To flex or not to flex? 5 common barriers to companies embracing energy flexibility
The UK government was the first major economy in the world to pass into law a commitment to ending its contribution to global warming by 2050. But achieving net zero won’t be easy. It’s going to take change across all levels, from how our energy is generated, to how we run our homes and businesses, the transport network and heavy industry.
The commercial and industrial sector is estimated to be responsible for around 19% of all UK greenhouse gas emissions. So, if the UK is to achieve its climate change targets, then businesses are going to need to step up to the plate.
For large energy consumers in particular, finding innovative ways to manage energy use and to improve efficiency is key. The extreme volatility in the energy markets and sky-high pricing we’ve seen recently only adding to the sense of urgency that many businesses are now feeling.
While there are many longer term steps that organisations might take, such as investment in low carbon generators and major energy efficiency upgrades, utilising existing assets for ‘energy flexibility’ is one potential quick win.
In simple terms, this involves using technology to manage energy use in a more intelligent way - one which could not only lower emissions but also reduce energy costs and open the door to additional revenue streams. It’s a process that can be implemented quickly, with minimal capital expenditure and which is low risk and available to organisations across all sectors.
Why then, do I repeatedly see companies struggling to capitalise on it?
5 common barriers to embracing energy flexibility
1. Prohibitive supply contracts
One barrier that businesses can face is working with an energy supplier who doesn’t support or facilitate flexibility. You may find you are tied into a prohibitive supply contract and when you approach them about flexibility, they are unwilling to budge, regardless of the economic and environmental benefits.
Make sure you go into any new supplier agreement with your eyes wide open about their stance on flexibility. If you invest in an asset, such as a battery or solar pv, check you understand how the supply contract enables you to capitalise on your investment.
If you are already tied in, then when your contract is up look around for suppliers who offer tariffs that encourage flexibility by lowering your energy usage rates or given you access to revenue sharing opportunities.
2. Risk adversity amongst the team
When you operate a large business, looking to capitalise on flexibility may seem like a no-brainer at a senior level. However, the idea may be met by challenges and objections as you move further down the ladder.
There are many potential reasons for this but most likely it will stem from a lack of understanding for how it will work and there may be some ‘what ifs’ that need answering.
That’s why it’s so important for senior teams to fully engage with employees early on.
Educate them about the technology and explain the benefits and impact case. There are also many use cases that can demonstrate the concept, reliability and its success in a range of different sectors.
3. Lack of understanding of the technology
Another barrier businesses can face is a lack of understanding of the technology and its capabilities, including what can be flexed and how.
It may be that the concept of energy flexibility is something your team members have never come across before. They may be unaware of the technology, how it works and what its potential financial and environmental benefits may be.
It‘s a pattern that we often see played out with new technologies. For example, it wasn’t that long ago that businesses were reluctant to move to the cloud, but now it’s a trusted tool. In the same way, for flexibility we were the pioneers but it now far more mainstream.
4. Questions over return on investment
While limited capital expenditure is needed to enter the flexibility market (just potentially a small amount of hardware needs to be added on site), flex itself is a complex market to understand. There are many potential routes open for managing energy usage in such a way that may provide access to new revenue streams or lead to cost savings. For example, by supporting National Grid to help balance the grid.
Some businesses can find it hard to pinpoint the potential return on investment, were they to flex, and may also be put off by the opportunity costs they might incur. However, there is now a plethora of case studies available on ROI and with the right advice and expertise you can put forward a compelling business case with minimal time investment and business continuity impact.
5. Lack of senior team buy-in
While we’ve already touched on the importance of getting buy-in from those on the ground, it’s also vital that senior team members are fully across flexibility and its benefits – from the potential cost savings and revenue generation, to how it can support environmental targets.
This can sometimes prove more difficult in large organisations, where multiple people are involved in decision making. Again, it comes down to communication and education.
As the UK continues to work towards challenging carbon reduction targets, and with ongoing volatility in the energy markets, it’s never been more vital for businesses to get smart with their energy management.
There’s also been a lot of talk in the media recently about greenwashing – and companies appearing to be greener than they actually are - but the reality is we all need to take positive action if the UK is to achieve its net zero ambitions.
Which is where flexibility comes in. It offers an easy way for businesses to utilise their existing assets in a more intelligent way – one which could result in cost savings, access to new revenue streams and importantly, lower emissions.
How can KrakenFlex help?
KrakenFlex enables system operators, traders, retailers and consumers to connect, optimise and control ‘distributed energy resources’ real-time in collaboration with a growing number of energy suppliers.
As part of this we have a team of industry experts leading the way to net-zero, that you can connect with. Feel free to Get in touch.
In reference to the 5 points discussed above we can help you in the following ways:
1. Prohibitive supply contracts: Speak to our team who can advise on the best suppliers, traders and opportunities currently in the market.
2. Risk adversity amongst the team: We can provide case studies from our large base of flexibility clients, which includes agricultural sites, data centres, manufacturers, sporting venues and universities.
3. Lack of understanding of the technology: You may find this beginners’ guide to flexibility, covering what we flex and how we do it, a helpful read. Also, let us know if you’d like any information about the many ways we help de-risk the process for our customers.
The KrakenFlex Distributed Energy Resource Management Solution (DERMS) is currently managing hundreds or mega-watts of critical infrastructure without impact business as usual activities.
4. Questions over return on investment: We can crunch the numbers for you. We will conduct a virtual analysis of your site to understand what the potential for flexibility is and then provide a breakdown of the potential ROI and revenue stack you might expect.
5. Lack of senior team buy-in: We have detailed analysis available including a detailed breakdown of the potential ROI and proven use cases.