Microgeneration poses new challenges to business, but can also empower consumers, argues Charles Yates, Associate Director, Energy, Environment and Sustainability at Grant Thornton UK LLP
According to figures from Ofgem, UK homes and businesses have installed nearly 380,000 green power projects such as solar panels, wind turbines, hydropower and anaerobic digestion in the first three years of the government’s feed-in tariff subsidy scheme. Microgeneration has moved beyond a theoretical, niche concept and, while perhaps not quite ‘mainstream’, is proving popular enough to demand attention. So what impact is this having on the energy consumers and what are the implications for the big energy companies?
As consumers start to take issue with the charges of the dominant energy companies and look to produce more of their own low carbon energy, this will have significant repercussions for the way in which the companies operate. The increased adoption of microgeneration will undoubtedly affect electricity networks and the way these networks are designed and operated as the electricity system moves from ‘one way traffic’ from large generators to the consumer, to ‘two way traffic’ from and to the producer and consumer. The ‘two way flow’ of traffic within the electricity network is a complicated process and will require investment to ensure it can be managed and monitored to identify who is providing the power, when it will be provided, how much, and to avoid congestion on the network. In order to do this, residences will need to be fitted with smart meters to provide more detailed monitoring and reporting of energy flows. The government roll out of smart meters has been delayed by at least a year and will not start before the end of 2015. The government hopes that by 2020 every household will have a smart meter to monitor and manage their own energy flow.
While solar and wind have dominated microgeneration to date, the use of electric vehicles could also have major implications for energy consumers and producers in the future. The batteries in electric vehicles can act as power storage hubs, diverting power from the cars into the grid to power, for example, a cooker or fridge, or alternatively the power can be diverted to neighbours. The batteries would be recharged late at night when there is excess generating capacity. As the number of electric vehicles grows, so too will the number of domestic energy producers. One benefit of this is that fewer power stations will be needed to meet the peak demand for energy, as part of this peak can be met by drawing power from car batteries, resulting in a cut in the investment in generation which consumers will have to finance.
To facilitate this transition to more widespread microgeneration, new business models need to be created. Although these will most likely evolve from current ones, there are few detailed models out there. If we look at electric vehicles, what happens if there is a change in routine and the car needs to be used in the night? How will the car recharge during off peak times and how will the middle man and the consumer selling the car battery electricity storage services get paid? These issues will need addressing. We should also see the government’s role increase as more rules and regulations will be needed to create stable appropriate physical and regulatory infrastructure to drive this project forward.
While the industry evolves it will not just be the large energy companies that face new challenges and opportunities. We will continue to see a lot of opportunities for small businesses, well beyond the current provision and installation of solar panels and small wind turbines in the home.
Empowering consumers and making them more involved in the energy system can be hugely beneficial. Rather than feeling like just a customer, individuals can feel confident in where their energy is coming from and this can have a considerable impact on their attitudes and thoughts towards green energy. Ultimately, when you produce your own energy and are in control of the flow of power, you are less likely to waste it. It is clear then that microgeneration is here to stay, and businesses of all sizes across the energy industry need to be thinking well ahead in terms of how this will impact their future incomes, as well as how best to make the most of the new opportunities it will undoubtedly bring.
