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ECIU: Data shows UK energy moving towards cheaper renewables

 960 640 Stuart O'Brien
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Government statistics on UK energy trends in Q1 2022 show that the shortfall in gas generation is being filled by cheaper renewables, namely wind and solar, which have increased their share of electricity generation on the same quarter last year.

Commenting on the statistics, Jess Ralston, Senior Analyst at the Energy and Climate Intelligence Unit (ECIU), said: “For every megawatt of renewable power this winter, that’s basically a megawatt less of gas power we have to source and pay for.

“This trend is only set to continue with recently commissioned wind projects four times cheaper than current gas and new farms coming online every year. This will protect us from gas price shocks in the long term particularly as the North Sea is a declining basin and fracking is so unpopular with voters.”

Shares of electricity generated by fuel main table (%)
2021
1st quarter		 2022
1st quarter		 Change on year before (%)
Coal 2.8 2.9 +0.1
Gas 38.7 33.3 -5.4
Nuclear 13.7 14.9 +1.1
Hydro 2.1 2.2 +0.1
Wind, onshore and offshore 25.2 29.1 +3.9
Solar 2.0 2.5 +0.4
Bioenergy 12.2 11.7 -0.5
Other fuels 2.1 2.3 +0.2
Pumped Storage 0.6 0.6 +0.0

Source: Energy Trends, BEIS. https://www.gov.uk/government/statistics/electricity-section-5-energy-trends

Gas prices are currently six times more expensive than last year [2], adding at least £2,000 to the average household’s annual bill this year [3]. Offshore wind projects online today are over three times cheaper than current gas generation, and the latest round of renewables auctions saw prices that are around five times less than the gas price during the gas crisis. [4]

Multi-billion euro energy link between UK and Germany gets green light for financiers

 960 640 Stuart O'Brien
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The European Investment Bank (EIB) — as part of a consortium of more than 20 international banks — has agreed on the financing structure of the first ever energy link connecting Germany and the United Kingdom.

The investment to build this interconnector will amount to €2.8 billion, with the EIB set to contribute up to €400 million for the financing of the European part. The investor consortium is led by French investor Meridiam, Allianz Capital Partners, and Japanese company Kansai Electric Power. Alongside the EIB, other promotional banks include the UK Infrastructure Bank and the Japan Bank for International Cooperation (JBIC).

The project will be the first interconnector between Germany and the United Kingdom, facilitating electricity trade between the European Union and the United Kingdom and contributing to the integration of high shares of intermittent renewables across the North Sea. The expected start date of commercial operations is in 2028.

The project consists of a high-voltage direct current link interconnecting England and Germany through German, Dutch and British waters. The project will have a rated capacity of 1 400 MW and DC voltage of 525 kV. The predominantly subsea cable will have a route length of 725 km and will connect a converter station and German grid interface to Tennet’s electricity network near Fedderwarden, and a converter station and grid interface on the Isle of Grain in the United Kingdom to the National Grid ESO network.

The project is an example of mutually beneficial cooperation between the European Union and the United Kingdom, including cross-border environmental benefits.

Siemens has been appointed as the contractor for the converter stations, and Prysmian will manufacture and install the cable. Both can be considered market leaders in these technologies.

The interconnector will help to ensure better utilisation of offshore wind capacities on the coasts according to the respective local wind strength, thereby supporting EU and German renewable energy policies. The project will make it possible to reduce CO2 emissions and will contribute to meeting the European greenhouse gas emission reduction target of at least 55% by 2030.

The route of the project will be implemented entirely underground and under the sea, meaning that the project does not fall under Annex I or Annex II of the Environmental Impact Assessment (EIA) Directive. Environmental impact studies have been carried out and appropriate measures will be taken to avoid, mitigate and compensate the impacts.

EIB Vice-President Ambroise Fayolle said: “This project is ground-breaking for the energy transition, as it makes it possible to use offshore wind energy more efficiently. Cross-border electricity trade can help redirect power to where it is most needed, and can thus contribute to the integration of renewables and the stability of the energy supply.”

Europe’s energy crisis creates a ‘trilemma’

 960 640 Stuart O'Brien
By:

HANetf recently reached out to its expert partners in the energy sector to articulate their thoughts on the ongoing energy crisis in Europe [1].

With Europe currently sweltering under extreme temperatures, cold weather is likely the last thing on the mind of many. However, with Russia dialling back supplies to Europe, the continent potentially faces an energy shock this winter.

Gabriela Herculano, manager of the iClima Global Decarbonisation Enablers UCITS ETF (CLMA) and iClima Smart Energy UCITS ETF (DGEN) comments on the difficult decisions being faced by European countries: “Countries are facing a “trilemma” during the coming energy transition, as we must decarbonize the energy industry while guaranteeing security of supply and affordability. European countries are doing two things in parallel: passing legislation that supports a massive acceleration in the energy transition, while going back to using fossil fuel for electricity generation.[2] Coal burning related emissions are thus likely to increase in Europe. The consequences of the reduced flow of natural gas from Russia that started in June are profound.

“In the long run, Germany will decarbonize its energy sources and renewable energy will replace Russian hydrocarbons, but in the short term the alternative is to replace natural gas (that can only be either liquified as LNG and then transported or sent via long pipelines) with coal (that is transportable in bulk) for electricity needs and store the natural has still being supplied for heat purposes ahead of next winter.[3] Germany, Italy, Austria, and the Netherlands have all announced plans to restart coal fired power plants; Germany’s Economy Minister Robert Habeck, a Green Party member, referring to the decision as “painful but a necessity.[4]

“However, the mid to longer term growth prospects of green solutions – from EV adoption to long duration energy storage – are extremely strong, again led by Germany in a material way. That means that longer term investors have a unique opportunity to invest in the companies leading the energy transition at a steep discount.”

Konrad Sippel, Head of Research at Solactive, the index provider for the Electric Vehicle Charging Infrastructure UCITS ETF (ELEC), expands on this issue:

“I think the interesting thing to observe is how quickly past policy decisions become obsolete in the light of a real and immediate threat of an energy shortage: discussions about increasing the use of coal power, the re-opening of a discussion on nuclear energy in Germany, just to name some examples.

“On the other hand, the short-term crisis is also likely to accelerate adoption and expansion of renewable and alternative energy sources and an affirmation of the Paris Agreement goals which should also in the mid-term benefit the Electric Vehicle ecosystem and provide an additional push for the expansion of the charging networks.”

Stephen Derkash, manager of the Solar Energy UCITS ETF (TANN) comments: “Global oil prices and European gas and electricity prices have spiked in the aftermath of Russia’s invasion of Ukraine. As the conflict in Ukraine continues, European leaders are pushing for a faster switch to renewables as part of a strategy to end dependence on Russian gas. Currently, approximately 40% of the EU’s gas and about 25% of its oil is imported from Russia. The EU’s ambitious plans now call for fast-tracking deployment of solar and tripling clean energy capacity by 2030.[5] The effects of the conflict have implications for greenhouse gas emissions and energy policy.

“Experts say that electricity has to take over from natural gas in sectors where just months ago gas seemed a secure long-term bet, which would significantly enhance prospects for solar power.[6] The European Commission believes it can replace 24 billion cubic metres (bcm) of Russian gas with zero-emissions renewable energy sources this year.[7]Furthermore, The International Energy Agency (IEA) issued a 10-point plan in March to reduce Russian gas imports by 63bcm, approximately half of what Europe imported last year, through a mixture of diversification and economy.[8]The organisation says these measures could be enacted in the next year, without building new infrastructure. Following the IEA’s statement, the European Commission announced an even more ambitious plan, the REPowerEU plan, to reduce reliance on Russian gas by two-thirds before Christmas and abolish all Russian fossil fuels – including coal and oil – by 2030.[9]

“The IEA plan would reduce Russian gas use by 33bcm by asking Europeans to turn down their thermostats by 1 degree Celsius (33.8 Fahrenheit) and increasing electricity generation from nuclear power and biofuels and renewable energy.[10] Additionally, the EU is aiming to make solar panels mandatory on all new buildings by 2029 under a new proposal aimed at rapidly replacing its reliance on Russian oil and gas.[11] The EU’s REPowerEU plan and the “solar rooftop initiative” is introducing a phased-in legal obligation to install solar panels on new public and commercial buildings, as well as new residential buildings by 2029.[12] If successful, solar energy will become the largest electricity source in the EU by 2030, with more than half of the share coming from rooftops.”

Furthermore, Europe’s energy crisis has implications far beyond the continent. Stacey Morris, manager of the Alerian Midstream Energy Dividend UCITS ETF (MMLP), comments: “Benchmark Dutch natural gas prices have reached record highs in the wake of Russia’s invasion. Unlike oil, there are no strategic reserves for natural gas, and European inventories were already tight this winter.

“Although it will take time, Europe can reduce its dependency on Russian natural gas through the ongoing shift towards renewables and by purchasing LNG. To facilitate this, additional import capacity may be needed with Germany recently committing to the construction of two LNG import terminals.

“While the near-term impact of Russia’s invasion on energy commodity prices is readily apparent, the intermediate and long-term implications for the US energy landscape are less certain. Changes in how Europe sources natural gas should have positive long-term implications for US LNG exports with direct and indirect benefits for energy infrastructure. The extent to which US producers will accelerate production growth is less clear but could result in more volumes for energy infrastructure companies to handle.”

[1] First white label ETF issuer, as confirmed in ETF Database of all ETFs: https://etfdb.com/

[2] https://www.france24.com/en/live-news/20220620-dutch-join-germany-austria-in-reverting-to-coal

[3] https://www.bloomberg.com/news/articles/2022-07-16/germany-to-do-everything-to-fight-climate-crisis-scholz-says

[4] https://www.bloomberg.com/news/articles/2022-07-07/germany-s-habeck-urges-canada-to-help-thwart-putin-s-gas-excuses#xj4y7vzkg

[5] https://www.carbonbrief.org/in-depth-qa-how-the-eu-plans-to-end-its-reliance-on-russian-fossil-fuels/#:~:text=The%20commission%20recommends%20raising%20the,for%2055%20proposals%20last%20year

[6] https://www.ftadviser.com/investments/2022/06/27/the-race-for-energy-independence-accelerating-the-green-transition/

[7] https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas

[8] https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas

[9] https://www.carbonbrief.org/in-depth-qa-how-the-eu-plans-to-end-its-reliance-on-russian-fossil-fuels/#:~:text=The%20commission%20recommends%20raising%20the,for%2055%20proposals%20last%20year

[10] https://www.theguardian.com/environment/2022/mar/03/turn-down-heating-reduce-need-russian-imports-europeans-told#:~:text=4%20months%20old-,Turn%20down%20heating%20by%201C%20to,for%20Russian%20imports%2C%20Europeans%20told&text=Europeans%20should%20turn%20down%20their,leading%20energy%20adviser%20has%20said.

[11] https://www.independent.co.uk/climate-change/news/solar-panels-new-buildings-eu-mandatory-b2081732.html

[12] https://www.independent.co.uk/climate-change/news/solar-panels-new-buildings-eu-mandatory-b2081732.html

Cybersecurity spending in the energy industry ‘will rise to $10 billion by 2025’

 960 640 Stuart O'Brien
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The rapid digitalisation of the oil and gas industry has made the industry increasingly vulnerable to cyberattacks, says GlobalData.

The leading data and analytics company notes that companies must now fortify their cybersecurity posture in line with their digitalisation strategy or risk financial and reputational harm.

GlobalData’s latest report, ‘Cybersecurity in Oil and Gas – Thematic Research’ reveals that the Colonial Pipeline attack in May 2021, which hammered home the sector’s vulnerability to cyber threats, spurred an increase in cybersecurity spending. Consequently, GlobalData estimates cybersecurity revenues for the energy industry will reach $10 billion by 2025.

Francesca Gregory, Thematic Analyst at GlobalData, said: “Demand for oil products fell 14% in Q2 2020, causing prices to plummet. To stay competitive in the face of mounting financial pressure, oil and gas companies invested heavily in digital technologies to streamline operations and cut costs, which is evidenced by an analysis of patent trends.”

Oil and gas companies increased total patent publications across artificial intelligence (AI), blockchain, cloud computing, the Internet of Things (IoT), robotics, and virtual and augmented reality by 46% between October 2019 and April 2021, according to GlobalData.

Gregory continued: “Oil and gas companies are realizing the benefits of integrating technologies into workflows, with the pandemic undoubtedly playing an instrumental role in boosting the momentum of the industry’s digitalization. However, the wider industry is largely underprepared to handle its risks. The digitalization wave creates new access points in industrial networks for hackers to exploit. As technology develops, from mobile apps to the cloud to IoT, the level of complexity needed for organizations to maintain a cyber-aware stance will rise.”

Despite the increase in cybersecurity spending, the industry is still not taking cybersecurity seriously enough. GlobalData’s recent report found that only 20% of the largest oil and gas companies by market cap had a chief information security officer (CISO) on the board. This suggests that, while companies have made room for cybersecurity in their budgets, cybersecurity is absent from companies’ central strategy.

Gregory added: “The industry’s current situation is precarious in the midst of the industry’s rapid digitalization, rising cyber risk, and the promise of maximum disruption and extortion from oil and gas companies.”

IRENA: Renewable power ‘remains cost-competitive’ amid fossil fuel crisis

 960 640 Stuart O'Brien
By:

Costs for renewables continued to fall in 2021 as supply chain challenges and rising commodity prices have yet to show their full impact on project costs – the cost of electricity from onshore wind fell by 15%, offshore wind by 13% and solar PV by 13% compared to 2020.

Renewable Power Generation Costs in 2021, published by the International Renewable Energy Agency (IRENA), shows that almost two-thirds or 163 gigawatts (GW) of newly installed renewable power in 2021 had lower costs than the world’s cheapest coal-fired option in the G20.

IRENA estimates that, given the current high fossil fuel prices, the renewable power added in 2021 saves around $55 billion from global energy generation costs in 2022.

IRENA’s new report confirms the critical role that cost-competitive renewables play in addressing today’s energy and climate emergencies by accelerating the transition in line with the 1.5°C warming limit and the Paris Agreement goals. Solar and wind energy, with their relatively short project lead times, represent vital planks in countries’ efforts to swiftly reduce, and eventually phase out, fossil fuels and limit the macroeconomic damages they cause in pursuit of net zero.

“Renewables are by far the cheapest form of power today,” Francesco La Camera, Director-General of IRENA said. “2022 is a stark example of just how economically viable new renewable power generation has become. Renewable power frees economies from volatile fossil fuel prices and imports, curbs energy costs and enhances market resilience – even more so if today’s energy crunch continues.”            

“While a temporary crisis response might be necessary in the current situation, excuses to soften climate goals will not hold mid-to-long-term. Today’s situation is a devastating reminder that renewables and energy saving are the future. With the COP27 in Egypt and COP28 in the UAE ahead, renewables provide governments with affordable energy to align with net zero and turn their climate promises into concrete action with real benefits for people on the ground,” he added.

Investments in renewables continue to pay huge dividends in 2022, as highlighted by IRENA’s costs data. In non-OECD countries, the 109 GW of renewable energy additions in 2021 that cost less than the cheapest new fossil fuel-fired option will reduce costs by at least $5.7 billion annually for the next 25-30 years.

High coal and fossil gas prices in 2021 and 2022 will also profoundly deteriorate the competitiveness of fossil fuels and make solar and wind even more attractive. With an unprecedented surge in European fossil gas prices for example, new fossil gas generation in Europe will increasingly become uneconomic over its lifetime, increasing the risk of stranded assets.

The European example shows that fuel and CO2 costs for existing gas plants might average four to six times more in 2022 than the lifetime cost of new solar PV and onshore wind commissioned in 2021. Between January and May 2022, the generation of solar and wind power may have saved Europe fossil fuel imports in the magnitude of no less than $50 billion, predominantly fossil gas.

As to supply chains, IRENA’s data suggests that not all materials cost increases have been passed through into equipment prices and project costs yet. If material costs remain elevated, the price pressures in 2022 will be more pronounced. Increases might however be dwarfed by the overall gains of cost-competitive renewables in comparison to higher fossil fuel prices.

CEBR: Risk of recession in Europe ‘rises to 40%’ as Putin turns off the gas

 960 640 Stuart O'Brien
By:

The Centre for Economics and Business Research (CEBR) estimates the risk of a recession in Europe this winter at approximately 40% as a result of Russian energy taps being closed shut as part of sanctions against the Putin regime.

Last week, Germany triggered stage two of its emergency gas plan, following a significant reduction in Russian gas exports to the Eurozone’s largest economy.

Russia’s state energy company Gazprom cut exports through the NordStream pipeline by around 60% and planned maintenance downtime July is widely considered a convenient opportunity for Putin to shut the pipeline down entirely.

The European energy crisis, which has started in the winter of 2021 and ratcheted up following Russia’s invasion of Ukraine, has thereby reached another level of escalation. The consequences of this are by no means limited to Germany. Gas flowing through the TurkStream pipeline to Bulgaria is down by 50% while exports through the Yamal pipeline to Poland have stopped entirely, making this a veritable pan-European crisis.

In the UK, too, the energy crisis could yet get worse. Rising gas prices have been a major contributor to the ongoing cost of living crisis so far. But a complete stop of Russian exports to Europe would also put the UK’s energy security at risk as the heating season starts in the winter.

While there is no Russian pipeline delivering gas to the UK directly – and indeed, the UK receives the vast majority of its gas imports from Norway – the UK is still exposed to swings in global market prices. Also, as increasing numbers of European countries are vying for a limited supply of gas from alternative sources, prices have shot up significantly.

In addition, the UK has very limited storage capacity, meaning it is less able to sit out temporary price shocks – whether these stem from Putin’s decision to turn off the gas taps or a spell of the feared ‘Dunkelflaute’ – a period of no wind and very little sunshine, preventing power generation from renewables.

The threat that Russia would use its energy exports as a weapon to exert pressure on Western countries that support Ukraine’s resistance has been clear since the beginning of hostilities, if not before. The flipside of this has been the attempt of Western allies to inflict as much economic pain on Russia as possible to make it harder for Putin to fund his war.

However, while the European Union agreed on an embargo of Russian oil at the end of last month, there was little appetite to extend similar measures to the Russian supply of gas, given the difficulties in finding alternative suppliers at short notice. Now, Putin seems intent on forcing the hand of European states, convinced that stopping gas exports will hurt Western countries more than it will cost Russia in terms of forgone foreign currency.

If gas supplies were indeed to run empty, governments will choose to shut down industrial sites first rather than reducing supply to homes. The knock-on effects on the economy therefore depend in part on the degree to which gas is used in industrial processes rather than to produce electricity or to heat homes.

In Germany, for example, industry accounted for 37% of gas consumption in 2021, a significantly higher share than in Italy at 25% or in the UK at 23%.

Despite these differences, it seems clear that in the case of European gas shortages, a severe recession will be a near certainty. This is because European countries are linked to each other not only via energy interconnectors but also through highly integrated supply chains.

The likelihood for a gas shortage emerging in Germany has been estimated at 20% in a recent joint-study by various research institutes, which is somewhat lower than a few months ago due to efforts to fill up gas reserves in recent weeks. However, from a European perspective, the risk of a recession must be estimated higher than this, given that most East and Central European countries are even more dependent on Russian gas than Germany is.

Italy and France are also on high alert as their energy supplies are equally at risk. In addition to this, a tight gas supply will lead to further increases in energy prices for consumers, adding to inflationary pressures and claiming an even greater share of households’ disposable income, which is a recession risk in itself.

Taken together, Cebr estimates the risk of a recession in Europe this winter at approximately 40%. It is therefore in everyone’s interest to use the time until winter to substitute away from gas where possible, secure additional supplies from other countries and reduce gas consumption wherever possible.

Routes to deliver net zero

 960 640 Guest Post
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By David Kipling, CEO – On-Site Energy

Businesses have complicated energy needs, particularly those that use a lot of thermal energy such as for steam or ovens.  Achieving net zero is going to require elements of re-engineering, re-thinking business processes, adopting new technology and changing energy purchasing strategy. But is it even possible in the current climate when those decisions will also directly affect the P&L through changed operating costs.

The main routes to net zero most businesses consider are:

  • Buy green tariffs – and hope they won’t be looked-through as “green-washing”. SECR reporting is starting to highlight energy intensity (how many kWh of energy your company uses to produce 1 kg of product) – which will aim direct comparison with competitors
  • Electrification – and hope the Government will make good on its promises to decarbonise the electricity grid
  • Await Hydrogen to move off gas – another big “if”. When or will it be commercially viable and available ?
  • Invest in energy efficiency

The problem with approaches (1) – (3)  is they will have failed to deliver the change that your customers are looking for anytime up to at least 2030. That could put your business at a competitive disadvantage. Also you are fully exposed to market volatility with these routes.

We believe the right path is option (4), to invest in reducing your energy intensity and also consider low-carbon generation solutions.  This way you reduce your CO2 footprint, reduce your exposure to the grid and are in control of your costs. Also bear in mind that the third round of ESOS is less than 2 years away, and its likely to be mandatory to enact the recommendations of the auditor.  In that ESOS round there is going to be an even greater focus on action on energy efficiency.

The challenge is keeping operating costs under control whilst achieving progress towards decarbonising and deciding when to adopt new technologies.  With a recession looking likely, capital availability may also become more difficult.  We can help deliver measures without any capex from you, using our zero-capex energy partnership solution.

If you would like to discuss how to be more energy efficient and accelerate your net zero strategy, please contact David Kipling, CEO – On-Site Energy on 0151 271 0037 or email  david@on-site.energy (www.on-site.energy).

UK offshore companies to invest £250bn in low-carbon energy

 960 640 Stuart O'Brien
By:

The UK’s offshore energy producers are to invest £200-£250 billion by 2030 to provide the nation with secure and increasingly low carbon energy, according to research by Offshore Energies UK (OEUK).

It has assessed the spending plans of offshore energy companies operating in UK waters, looking at their investment plans over this decade. OEUK represents 400 leading companies and organisations involved in  energy production in the North Sea, Irish Sea and near Atlantic, including oil, gas and offshore wind.

The findings suggest around 60% of the investments will be spent building renewable and low carbon energy infrastructure, such as offshore wind and systems for capturing CO2 for permanent disposal in deep rock formations.

Such investments are just a fraction of what is needed for the UK to reach net zero – the point at which it generates no overall greenhouse gas emissions. The UK government’s target for achieving this is 2050. The Office for Budgetary Responsibility (OBR) has put the cost of reaching net zero at £1.4 trillion and has said £1 trillion of this money must come from UK companies.

Some companies have already set out their investment plans. This week BP, one of the largest UK oil and gas producers, announced plans to invest up to £18 billion in the UK’s energy system by the end of 2030. Most of its plans are for offshore wind and other low-carbon projects such as mass hydrogen production and CO2 capture.
Shell has said it will invest £25 billion into UK energy systems over the next decade with 75% of the investment in low-carbon products and services including offshore wind and hydrogen production.

Such pledges support OEUK’s own research findings, that the biggest investments over the next decade will come from oil and gas companies transitioning to low-carbon alternatives, and that offshore wind would be the biggest beneficiary, including:

  • £70 billion-plus in capital investment, adding 40 gigawatts of capacity to the 10Gw already built
  • £20 billion in operational expenditure – maintaining and operating wind farm infrastructure
  • Investment in people: Building a workforce skilled in constructing and maintaining offshore infrastructure is becoming a priority for offshore operators and their supply chains.

Other low carbon technologies will attract billions more, including:

  • £20 billion in mass hydrogen production and carbon capture transport and storage plants

Oil and gas will remain vital for many years, albeit in decreasing amounts, so energy companies are planning further investments to ensure the UK can meet as much of its own needs as possible.

  • £25 billion to open new oil and gas fields or expand existing resource
  • £50 billion to maintain or improve existing infrastructure – much of which is ageing
  • £15 billion to decommission infrastructure that has become redundant.

Such figures must be treated with caution as the spending plans of different companies are at different stages and not all are fully committed. However, based on past trends, the overall amounts are likely to increase significantly as time goes by.

The research coincides with a surge in the tax revenue being generated for the UK exchequer by the UK offshore sector.

  • £20 million/day OBR estimate of how much UK tax is currently being paid by offshore oil and gas companies – more than double what they were paying a year ago.
  • £7.8 billion Total UK tax income from offshore oil and gas companies for this financial year – more than double the £3.1 billion paid last year. (OBR prediction)

Ross Dornan, OEUK’s market intelligence manager, who oversaw the research, said he expected to see offshore energy companies investing up to £150 billion in renewable and low-carbon projects, plus another £90 billion in oil and gas projects by 2030. Most of the investments would be from companies transitioning from oil and gas into low-carbon energy.

“The UK’s energy companies are leading perhaps the most ambitious and far-reaching energy transition our nation has ever seen. They are providing the UK with energy now, mostly from oil and gas, while working to replace those fuels with low-carbon alternatives.

“It means we must invest in our existing oil and gas reserves to protect the UK against the global prices spikes and possible shortages generated by crises like Russia’s invasion of Ukraine, while also spending billions on the energies of the future.

“The amounts being spent are far greater than any sums that might be raised by a windfall tax but what policymakers need to understand is the sheer scale, not just of the investments but also of the ambition. The UK could become a world leader in low-carbon and renewable energy – but to achieve that we need long-term thinking by planners and policymakers.

“Above all we need a stable and predictable set of rules governing the way the industry is taxed and regulated. “We are proud to pay our taxes and support the UK’s net zero targets but if those rules keep changing it will undermine confidence, drive investors away and make the UK’s net zero targets impossible to achieve.”

5 Minutes With… On-Site Energy’s David Kipling

 960 640 Stuart O'Brien
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In the latest instalment of our energy management industry executive interview series we speak to On-Site Energy CEO David Kipling about rising energy costs, what we can all do to manage through that challenge and how the path to Net Zero presents an opportunity for us all…

Tell us about your company, products and services.

DK:  The inspiration for ON-SITE came from my previous role where I led a team addressing energy in over 100 manufacturing plants globally.  We saw the value of data-led energy analysis in identifying more than 50% savings but we found in practice we could only execute those measures with a short payback.

With the pressure now on achieving better sustainability, and on reducing costs, companies are going to have to find a way of doing the longer payback measures that until now sit on the shelf.   This is what ON-SITE is about – we help unblock long payback capex and enable the measures to happen.  We work with our customers to identify measures with a data-led approach, and then implement them using our money, with no contribution from the customer.  We effectively keep some of the savings to pay for our returns, and pass the remainder on to the customer through lower energy costs.  This way we can also help companies embrace net zero much faster.

We work with energy intensive manufacturing companies, and cover a wide range of technologies including efficiency measures, onsite generation and heat recovery.  We think its important to identify the most appropriate measures and which will have most impact, so we keep an open mind on what we recommend and are instead guided by the data.

What have been the biggest challenges the Energy Management industry has faced over the past 12 months?

DK:  The crisis of rising energy costs that started last Autumn has brought sharp focus on energy costs for many.   It really has shown the value of energy hedging but also the risks of what happens when your hedge ends and you face the market again.    Our view is the best way of defending your business from the market prices in the long term is (1)  consume less through investing in energy efficiency measures and (2) invest in your own generation, which is usually much cheaper and efficient, so that between these two steps you minimise your exposure..

And what have been the biggest opportunities?

DK:  Net Zero.  Most significant businesses now have a sustainability strategy with goals for achieving carbon neutral, but a lot have also had capex capped for at least the next few years because of COVID-19.  The pressure for change is building, and the main obstacles are capex and sometimes innovation.   We can help with both of these with our zero capex approach, and enable companies to stay on track or even accelerate their plans.

What is the biggest priority for the Energy Management industry in 2022?

DK: I would say that underlying its still decarbonisation, but the cost pressures of the last six months means that reducing energy costs on a long term basis will take priority.

Fundamentally your business needs to be viable to be sustainable, so costs need to be addressed..  The good news is that sustainability improvement goes hand in hand with savings, so accelerating your sustainability plans can also mean lower energy costs.

The biggest challenge will be decarbonisation of heat – in other words planning to switch from gas to electricity.  This will be a massive change for gas hungry businesses.  I think this will be an increasing priority given the recent cost of gas, and increasing talk about hydrogen (albeit that’s still years away). For a lot of businesses that will mean significant additional cost unless they develop a comprehensive approach and plan.

What are the main trends you are expecting to see in the market in 2022/23?

DK:  I see two things – there is going to be a bigger push on onsite generation to reduce costs, and also the next round of ESOS is due by end 2023, and its likely it will be mandatory by then to have to enact the measures reported.  Its going to result in a lot of challenges to auditor findings, but its also going to bring a focus on getting ahead of the game and being proactive in addressing points.

What technology is going to have the biggest impact on the market this year?

DK:     I think its going to be solar PV.  Its cheap, fairly fast to deploy and can provide some relief for businesses against the high energy costs.     The issue is its usually limited impact in manufacturer’s energy costs.  For much larger savings you can’t beat CHP currently, but the key is using the heat constructively to reduce other fossil fuels.

In 2025 we’ll all be talking about…?

DK:  100% Hydrogen-ready CHP.  The technology already is in market, but there isn’t much hydrogen available to use it.   Whilst the initial reaction for some is its more gas usage, CHP could be the transition technology to 24/7 zero carbon onsite generation once hydrogen is available.

Which person in, or associated with, the Energy Management industry would you most like to meet?

DK:  Lisa Rose of Forum Events (again) !   Lisa’s an enthusiast and is great at making people talk.  We need more Lisa’s !    It was good to get back to some face to face networking last year at the energy management event in London.  Looking forward to this October.

What’s the most surprising thing you’ve learnt about the Energy Management sector?

DK:  I think people enjoy learning about opportunities they hadn’t previously known about, which can be brought about by new technologies .  It’s an exciting space which is innovating fast.  It also has a meaningful impact on both business profits and on climate change and sustainability, so the people in the Energy Management space are often driven by the benefits they can deliver.

You go to the bar at the Energy Management Summit – what’s your tipple of choice?

DK:  Mine’s a pint !

What’s the most exciting thing about your job?

DK:  Delivering new insights and levels of savings not thought possible

And what’s the most challenging?

DK:  Countering the “we’ve seen it before” response.   Reality is if they saw exactly “it” previously, then “it” has either changed massively or it wasn’t approached in the way we would use it.  It doesn’t hurt to take 15 minutes to see if you can learn something.

What’s the best piece of advice you’ve ever been given?

DK:  A quick “no” is better than a slow “no”.

Peaky Blinders or Stranger Things?

DK:   My TV watching is limited to repeats of Top Gear.

SPIE secures five-year FM contract with NHS NSS

 960 640 Stuart O'Brien
By:

SPIE UK has been appointed by NHS National Services Scotland to deliver planned and reactive maintenance of mechanical and electrical assets across nine National Services Scotland (NSS) properties in Glasgow, Scotland.

Under the five-year contract (three plus two), SPIE UK will be responsible for managing mechanical and electrical assets and will undertake planned and reactive maintenance. Sustainability is at the forefront of the work, which includes collaborating with the NHS Energy team to develop and promote energy conservation and technology improvements throughout the term of the contract.

Properties included within the scope represent critical infrastructure for the running of NHS services throughout Scotland, including NHS 24 call centres and the National Distribution Centres which distributes essential stock to hospitals throughout Scotland. To further add value, SPIE UK will be supplying energy management services to NHS NSS.

The SPIE UK team will be offering building energy surveys, an introduction of an energy management platform, behavioral analysis, and life cycle analysis.

Jim Skivington, Divisional Managing Director at SPIE UK, said: “NHS National Services Scotland works at the heart of the health service, providing national strategic support services and expert advice to NHS Scotland. SPIE UK being awarded this five-year contract is a testament to our excellence in delivering a range of specialist planned, reactive and statutory maintenance and Facility Management services. With our combined engineering ingenuity, excellent management capabilities and technological know-how, SPIE is best placed to deliver these works efficiently.”