A recent NatWest report found that just 7 per cent of small and medium-sized enterprises (SMEs) have invested in onsite generation, but this is set to more than double over the next 12 months with a significant proportion of the SMEs surveyed intending to invest in onsite generation.
All organisations should renew their efforts to incorporate onsite or local energy generation. Roughly a quarter of your bill goes to the transmission and distribution network operators to deliver energy into our buildings. Another 25 per cent goes to the supplier for billing, metering and their margin. A significant proportion of those costs can be kept in the local economy.
Our energy system is undergoing significant change. Traditional centralised, fossil-based systems are giving way to an increasingly renewable, decentralised system. Energy is being democratised. Simultaneously, most organisations are striving to improve environmental, social and governance (ESG) credentials.
These trends all open the door to different business models for onsite generation and ways individual organisations can participate in the energy sector. The most direct way to decarbonise your business is to produce your own clean energy. A carbon-zero business means a future proofed business.
It’s worth remembering renewable ‘fuel’ is free, so the dominant cost in consuming energy becomes the infrastructure needed to deliver it. Wind turbines, battery storage and solar panels have low operational costs once built. Those with cash reserves (or access to favourable lending) may wish to use them to hedge against future energy price increases.
On-site generation involves considering each site individually, to find a solution that works. It is crucial to clearly understand your goals. Are you looking for cost savings, self-sufficiency, income generation or all of the above?
If you generate onsite you could set yourself up as a generator and sell power to your neighbour or tenants, or you could find adjacent partners to generate power on neighbouring land.
Those that produce significant amounts of green energy can create a surplus which they can sell back to the grid or to neighbouring consumers through a private wire arrangement, creating another revenue stream for your business. If you are a commercial developer and landlord can you maximise returns from the asset by also supplying power to tenants?
Smart grids are systems that let energy flow both into and out of buildings, measured and controlled by digitised systems. By balancing demand, such systems can reduce inefficiencies, but they also create all kinds of opportunities at the local level. Our businesses can lead the way in our towns and cities, encouraging collaboration and experimentation at the local level.
By reframing these issues as a commercial opportunity, we can begin to see the energy challenges in our towns and cities in a new light.
The pandemic highlighted our reliance on massive but fragile infrastructure. It has generated a long-overdue discussion about localism, the public good and environmental sustainability. We should all be active participants in this discussion.
Martin Whiteford is a Partner at Anderson Strathern
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