UK Onshore Wind

Sunset for subsidies and a new day for batteries

Nearly all of the UK’s renewables generation was developed with the help of subsidies: feed-in-tariffs, the renewables obligation (RO) scheme and contract-for-difference auctions.

The gradual sunsetting of these incentives makes it a time of seismic change for the entire energy industry. That being said, it’s far from the apocalypse.

September’s energy auction, if anything, offered a glimpse of a future where advanced commercial and risk-mitigation solutions will become the best way to guard revenue streams, not public patronage.

The best place to observe this shift is in the case of onshore wind. These operators are vanguard for the end of subsidy, with schemes having been closed to new entrants for a few years. The first RO schemes for onshore windfarms will finish in 2027. It may not seem imminent, but the long-term investment required for renewables means that onshore operators should all be in advanced planning for future profitability.

 

The September CFD Auction turning point

The market was braced for big price movement well ahead of September’s contract-for-difference auction. It was still a surprise. Offshore wind went for under £40/MWH, 30% lower than the lower limit of 2017, and well under the government’s £49/MWH wholesale market price.

Far from a sign that onshore would never be able to compete with offshore peers, CfDs veering below wholesale prices only illustrated how close we have come to a level playing field – one where every operator needs every competitive advantage to succeed.

In the absence of subsidy, the challenge for onshore wind is maximising profits without offering too much of a discount on account of the unavoidable variability of its source.

 

Derisking the route to market

The two most straightforward routes to market for onshore wind are securing new long-term contracts outside of government auction or adopting an active next-day trading strategy, returning to the market every day.

An increasing number of corporations are looking to buy long-term power purchase agreements to secure a cleaner energy supply. This offers operators a welcome and predictable revenue stream, but at the cost of ‘paying’ the counterparty to take on the risk with discount prices.

The alternative is surrendering long-term security and deciding to ‘play the market’ with active day-ahead nomination. There are a number of options here: N2EX market, spot market or another balancing mechanisms. For those up to the challenge of a constantly changing supply and demand balance, the potential rewards are great. Unfortunately, so are the risks. Significant in-house expertise and attention is necessary to avoid one bad day wiping out a month’s worth of gains .

What both approaches share are returns which hinge on the risk of variability at the point of generation. This means any way of mitigating that risk will have a major impact on returns.

When bidding directly into the N2EX market, the operator must accept a variable day-ahead price for their forecasted wind generation, with any forecasting errors settled at a possibly lower, or even negative, price. While the mean day-ahead price will be higher than the mean price an energy supplier will be willing to offer in a PPA, the time-variance in the price leaves the operator at the mercy of wind forecasting errors – or simply untimely generation.

To make matters worse, high levels of forecasted national wind generation tend to lead to low prices.

A portfolio operator can mitigate forecasting risk by placing all wind farms under a single supply contract and nominating their aggregated volumes. This is because forecasting errors, while geographically correlated, will be lower on aggregate as positive and negative errors across the portfolio cancel out.

Managing day-ahead bidding, forecasting, and intra-day positions requires not only significant expertise but also robust IT systems. An energy optimisation platform with auto-bidding capabilities can do the heavy lifting cost-effectively, obviating the need to build this capability in-house.

To mitigate market risk, aggregated nominations are not enough, as geographical correlations in wind speed imply that times when wind speeds are forecasted to be high will also be times when N2EX prices will be low. It may not be possible to tame the wind, but what is possible is installing solutions that intelligently store energy and sell it at a time when prices are higher.

 

On-site batteries – to build or buy?

Wind operators who realise the value in installing (or upgrading) onsite batteries face yet another choice: install and manage the full operation of the new batteries, including the charge management, forecasting and market bidding, or – outsource it to a partner.

While most operators have highly technical teams, unquestionably the experts on the particular nuances of their own sites, a self-build strategy is still one where minor oversights or missed opportunities will rapidly erode ROI.

Take the deceptively simple task of choosing the right size of battery. Colocated batteries have the advantage of a shared grid connection point with wind generation on site, and a lower cost of installation due to easier access (compared to those out at sea). However, not every site will have the same amount of room before it hits its connection limit, or may have a wide range of forecasting error.

Making the most of each individual site, and avoiding wasted battery headroom or overflow energy spillage, requires careful battery selection.

Even with a wealth of site data, minor sizing errors will add up to significant loses in the long run. Lacking the size to conduct effective state of charge management, for example, significantly reduces the lifetime potential of each battery, and forces operators to either reinvest or seek external support after all.

Across larger portfolios, the benefits of a networked system of batteries is even greater. This is especially true for windfarms which have a greater potential for site-to-site variance than solar equivalents. With a connected system, the aggregation of risk and capacity means that the individual size (and cost) of each battery can be smaller, reducing overall cost. Larger portfolios allow for distributed risk, but also require more complicated systems to to apportion balancing between the available storage in the portfolio within the constraints of the battery systems’ warranties.

The most advanced management systems do more than simply manage a state of charge or capture overflowing electricity. Reducing variability and risk means also capturing every possible market access point, including accessing the ancillary services and capacity markets, and even the balancing market via a range of aggregators. Not only are these revenue streams decoupled from day-ahead market prices, diversifying market risk – they can more than double the value generated by the storage system.

Especially for larger portfolios, the potential ROI of an advanced management system far outweighs upfront costs. Forecasting day-ahead generation, managing charge levels and setting optimal nomination volumes for suppliers are all vital components of a long-term strategy to maximise return. Partnering with experts for both hardware and software is the most effective and rapid route to success.

In a year-long simulation using 2018 market prices, we found that a suitably sized battery storage system deployed on an on-shore wind farm running Open Energi’s DD2.0 optimisation software could annually generate £77.10 of value per kW of battery capacity (net of connection charges). The system helped buffer wind forecasting errors, reducing them by up to 75%, arbitrage day-ahead energy market price shape, and participate in ancillary services such as Firm Frequency Response.

At a portfolio level, the optimally sized batteries allowed the wind operator to take more risk with their PPA with day-ahead exposure, resulting in a 8% increase in portfolio turnover compared to a PPA with risk taken on by the supplier.

 

End to end optimisation

Wind operators don’t have the luxury of picking and choosing which areas they would most like to see revenue optimised. Every advantage is necessary to survive in a post-subsidy renewables energy market. A comprehensive solution, and an experienced partner to install and run it, offers the best and fastest route to future returns.

Open Energi is one of the UK’s longest standing providers of solutions to mitigate risk and improve market access for renewable operators. We have spent over a decade working to build solutions and platforms that help operators protect their revenue streams, ensure they begin delivering value fast. One of our most recently installations, at one of the UK’s largest battery sites, was taken from ‘contract to commission’ within a week.

The UK is rapidly approaching a time when renewables are competing directly – without government subsidy – through a mix of both long term and day-to-day trading through a range of markets. An onsite battery solution offers a commercially optimised route to success in the UK’s post-subsidy future with a high potential for capturing returns.

Charity cycle funds solar panels in Kenya. Thank you to all our sponsors!

London to Brighton-Ditchling Beacon

On the 27th September ten not-so-seasoned Open Energi cyclists gathered at London’s Clapham Common to tackle the 54-mile cycle route from London to Brighton in aid of Renewable World, a charity dedicated to bringing clean and sustainable sources of energy to power-poor communities.

We had an amazing day, and all arrived safely in Brighton with no major mishaps other than David Hill contriving to get a puncture 400 yards from the start, and Tom Saul delivering a circus-style dismount in front of an appreciative seaside crowd. Special mention goes to Clive Booth for completing the course (including the monstrous climb up to Ditchling Beacon) on a bike wholly unsuited to the purpose, the cycling equivalent of dragging a sack of rocks along behind him.

charity cycle

Most importantly though we would like to say a huge thank you to everyone who so generously supported our efforts. Collectively we raised over £3,700 which is paying for 20 X 24V (250W) solar panels for community owned solar microgrids for communities living on the shores of Lake Victoria, Kenya.

Access to renewable energy not only helps to drive improvements in the health, education and income of local people; it also reduces environmental damage.

‘Since I was connected to the bug, my life has changed. I want my wife to study at university, that is my dream.’ Charles, N’gore Village, Kenya

But there is a long way to go. Globally, almost 1 in 5 people do not have access to electricity; over 1 in 4 lack basic water services like taps and safe drinking water; and over 1 in 3 are without clean cooking facilities. Without access to energy, people remain trapped in a vicious circle of poverty.

Since 2007 Renewable World’s programmes have transformed the lives of over 35,000 people in Central America, East Africa, and South Asia, bringing life-changing renewable energy to communities in need.

To find out more about their fantastic work please visit their website.

ADE I&C Energy Conference

ADE logo

On the 30th October the Association for Decentralised Energy (ADE) will be hosting a practical conference designed to support developers, suppliers, industrial and commercial customers, funders and consultants in understanding industrial energy use in the future smart system.

Open Energi’s Commercial Director will join key market players and experts, discussing:

  • What will be the most lucrative markets in the future smart system for industrial energy?
  • How can large energy users increase their energy revenue and/or decrease their energy costs?
  • How can we make business energy policy more reflective of business needs?

Date: 30th October 2018

Location: Pinsent Masons, London,  EC2A 4ES

Speaker: David Hill, Commercial Director

Further information is available from the event website.

Energy Live Expo

Energy Live News

Energy Live Expo is taking place on October 31st. As always it will look at all the major energy issues of our time in particular the disruption taking place in the energy sector with new technologies, storage and of course policy changes as we enter our transition period of Brexit.

Open Energi will be speaking in the Innovation Hub, sharing our views on the future of energy tech and the opportunities for businesses to cut costs, create revenue and reduce carbon through energy optimisation and demand flexibility.

Date: 31st October 2018

Location: QEII Centre, Westminster, London

Speaker: David Hill, Commercial Director

Further information is available from the event website.

Share Your Energy Conference – 14.11.18

Share Your Energy

Share Your Energy is bringing together the most influential innovators of modern energy. Open Energi’s Head of Markets and Policy Sebastian Blake will join other leading energy tech companies to discuss the latest in flexibility, block chain, artificial intelligence and peer-to-peer energy markets.

Date: 14th November 2018

Location: Prague, Czechoslovakia

Speaker: Sebastian Blake, Head of Markets & Policy

Further information is available from the event website.

Future of Utilities: Smart Energy 2018 – 20/21.11.18

Future of Utilities: Smart Energy is set to bring together 300+ attendees for two days of collaboration discussing energy storage, supply and smart grid developments.

Featuring technology-driven content about how to make energy retail smarter, and systems more flexible, Smart Energy will showcase the experiences of a wider range of energy companies than ever before. 

Open Energi’s Commercial Director David Hill will join a panel session to explore the business case for storage and different approaches from across the value chain.

Date: 20th-21st November 2018

Panel: 14.35, 20th November

Location: The Tower Hotel, Guoman – London

Speaker: David Hill, Commercial Director

Further information is available from the event website.

How greater flexibility can help UK deliver 50% renewables by 2030

electricity pylons

The National Infrastructure Commission (NIC) recently published its first National Infrastructure Assessment (NIA), setting out a strategy for the UK’s economic infrastructure from 2020 to 2050. A key focus is decarbonising the UK’s energy supply and the report recommends 50% of generation is supplied by renewable power by 2030, with the UK’s electricity supply almost entirely zero-carbon – thanks to nuclear and renewables – by 2050. But how can we integrate this level of renewables cost-effectively, and what do we do when the sun doesn’t shine, and the wind doesn’t blow? Wendel Hortop, Commercial Analyst at Open Energi, explores the role of flexibility in enabling the UK’s transition to a zero-carbon energy system.

What would such high levels of renewables mean for the energy system?

The UK is on track to power 50% of our electricity supply with renewable generation by 2030 but this level of renewables creates some very specific challenges. Solar and wind, which would form most of new renewable capacity, are highly inflexible – energy is only generated when the sun is shining, or wind is blowing. Despite increasingly accurate forecasting, this inflexibility introduces short-term (balancing electricity supply and demand within a given half-hour) and long-term (what to do when wind and/or solar output is low for hours or days at a time) challenges, and reduces the level of inertia on the grid, resulting in much quicker changes in system frequency – which must be managed to ensure power keeps flowing.

Flexibility can help to address these impacts cost-effectively – reducing total system spending by between £1-7bn per year – and enable the UK to integrate renewable generation at the scale required by the NIC assessment.

Flexibility can deliver significant cost reductions in in a high renewable system

Source: Open Energi
Source: Aurora Energy Research

 What role does flexibility have to play?

The majority of system balancing occurs through the energy market in response to energy prices visible over different timescales, of which the last resort is the imbalance price. Energy generators and suppliers forecast their half-hourly energy usage and provide this to National Grid, who then take action to correct any differences between forecast and actual energy usage. Anyone out of balance in a way which harms the system pays a penalty, whilst the opposite is also true – putting yourself in imbalance to benefit the system gets rewarded. The imbalance price (or System Price) is not known until afterwards so predicting and reacting to it allows energy users to help the grid and be rewarded; increasingly trading teams at big suppliers are looking to their customers to help manage this.

Open Energi are already responding to the imbalance price by flexing loads through signals from suppliers, such as Ørsted’s Renewable Balancing Reserve. Increased renewable generation on the grid will increase the likelihood of system imbalances, and the incentive to respond.

Flexible loads can respond in real-time to predicted system prices

Flexible loads can respond in real-time
Source: Open Energi

The wholesale market doesn’t balance all supply and demand so National Grid look to the suite of services they procure to do the rest. For example, frequency response services fine tune the system balance and provide a ‘first line of defence’ after large generation outages.

Demand flexibility is already an established tool in helping to balance frequency on the grid via the Firm Frequency Response market. Inertia levels falling means faster frequency response is needed. Lithium-ion batteries are perfect for delivering this, whilst some forms of demand flexibility can also respond at the required speed. National Grid is developing a Faster Acting Frequency Response product which will allow loads capable of responding quickly enough to participate and will procure a mix of assets capable of tracking frequency (such as batteries) and those capable of delivering large shifts in demand almost instantaneously (such as large industrial processes).

Longer term shortfalls in generation introduce a new challenge for flexibility

The more significant challenge is in longer periods of low wind and solar generation. Increased interconnection with Europe will help but demand flexibility can again play a key role.

Frequency response has tended to focus on energy flexibility within a half-hour period, however many processes have inherent energy storage of hours or even days. Water pumps, heating and CHPs are all assets which can shift demand over long periods. The signals to do so come from the market – low renewable generation leads to increased wholesale energy prices, and vice versa. As wholesale energy prices can be known a day ahead, a load can be optimised in advance to increase consumption when prices are lowest, and reduce consumption when prices are high.

Many flexible processes have hours or even days of energy storage
 

Many flexible loads have hours or even days of storage
Source: Open Energi

Advances in storage technology will also assist with this longer duration requirement for flexibility. Technologies such as vanadium flow batteries can provide over 4 hours of energy storage and can help balance sustained periods of low or high renewable generation as well as providing short-term frequency response and price arbitrage.

Aggregation of assets such as these, diverse in both location and technology, will help to tackle longer periods by spreading the requirement for flexibility. Digitalised platforms that use artificial intelligence (AI), statistics and probability can schedule and manage asset behaviour to deliver the optimal amount of flexible capacity.

As we look to 2030, increased adoption of electric vehicles (EVs) will also come into play, either through smart charging or vehicle-to-grid (V2G) charging. In their latest Future Energy Scenarios report National Grid predict we could have over 10 million electric vehicles in 2030, and over 35 million in 2040 – a huge number of flexible, distributed assets.

Smart charging will allow EV charging to be modulated or staggered to avoid surges in consumption or shifted to times of day when demand is low, reducing the infrastructure required to support them. Aurora Energy Research estimate that smart charging can reduce the level of generating capacity required in 2050 by up to 22GW in a high renewables system. Meanwhile V2G charging introduces possibilities such as taking households off-grid during peak periods – Open Energi are part of the PowerLoop consortium exploring this and other potential V2G applications.

Smart charging significantly reduces the need for flexible generating capacity

Source: Aurora Energy Research
Source: Aurora Energy Research

Decarbonisation of heat will introduce new sources of flexibility

One common process with very high levels of inherent storage is heating; however the UK’s reliance on gas means potential flexibility which could be offered to the electricity system is currently limited. Looking forward the decarbonisation of heat therefore offers long-term opportunities, whether this comes through electrification or a transition to hydrogen and district heating.

Switching to heat pumps would introduce a large but flexible energy load into the system with significant storage potential. Coupled with smart meters and other advances in technology this could lead to a highly distributed source of flexibility for the grid, just as with the shift to electric vehicles.

Hydrogen powered heating – produced via electrolysis – is an energy-intensive but flexible process, which alongside district heating networks would likely lead to many more CHPs – which offer short and long term flexible capacity.

Technology will play an important role in delivering this flexibility

The NIA shows that flexibility has a key role to play in delivering or surpassing our carbon targets. As renewable generation increases significantly so will the need for flexibility. We already have many of the solutions we need – the real challenge is rolling these out at the required scale and speed.

This is where AI and cloud computing can come into their own. Aggregation of larger and larger portfolios of diverse loads will require the behaviour of each of these individual loads to be optimised and controlled in real-time in response to the requirements of the system. Meanwhile the move to smaller, distributed loads, including those on a domestic scale such as electric vehicles, will rely heavily on cloud computing with dispatch instructions delivered over the internet and loads communicating their behaviour with the platform and each other.

Ultimately these solutions can give rise to an autonomous, self-balancing grid which operates incredibly cheaply. Open Energi are leading this transition, connecting, aggregating and optimising distributed energy resources in real-time, to create a more sustainable energy future.

Cenex LCV event 2018

Cenex LCV 2018

Cenex-LCV is the UK’s premier low carbon vehicle event incorporating a seminar programme, technology exhibition, low carbon community networking and ride & drive of the latest research & development and commercially available vehicles.

LCV is run by Cenex, the UK’s first centre of excellence for low carbon and fuel cell technologies with assistance from Supporting Partners including the Department for Business, Energy and Industrial Strategy, the Centre for Connected and Autonomous Vehicles, the Office for Low Emission Vehicles, the Department for International Trade, the Advanced Propulsion Centre, the Automotive Council, Innovate UK, the Low Carbon Vehicle Partnership, the Society of Motor Manufacturers and Traders, and Transport Systems Catapult.

Date: 12-13th September 2018

Location: Millbrook, Bedfordshire

Speaker: Robyn Lucas, Head of Data Science

Further information is available from the event website.

BNEF Future of Energy Summit

BNEF logo

Since its inception in 2008, the BNEF Future of Energy Summit has featured a unique convergence of the old and the new – traditional players and advanced-energy leaders. It continues to create an environment for making new connections, and serves as a forum to discuss the critical energy issues of today and the next decade.

Date: 1st-2nd October 2018

Location: Intercontinental Hotel, Mayfair, London

Speaker: David Hill, Commercial Director

Further information is available from the conference website.

Power Responsive success stories: Aggregate Industries

National Grid’s Summer Reception 2018 profiled Aggregate Industries’ pioneering partnership with Open Energi as an example of real life achievements to unlock demand side flexibility and the innovation and collaboration within the industry.

Aggregate Industries is the first business to deploy Open Energi’s artificial intelligence-powered flexibility platform, Dynamic Demand 2.0, to deliver electricity cost savings of 10%.

40 bitumen tanks at ten Aggregate Industries’ sites UK-wide have already been connected to the platform, which uses artificial intelligence to automatically optimise their daily electricity use in response to a variety of signals, including wholesale electricity prices, peak price charges, fluctuations in grid frequency, and system imbalance prices.

Aggregate Industries is accessing the imbalance market via Renewable Balancing Reserve (RBR), a product offered by its renewable electricity supplier, Ørsted. RBR enables Aggregate Industries to tap into the financial benefits of participating in the imbalance market, by reducing its demand at certain times.

Over time Aggregate Industries plans to expand its use of Dynamic Demand 2.0 to 48 asphalt plants UK-wide – representing up to 4.5MW of demand flexibility. It is also exploring its wider portfolio of assets and processes to identify where further benefits may lie.

Talking to National Grid, Richard Eaton, Energy Manager at Aggregate Industries explained: “What we’re doing now is rolling out Open Energi’s Dynamic Demand 2.0 platform, where what we do is we flex our assets, not only to calls from National Grid, but also now to calls from Ørsted under their Renewable Balancing Reserve.

“The artificial intelligence within Dynamic Demand 2.0 is helping us to optimise our bitumen tanks leading to a predicted 10-15% reduction in the operating costs of those assets.”