Distributed Energy. Powering the future of industry. September 2018

Transcription

1 Distributed Energy Powering the future of industry September 2018

2 Contents Foreword 3 Executive summary 4 Breakdown of projected savings by region 6 Background: What is distributed energy? 7 The opportunities for the industrial sector 8 Case studies 10 The national picture 14 About Centrica 15 Foreword By exploiting the energy technology of the 21st Century, I believe UK industry can inspire a new revolution which will boost economic growth and create jobs. The industrial sector uses one quarter of the UK s entire electricity supply. As well as being a staggering statistic, I believe this is also a clear signal of the opportunity for industrial organisations to play their part in the changing energy landscape, while also unlocking the potential of energy to ensure our position in the global marketplace. We should take our inspiration from the Industrial Revolution which began in the UK over 200 years ago. At the heart of that seismic change was new technology which created the ability to harness energy on a large scale for the first time. Today, by exploiting the energy technology of the 21st Century, UK industry can inspire a new revolution which will boost economic growth and create jobs. It could also give the UK a critical competitive advantage as we adapt to life outside the European Union. In this report, we show how UK industry could save 540 million a year by adopting the full range of distributed energy solutions. But more significantly, we also show how this could help to create hundreds of thousands of new jobs, boost overall economic growth and even help to tackle that age-old UK affliction our low productivity. At Centrica, we believe that the energy system of the future will look fundamentally different to how it does today; and we are committing hundreds of millions of pounds in new investment over the next few years to make that future a reality. Our approach is not just about more efficient ways of saving energy; it is also about producing more electricity closer to the point of use through technologies such as solar, Combined Heat and Power and battery storage; and it is about harnessing the full power of data and the digital world to give industry real control of its energy use. Adopting new energy technology will ultimately help our industrial sector to grow, become more productive and create jobs. I hope this report inspires you to make this vision a reality. Jorge Pikunic, Managing Director, Centrica Business Solutions September

3 Executive summary Energy is one of the largest operational costs borne by UK industrial businesses. Using energy more effectively will not only improve the bottom line, but also boost productivity, resilience and competitiveness. Context Although the UK economy continues to grow, the underlying rate is modest by historical standards, and manufacturing output has fallen back from the high point which it reached at the end of The UK's trade deficit has noticeably worsened, as exports of goods such as cars and planes have declined sharply while imports have risen. The total UK trade deficit widened by 4.7 billion to 8.6 billion in the three months to June bn Industrial sector spend on energy per year worked is more than 20 per cent higher in the US, compared to the UK, and in Germany it s nearly 30 per cent higher 2. Energy costs on average account for three per cent of UK business expenditure. But there are 16 sectors in the economy nine of which are energy intensive industries such as the iron and steel sector where energy costs represent more than 10 per cent of total business expenditure 3. This adds up to a challenging outlook for the UK industrial sector, as the export dividend from a weaker pound diminishes and the higher price of imported goods begins to have an impact on input costs. Brexit has created uncertainty not just about demand for UK manufactured goods once we leave the EU but also about the impact on cross-border movement of goods and the resilience of supply chains. UK industry also continues to suffer from relatively low productivity, lagging behind most of our peers in the G7 group of leading industrialised nations. GDP output per hour 540m These are sectors where the UK is fighting to compete in a global marketplace. With our industrial sector using 92 million megawatt hours of energy in 2017, small changes in energy costs can have a big impact 4. The UK currently has the second highest industrial electricity prices among the G7 countries 5. Helping businesses to use energy more effectively will be critical in ensuring that the UK can improve its productivity, boost competitiveness and seize new post-brexit trade opportunities. Helping businesses to use energy more effectively will be critical in ensuring that the UK can improve its productivity, boost competitiveness and seize new post-brexit trade opportunities. Industrial GVA Industrial employment Industry economic benefits 13.9bn 195, Our report reviews the economic impact if just 50 per cent of businesses in the industrial sector adopted distributed energy solutions. GVA to UK Jobs supported bn % 50% 75% 100% Percentage take up by the sector Thousands % 50% 75% 100% Percentage take up by the sector Our findings suggest that businesses could reduce energy costs by 540 million a year, enough to fund the average UK salaries of more than 11,000 professional engineers 6, or save five per cent of the sector s total annual energy spend 7. The 50 per cent scenario could also create 13.9 billion for UK GVA (Gross Value Added) and support around 195,000 jobs that would be needed to help deliver distributed energy technology for the sector. 1 ONS, statistical bulletin: UK Trade, June ONS, international comparisons of UK productivity (ICP), final estimates: Department for Business, Energy and Industrial Strategy (BEIS), Business energy statistical summary July BEIS, DUKES June BEIS, industrial electricity price in the IEA, June BEIS, DUKES July

4 Breakdown of projected savings by region Background: What is distributed energy? England 467m The first step in understanding the potential of distributed energy solutions is understanding what the term means. The World Alliance for Decentralised Energy defines this as electricity production at or near the point of use, irrespective of size, technology or fuel used both off-grid and on-grid. We believe that this is a good start, but is too narrowly defined. Distributed energy should also cover a much broader range of solutions, including energy efficiency, monitoring and on-site generation, that can help industrial businesses to take control of their energy and turn it into an opportunity. SCOTLAND 45m Scotland 45m 1 5 Energy Insight 2 Power Generation e.g. Back-Up Generator and Solar Energy Efficiency e.g. LED Lighting, Heating, Ventilation and Air Conditioning (HVAC) NORTH EAST 23.5m Wales 28m 3 Battery Storage 6 Combined Heat and Power (CHP) NORTH WEST 62m YORKSHIRE AND THE HUMBER 46.1m 4 Demand Side Response (DSR) Key 71,000,000 or more 51,000,000-70,000,000 31,000,000-50,000,000 30,000,000 or less WALES 28m WEST MIDLANDS 47.3m EAST MIDLANDS 41.9m SOUTH EAST GREATER LONDON 83.2m EAST 49.5m 1. Energy Insight New technology is available that allows larger energy users to accurately monitor their energy use across all equipment and devices. For example, Centrica Business Solutions own Panoramic Power technology. 2. Power Generation A range of small-scale power generating technologies can provide on-site generation; delivering back-up power and the ability to sell excess energy back to the grid. 4. Demand Side Response (DSR) Revenue streams are available for energy users if they are able to reduce, or even increase, their energy consumption at times when the grid demands it. New technology allows energy users to respond to these changes in demand quickly and easily, without putting security of supply at risk. 5. Energy Efficiency Reducing costs by upgrading or improving a range of energyconsuming processes. SOUTH WEST 42.9m 70.6m Regional estimates are based on non-domestic electricity demand at a local authority level*, apportioned to the total 540 million savings opportunity 3. Battery Storage Lithium-ion battery storage systems can be charged at cheaper times and then used when prices increase to better manage energy costs. They can also work alongside renewable technologies, which on their own are intermittent, and can be used to support the grid, which will create new revenue. 6. Combined Heat and Power (CHP) CHP plants work by converting gas into both electricity and heat in a single process. It s one of the most efficient sources of energy and allows significant amounts of energy to be produced on-site, improving the resilience of supply, reducing costs and helping to reduce carbon emissions. *Source: BEIS national electricity consumption statistics (2016) 6 7

5 2 Protecting margins and customer relationships with enhanced production resilience When margins are tight, industrial firms can t afford any downtime in their processes which may result in lost output and revenues, and damage product quality. Unreliable grid supply in some areas increases the risk of production outages. The resulting delays in just-in-time delivery schedules are likely to result in dissatisfied customers and cancelled orders. Stable energy supply is therefore vital to ensuring production resilience. We believe industrial businesses should take advantage of innovative new technologies to ensure the security and stability of their energy supply, and provide early warning of potential equipment failures to enable smart production. Energy insights support preventative maintenance processes to ensure production lines are kept functional and running as smoothly as possible to produce high quality output. On-site generation, particularly CHP, back-up generators and storage solutions, reduce grid dependency and ensure a secure and scalable supply for a manufacturing facility. > 180bn The annual cost of machine downtime to British manufacturers 10. The opportunities for the industrial sector 3 Enhancing environmental performance and business agility to ensure a sustainable future 1 Improving competitiveness by optimising production performance Industrial businesses operate in an increasingly competitive global marketplace. To stay ahead, manufacturers need to continually invest in new technology and product lines, meaning there is limited capital to invest in non-production assets such as energy infrastructure. As a result, many manufacturers are running ageing and inefficient energy estates, which is leading to unnecessary wastage and costs, impairing their ability to optimise production quality and capacity. We believe distributed energy technology can enable businesses to improve production efficiency and save money. Energy insight tools can provide real-time monitoring and analytics which identify what actions a manufacturer can take to maximise their energy usage profile. These could range from LED lighting or insulation, to on-site generation to deliver large energy efficiency gains across heating, cooling, drying and moulding processes. Demand response programmes could also optimise energy assets, while revenue generated can off-set energy costs. 30% The percentage savings in energy costs that can be achieved by replacing older lighting technologies with LED 8. 40% Percentage of full load still in use by air compressors when idling 9. Changing consumer attitudes, tighter environmental regulations and increased awareness among employees, shareholders and investors have all made demonstrating a commitment to sustainability increasingly vital for industrial businesses. All of which makes recent advances in energy technology particularly relevant. These advances provide manufacturers with timely opportunities to enhance their brand reputation by reducing their carbon footprint, while also achieving greater flexibility. We believe it s critical for businesses to implement sustainable energy strategies that increase their appeal to environmentally conscious consumers. Renewable generation technologies, including solar, enable unused space such as roofs to be used to reduce both energy costs and carbon footprint. On-site energy co-generation technologies including Combined Heat and Power (CHP) and trigeneration (CHP integrated with absorption chillers) are another high-potential option for manufacturers with mixed energy load profiles. 8 Centrica Business Solutions: com/blogpost/ten-tips-reduce-waste-energy-your-production-line 9 Food & Drink Processing Sector Overview, The Carbon Trust, The Staggering Cost of Machine Downtime report, Oneserve, Energy Advantage Research, Centrica Business Solutions, Unilever % Percentage of UK manufacturers who say ensuring environmental and sustainability targets are met is one of their biggest challenges % The percentage of international consumers who now choose to buy from brands that they believe are doing environmental good

6 Powering increased productivity, resilience and competitiveness for British industry Centrica is helping industrial businesses across the country overhaul their approach to energy. From car manufacturing plants to cheese-packing facilities, forward-thinking companies are changing their relationship with energy by installing Combined Heat and Power (CHP); efficient lighting; heating and ventilation systems; renewable technology; and building management systems. We created the UK s largest factory-connected solar photovoltaic (PV) system for Toyota, allowing them to generate their own power naturally. 17,000 PV modules installed Case study: Toyota 4 months from commission to completion They were looking for a greener solution Toyota wanted a partner to create a turnkey project for the UK s largest factory-connected solar PV installation. This was to help power their first European Model Sustainable Plant at Burnaston. We completed the project in just four months Following our commission, there was a change in the government Feed-in Tariffs (FiT) scheme for large-scale systems a programme that promoted the uptake of renewable and lowcarbon electricity generation technologies. This change allowed us to significantly accelerate the project with installation and commissioning being completed in less than four months from project approval. 5% of the plant's energy now powered by the sun What we did We were responsible for the full development of the site including environmental studies and planning support. During the 10-week construction programme we installed nearly: 17,000 PV modules 240 inverters 140km of cabling and associated HV works How it works The electricity generated via the solar panels is sent along cables to a power inverter where it s converted from direct current (DC) to alternating current (AC). It s then ready to be used directly by the business, just like electricity that s bought from a supplier. In a separate project, British Gas Energy Construction Services (now Centrica Business Solutions) designed, installed and commissioned a multi-millionpound project providing 13,000 solar panels to Toyota UK s engine production centre at Deeside in North Wales. The solar array provides up to 10% of all the electricity required for manufacturing at the site, generating up to 3,475MWh of electricity each year enough to produce up to 22,500 car engines. The funding for the project This was a funded project providing the project finance through a funding vehicle. Toyota receives all the electricity generated, and the funding vehicle takes any FiT revenue. The results The PV system is now providing five per cent of Toyota s site energy consumption, helping to cut costs and reduce the carbon footprint. The installation has now been sold to Bluefield LLP, a specialist investor in UK renewable energy and solar PV

7 We wanted to understand our energy consumption at a granular level. Centrica Business Solutions is a leader in this field and the initial project has immediately provided substantial cost savings. We now plan to roll-out this solution to our international sites. Dairy products company, Ornua Foods (previously Adam Foods), is achieving impressive carbon performance at its factory in Staffordshire, thanks to Combined Heat and Power (CHP) technology. Adam Batting, Operations Director, FUJIFILM Speciality Ink Systems 22 sensors 5% cost 3 weeks 476 tonnes 31,500 savings Real-time energy data Solution cost 5 per cent of the total savings Return on investment within three weeks CO2 emissions saved annually Cost savings per year Case study: FUJIFILM Case study: Ornua Foods Device-level insight into energy use FUJIFILM Speciality Ink Systems is a global leader in the development and manufacture of UV inkjet inks for wide format and other printing sectors. Continuously finding ways to improve efficiency in its operations enables the company to remain competitive and to invest in the development of future technology. Driving operational efficiency FUJIFILM wanted to drive energy efficiency across its UK manufacturing site, but needed expert insight to support meaningful action. Centrica Business Solutions began by installing 22 sensors at the facility in Broadstairs, Kent. The wireless, self-powered sensors monitored the flow of electricity and delivered energy information to an online analytics platform. The data would be analysed after a six-week Proof of Concept. The Energy Insights solution, Panoramic Power, has been created to improve operational efficiency, uncover new growth opportunities and reduce business risk. The results Within six weeks the Energy Insights solution had unearthed two major issues. It discovered a fault with the air compressor units which was causing them to run over the weekend while the site wasn t operational. This was costing 330/ weekend leading to an annual saving of 17,000. Secondly, specific chillers on the ink production line were also kept running after production stopped. By optimising these chillers and looking into operational efficiency, FUJIFILM achieved a saving of 26,000 per annum. The payback period for the investment in Energy Insights was three weeks. Centrica Business Solutions has since been invited to extend the solution to FUJIFILM s customer site in South Africa. FUJIFILM is also looking to extend energy monitoring to other UK sites. Aiming for optimum efficiency Ornua Foods (previously Adam Foods) 30m state-of-the-art factory and office complex in Leek, Staffordshire, offers best in class production capabilities and was designed to be the most efficient and environmentally friendly cheese packing facility in Europe. Pay-as-you-save contract ENER-G (now Centrica Business Solutions) installed a new CHP plant to help meet the electricity and hot water requirements of the factory. The highly efficient system generates 150kW of electricity and provides 225kW of heat that is used to warm water for washing and cleaning. The results The technology works by generating electricity on-site and recovering the majority of the heat created in the process. For Ornua, this meant substantial carbon savings to the tune of 476 tonnes, equivalent to the environmental benefit of 47,600 trees. Why Centrica Business Solutions? Offers financial savings over conventional energy supply Primary energy savings deliver lower energy bills Higher efficiency offers reduced greenhouse gas emissions, offsetting the carbon impact Greater security of supply and plentiful hot water 12 13

8 The national picture About Centrica The information in this report is taken from Distributed Energy: Powering Britain s Economic Future, published by Centrica Business Solutions in November The world of energy is changing and, with our chosen businesses, distinctive positions and current capabilities, Centrica is well placed to deliver for its customers and for society. We are focused on delivering high levels of customer service, improving customer engagement and loyalty. We aim to be a good corporate citizen, employer of choice and to provide leadership in a dynamic and changing world. This research provides a picture of the scale of the potential economic benefit for the UK economy if the opportunities from distributed energy solutions are taken up in the healthcare, industry, and hospitality & leisure sectors. Our analysis shows that if just 50 per cent of the three sectors utilised these solutions it could deliver: 980m 18.5bn Economic boost to UK GVA We will satisfy our customers, deliver cash flow growth and returns for our shareholders and be efficient and excellent in our operations. We are shifting investment towards our customer-facing businesses organised around two global customer facing divisions: Centrica Consumer and Centrica Business focused on the residential consumer and the business customer respectively. Our areas of focus are Energy Supply & Services, Connected Home, Distributed Energy & Power, Energy Marketing & Trading. We supply energy and services to over 27 million customer accounts mainly in the UK, Ireland and North America through strong brands such as British Gas, Direct Energy and Bord Gáis supported by around 12,000 engineers and technicians. We are developing innovative products, offers and solutions, underpinned by investment in technology. In February 2017 we announced the creation of a new venture Centrica Innovations that will identify, incubate and accelerate new technologies and innovations. We will look to invest up to 100 million over the next five years in start-ups, giving us access to technology and entrepreneurial capability and resources. For more information: centrica.com 260, % New jobs Boost to UK economic output Centrica commissioned FTI Consulting to help develop the quantitative analysis for this report. FTI Consulting is an independent global business advisory firm, with deep expertise and significant experience in energy markets, and in performing economic analysis across a range of sectors. To read the report in full and view our methodology, visit centrica.com/economicfuture About Centrica Business Solutions Centrica Business Solutions has been established to develop new thinking, new technologies and new ways of working to help our customers take control of their energy and improve their performance, resilience and growth. Our energy intelligence, products and solutions are already powering the ambitions of more than 4,500 customer sites around the world. From retail and manufacturing to health and education, we help our customers improve their operational efficiency, increase their resilience, and unlock new sources of value and revenue. Centrica will be investing over 700 million in this area by For more information: centricabusinesssolutions.com 14 15

9 Disclaimer The analysis as described has been prepared by FTI Consulting LLP ( FTI ) for Centrica plc in connection with the Quantitative analysis to support delivery of a research paper on distributed energy project commissioned in June This analysis has been prepared solely for the benefit of Centrica plc in connection with this project and no other party is entitled to rely on it for any purpose whatsoever. FTI accepts no liability or duty of care to any person for the content of this analysis. Accordingly, FTI disclaims all responsibility for the consequences of any person acting or refraining to act in reliance on the analysis or for any decisions made or not made which are based upon such analysis. The analysis contains information obtained or derived from a variety of sources. FTI does not accept any responsibility for verifying or establishing the reliability of those sources or verifying the information so provided. Nothing in this analysis constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to the recipient s individual circumstances, or otherwise constitutes a personal recommendation. No representation or warranty of any kind (whether express or implied) is given by FTI to any person as to the accuracy or completeness of the analysis. The analysis is based on information available to FTI at the time of preparing the analysis in August 2017 and does not take into account any new information which becomes known to us after this date. We accept no responsibility for updating the analysis or informing any recipient of the analysis of any such new information. All copyright and other proprietary rights in the analysis in Appendix 2 of the Distributed Energy: Powering Britain s Economic Future report remain the property of FTI and all rights are reserved. UK Copyright Notice 2017 FTI Consulting LLP. centricabusinesssolutions.com 2018 Centrica plc. Registered office: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD. Registered in England & Wales No WP UK_EN