running the transmission network, largely due to changes in generation mix, is rising rapidly. In 2010 it cost around £950m. By 2021 it is expected to hit £3.7bn.
Growth in behind-the-meter generation to avoid those charges mean higher costs for those that cannot avoid them. As such, Ofgem is undertaking a major review of how network costs are allocated.
That means “the world in which people could install onsite generation and take value from avoiding use of the grid is going away”, said Rotheray.
“In the future, the only way [businesses] will be rewarded will be based upon what they do in the short and medium term on the grid: are you helping balance the grid; are you helping to avoid reinforcement? And not just in a generic way, but much more precisely.”
Rotheray urged businesses to educate themselves about what is coming down the track in terms of regulatory change.
“If you are an energy user, you need to be aware of what Ofgem is doing via the Charging Futures Forum and the Targeted Charging Review. They are going to happen, and they are going to happen really fast.”
Rotheray said charging regime change and the fact government will require businesses to be “much more active participants in [decarbonising] heat and transport” to meet the fifth Carbon Budget, “means being a fully engaged energy user will really start to matter”.
“If you are an engaged energy user, you have an opportunity. If you are a passive energy user, my expectation is your bill will rise significantly,” said Rotheray.
“You are going to start to become less and less competitive.”
The Energyst has produced a new report on heat, with industry views on challenges and opportunities around decarbonisation pathways. It also contains a survey of end users around attitudes to heat, plus a snapshot of emerging technologies that may deliver step change. Download it here, free of charge.
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