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Is green the new brown (energy)?

A new report has revealed that renewable energy costs are falling so fast that they should be consistently cheaper than fossil fuels by 2020.

The report, which was carried out by International Renewable Energy Agency (IRENA), shows that the costs of renewable energy generation have fallen significantly in recent years. Onshore wind generation costs have fallen by around 23% since 2010, while the cost of solar photovoltaic (PV) electricity has fallen by 73% in the same period. IRENA predicts that typical solar costs will halve again by 2020, and that other green energy options will also decrease in cost, becoming competitive with fossil fuels on price in two years’ time.

With such significant findings contained within the report, we’re asking: is green energy the new brown energy?

Are we set for a renewable revolution?

In recent years, we’ve seen renewables account for a steadily increasing proportion of our energy supply. Renewables generated over three times the amount of electricity as coal in 2017, accounting for 30.7% of power in the second quarter of the year – a record high. In fact, wind farms in Britain generated more electricity than coal plants on more than 75% of days last year. We also saw the record-breaking low price of £57.50/MWh awarded in the Contracts for Difference (CfD) auction.

At the same time, we’ve seen a decline in some forms of traditional ‘brown’ energy generation. Coal, for example, generated just 2.9% of our electricity between July and September 2017, while on 26th May 2017, solar power provided us with 8.7GW of energy – which was more than the UK’s nuclear power stations. It seems that we’re witnessing a sea change in the energy mix.

What does this mean for businesses?

Despite the falling costs of renewables, businesses are unlikely to see any impact on their energy bills until the 2030s. That’s because the cheaper CfD contracts that have been agreed are for future wind farms, so the cheaper prices won’t come into fruition yet. Also, despite the clear benefits of the UK moving towards a low carbon future, renewable methods of generation are intermittent. This could impact price volatility as balancing the grid becomes more challenging.

New technology, such as battery storage, should help to smooth the effects of intermittent sources of energy. Energy storage is clearly a priority for the UK government, as last year they announced the Faraday Challenge, which is the first phase of a £246m investment in battery technology. The Challenge will fund research and development into batteries for the automotive electrification market, with the aim of putting the UK at the forefront of the energy storage market.

Inenco’s latest research found that by 2030, it will become common practice for Utilities Managers to use EV battery storage to buy and store cheaper energy. By purchasing energy while prices are low, businesses can make savings by storing that energy for use when prices rise. As the cost of batteries decreases – it’s predicted that a battery pack will cost around $190/kWh by 2020, and this will decrease to $100/kWh by 2030– businesses should regularly review the commercial viability of battery storage in their business.

Demand side response (DSR) will also become increasingly important when it comes to balancing the grid. Businesses of all sizes can get involved in DSR schemes, as smaller businesses can join a ‘Virtual Power Plant’ (VPP), which pools flexible demand and distributed generation and then dispatches it to help balance the grid. There are a number of schemes available, and many of them pay businesses simply for being available to turn their consumption up or down, even if they’re not called upon to do so.

Next steps

While businesses are unlikely to see the impact of falling renewable costs on their bills for some years yet, if they can help to tackle some of the challenges of an increasingly intermittent supply then they could see significant returns.

Any size businesses can benefit from getting involved in DSR schemes if they join a VPP, and for those that don’t know how to get started, we can help! For larger businesses with greater consumption, DSR schemes can be even more lucrative, and you may find that battery storage provides a substantial ROI. If you’d like to find out more about how to optimise your energy strategy, call us on 08451 46 36 26 or email