The incredible Ukrainian attacks on Russian military forces deep inside Russia reminded me of the old axiom that Armies prepare to fight their last war, rather than their next one. Ukraine is clearly fighting the current and next war, rather than the last one and drones are the weapon of choice.
Designers and engineers of energy systems for buildings and industry could also be said to be fighting the last war rather than the next one. In recent months we have seen several examples of this. Some of this behaviour is for understandable reasons such as the effect of standards which have been put in place for good reasons, particularly human safety; some of it is due to incumbents using their market position and marketing muscle to continue to sell their solution, even when it is no longer the right solution for the customer; some is due to silo thinking rather than system thinking; and some is due to human nature, people tend to carry on doing what they have done before.
Many organisations are genuinely committed to decarbonising their energy system by replacing gas used for heating and/or process by electricity. With our rapidly decarbonising electricity system the carbon emission reduction benefits are clear, and electrification brings other benefits such as reduced maintenance, improved safety, and reduced local air pollution. What it often doesn’t do though, at least in the UK, is bring a financial benefit, or at least a sufficient financial benefit to make it investable given normal corporate investment criteria for non-core business. With heat pumps being one of the preferred solutions for electrifying heating systems the ratio of the cost of electricity to that of gas – the ‘spark spread’ – is critical, and with electricity prices being 3 or 4 times gas prices, even with heat pumps running at an assumed Seasonal Coefficient of Performance of 3 to 4, means investing in them will lead to increased, or at best similar, energy costs. In addition there is the increase in power capacity needed which can lead to a need to upgrade the connections, resulting in yet more capital cost. This lack of financial viability and capacity constraints often stops investment.
The problem we see here is there is still too much thinking about the sub-system of heating as opposed to the whole energy system. We know that the electricity system is rapidly decarbonising, the UK government’s ambition to have ‘clean power by 2030’ is, according to the National Energy System Operator, challenging but achievable. Even if it is not quite achieved by 2030 the direction of travel is clear. Alongside the decarbonisation we are also seeing decentralisation and digitisation of the electricity system and much higher need for flexibility, flexibility that can come from batteries and smart control of loads of all sorts including heat pumps.
Given the evolving nature of the electricity grid it is necessary now for anyone designing, engineering or procuring a new electrical system or an upgrade to an existing system, or decarbonisation of heat by replacing gas, needs to design an electrical system that is fit for purpose and can interact with the grid itself to reduce costs and maximise revenue from sales of power and grid services – that is the grid as it will be in 2030 and not the old, uni-directional grid. The old hard, fixed border between the grid and internal power systems of a building or an industrial facility – a border that traditionally only allows one-way traffic – is now porous and open; Power, grid services, information and money must be able to flow in both directions between the grid and the ‘prosumer’.
What does this mean in practice? With solar PV now being the cheapest source of power, and so cheap that the old considerations of orientation and angle are less important as economic drivers, the starting point is to maximise self-generation. That means use roofs, walls, car ports, fences and even balconies as solar generators. Then use batteries to store energy and maximise use of solar. Get the biggest connection possible for import and export. Sign up with an aggregator who can maximise revenues from selling power in the wholesale market, as well as revenue from the Balancing Market, the Capacity Market and other ancillary services markets. Also look to see whether your system can be extended to other near-by users in a micro-grid, either through private wires or sleeving arrangements.
Our experience is that when you look outside the immediate problem of replacing gas, and start to consider the whole system and the benefits of being fully integrated into the flexible electricity market of the future, investment returns look much better. Smart capital is starting to realise that this approach will design and build the infrastructure of the future, and fund integrated distributed energy infrastructure in energy or net zero as a service.
ep is working with clients, technology providers and sources of capital to design, deliver and finance infrastructure fit for the future. We can help you prepare to fight the next war rather than waste time and resources fighting the last war.