UK electricity blackout: A necessary wake-up call for UK industry?

As the dust settled and the lights came back on after the country’s unexpected electricity outage, we took some time to assess the situation and look at the bigger picture…

UK electricity blackout: what happened exactly?

Last Friday (9th August 2019), the UK suffered its most severe electricity blackout in more than a decade, causing chaos across the country’s transport infrastructure and leaving almost a million homes and businesses in the dark.

National Grid blamed the “rare and unusual event” on a severe drop in the grid’s frequency following a duo of major generator outages. However, further reports have suggested there were three blackout near-misses in as many months before Friday’s major outage.

While the energy system operator has reassured there was “no trend or prediction of more frequency excursions”, it has taken responsibility for the nationwide power cut and is working with Ofgem, generators and other stakeholders to understand the lessons learned.

Should we be worried?

Though there is no major cause for panic, the blackout does serve as a timely and very public reminder about some of the major challenges – and greater responsibilities – that all of us face as we transition to a cleaner, greener, more modern energy system.

As is by now widely understood, to enable this transition the UK will need to increase its use of renewable energy sources. Though there is no suggestion that renewables such as wind power – which was responsible for one of the two generator outages that caused the blackout – are unreliable sources of electricity, some questions have been raised over whether the grid is currently well-equipped enough to cope with the changes that renewable energy brings to the system.

With greater volumes of renewables being added every year, it is becoming increasingly difficult for the National Grid to balance the frequency of the network, which was originally built to accommodate fossil fuel power plants (these can deal with fluctuations in electricity use more easily than intermittent renewables).

What does this mean for businesses?

To counter the above conundrum and better prepare for the UK’s energy transition, the system operator has developed a suite of balancing services, or demand-side response (DSR) tools, that offer the opportunity for  industrial and commercial (I&C) businesses to rebalance sudden changes in supply and demand in return for financial reward.

The challenge for National Grid and the energy industry as a whole is to attract more companies to adopt DSR in order to balance the grid more effectively and avoid further blackouts in the future. This will help us to rely more on renewables (as they contribute an ever-rising share of our energy generation mix) and at the same time reduce the need to build new, conventional fossil-fuel power stations in the UK.

However, getting a greater number of I&C businesses to engage with frequency response would be to overcome just one part of the obstacle on our path to decarbonisation.

Increasingly, we will also need to depend on businesses – alongside UK households – to practice much higher levels of energy efficiency (considered to be the lowest-hanging fruit in terms of the methods available to improve energy productivity).

The role of energy efficiency and smarter energy consumption

As we transition to low carbon, a change in electricity demand at the distribution level is expected as consumption patterns shift, such as higher electricity load caused by the anticipated mass up-take of electric vehicles.

Besides the role it plays in lowering greenhouse gas emissions, energy efficiency in this sense can also provide an essential mechanism for providing stress-relief on the grid as electricity loads shift upward.

Like DSR, energy-saving measures not only offer business the opportunity to contribute to a more efficient, cleaner system, but the potential of long-term financial incentives too. But as is also the case with DSR, getting businesses to fully understand the holistic benefits of energy efficiency – for their overheads, for the energy system, and for the environment – is also a work in progress.

Through its Clean Growth Strategy, published in 2017, the government set out to help UK business improve its energy efficiency by at least 20% before 2030, and until now a keystone policy towards achieving this has been the Energy Savings Opportunities Scheme (ESOS).

However, in a report published by MPs in July 2019, ESOS was highlighted as one of several “failing” energy efficiency policies, with available evidence suggesting that as little as five per cent of compliant organisations have taken forward energy-saving recommendations proposed as part of the scheme.

So, as an industry, where do we go from here?

The SMS View

While the deployment of technologies like renewables and electric vehicles are fundamental to the country’s low-carbon ambitions, as we saw recently with the nationwide blackout, this transition will mean – in the mid-term at least – less predictable electricity production.

To ensure that this causes minimum disruption to the UK economy, there is major onus on the government and the energy industry to facilitate a smarter grid that enables flexible ways of balancing supply and consumption. This must be done through building better policy, removing barriers to markets, and stimulating general awareness.

In the case of business energy efficiency, there is much debate over the current effectiveness of current regulation – ESOS in particular – and this is something we recently looked at in depth on our blog (At SMS, we are committed to working with businesses not only to identify energy saving opportunities, but to deliver them).

As with energy efficiency, there are also calls for policy around DSR to be addressed. With participation largely consisting of supermarkets, small generation and large-scale plants, there is a real need for regulation that enables greater levels of industry involvement and which unlocks emerging DSR technologies to support the balancing of the grid.

A key hurdle we see to wider adoption is a lack of understanding around the benefits, and indeed the risks of not engaging with ongoing changes to the energy system, creating an uncertain market for investment.

Nevertheless, armed with better awareness, there is ample opportunity for businesses to make a hugely positive impact.

To gain better knowledge about the feasibility of DSR, organisations will need to gather detailed insight into their energy consumption, as well as information about local grid infrastructure and potential on-site limitations. This is where current policy (when applied effectively) can provide a vehicle to improve uptake of both DSR and energy efficiency in tandem.

For instance, under ESOS, qualified organisations are required to gather such data about their site’s energy profile. Therefore, there is no reason why a thoroughly planned and well-implemented ESOS audit couldn’t deliver all the evidence needed to develop a full business case for DSR (alongside the raft of other energy-saving measures identified as part of the assessment).

This goes to show how, ultimately, addressing the challenge of decarbonising and balancing our energy supply will require a multi-faceted approach. Only by looking at the problem holistically will we be able to make this transition successfully.

Growing responsibility for UK industry

Lastly, it is important to remember that as businesses and everyday consumers, we cannot just rely on the government and the energy system operator to fix the challenges of the modern energy grid alone. Our relationship with energy will need to change if we are to achieve our net-zero ambitions.

A smart energy future will see a change in the traditional supplier/end-user relationship, moving toward a much more flexible model where we not only consume energy, but provide additional capacity or rely upon storage for grid balancing and decarbonisation of our energy grids. Thus, we will need to change our approach from that of a consumer, to that of a prosumer.

We all have a responsibility to engage with these changes that are happening, primarily by looking at our own energy use. At SMS, we are acutely aware of our own responsibility as a business leading the transition to smart and flexible energy. We not only work with our clients to support their ambitions but also within our own business to reduce our energy and carbon footprint and develop a long-term approach to investing in new, low-carbon technologies.

By investing in smarter energy practice now, UK businesses can make their organisation more financially and environmentally sustainable, lessen exposure to rising costs, and – crucially – contribute to a more efficient, more secure and cleaner energy that will work better for society in the long run.

That means ensuring the lights stay on for good!

Besides our work to lay the foundations for a smarter energy grid through our installation and ownership of smart meters, at SMS we also work directly with I&C businesses to improve their understanding of energy performance and implement energy efficiency programmes. Through high-grade energy audits and consultancy, we make achieving compliance with regulations such as ESOS an integral element of a wider energy management strategy, including opportunities to access the DSR markets.