How the clock change impacts UK energy demand

The clocks are scheduled to go back one hour this Sunday 27th October. The change will cause an obvious shift in usage of the electricity system as evenings draw in earlier in the day.

It also accelerates the seasonal trend towards higher demand during the colder, darker winter months, placing increased pressure on power margins. This can lead to spikes in electricity prices, should supplies struggle to meet the higher demand.

 

Jump in demand decreases as overall downward trend continues

As forecasts currently stand, the average peak demand for the week following the clock change will be 4.4% higher than the week before. Consumption is expected to rise by almost 2GW as lighting usage increases during the traditionally higher post-work demand period.

 

Average Weekday Peak Demand Weekly average before Clock Change (GW) Weekly average after Clock Change (GW) Difference (GW) Increase (%)
October 2019 (Forecast) 38.9 40.6 1.7 4.4%
October 2018 40.0 43.6 3.6 9.0%
October 2017 40.7 43.7 3 7.4%
October 2016 42.2 44.8 2.6 6.2%
October 2015 43.9 45.2 1.3 3.0%
October 2014 43.0 44.0 1 2.3%

 

However, the forecasted rise in average peak demand in 2019 is lower than in recent years. Notably 2018 which saw the highest percentage change, as consumption rose by almost 4GW week-on-week.

Overall peak power demand has been dampened marginally this year, with consumption after the clock change peaking at 40.6GW on average, 3GW lower than last year. This reduction can be attributed partly to half-term school holidays, which fall on the week either side of the clock change depending on school catchments. Higher renewable levels have also contributed to reductions in demand.

The ongoing trend in reduced energy consumption year-on-year continues, meaning that demand is rising from a far lower base. Improvements in energy efficiency have been helping to reduce electricity use over the last ten years. A large part of the reduction in peak demand has been the use of new technology, resulting in smart and more efficient appliances, able to do more with less.

Expected demand before this month’s clock change is 5GW lower than the highest peak in 2015. Furthermore, the forecasted post-clock change peak is the lowest on record.

 

Graph displaying electricity demand during the clock change

The role of renewables

The increase in wind and solar capacity in recent years has contributed to the overall demand reductions. Higher volumes of on-site renewable capacity allow more generation to be provided off-grid as homes and businesses generate their own electricity supply during windy or sunny spells. This reduces demand on the national transmission system. The high levels of solar availability during the summer season were a particularly strong influence on demand levels this year as on-site solar panels increased embedded generation. This reduced demand requirements for the transmission network.

Wind power continues to deliver a growing percentage of the UK electricity mix. By the end of September 2019, the UK’s fleet consists of over 10,000 wind turbines with a total installed capacity of over 21.5GW. Overall wind generation in the UK has so far been 33% higher through 2019 than over the same time period last year.

 

Graph showing monthly wind generation

What happens when there’s no wind?

While high winds have the capability of cutting power demand, one of the biggest dangers to the National Grid electricity network is a high demand scenario, at a time when wind output is very low.

Lighting has a bigger impact on electricity demand than heating, as the majority of home heating is gas-fired. However, during severe cold snaps, electricity demand does spike as additional heating is needed to cope with the very low temperatures. This scenario occurred during the Beast from the East cold snap in February last year. However, robust winds provided high levels of low cost electricity to the grid.

A lack of wind would see supply margins placed under significantly more stress during a similar cold snap this winter. This would require additional supply being provided by gas and coal plant or imports to make up for the increased demand. Such a scenario is likely to require significant price rises in the Within-day and Day-ahead markets.

The National Grid’s Winter Outlook for 2019/20 expects that there will be a sufficient supply margin to accommodate a wide range of security of supply scenarios. However, the organisation’s statistical 1-in-20 peak demand forecast predicts a demand of 499mcm/d, greater than the highest recorded gas demand. This is an unlikely scenario, but demonstrates how a period of high demand and low renewable availability could coincide to increase short-term prices.

An end to the clock change?

There have been proposals dating back to 2015, from members of the European Parliament, to end summer time observance. In September 2018 the European Commission proposed an end to seasonal clock changes, asking that member countries decide by March 2019 which time they would observe year round. The proposal was approved in March 2019, by 23 votes to 11. However, the start date has been postponed until 2021 to allow a smooth transition.

The United Kingdom is due to leave the EU before the reform becomes effective, meaning that it would be left to the government to make their own decision on observing summer/winter time. If continued, Northern Ireland would have a one-hour time difference for half the year with either the Republic of Ireland or the rest of the UK. The House of Lords launched an inquiry in July 2019 to consider the implications of this, with a call for evidence ongoing.

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Climate Emergencies and Net Zero – what you need to know

Global scientific data supports action

The action follows a highly critical 33 page report publicised in 2018 by the Intergovernmental Panel on Climate Change (IPCC). The IPCC is the United Nations body for assessing the science related to climate change.

The report focused on the impact of limiting global warming to 1.5°C. Limiting warming to 1.5°C rather than 2°C significantly reduces the climate change risks according to Professor Jim Skea, who co-chairs the IPCC.

What’s alarming is the scale of the challenge ahead of us to ensure we achieve these targets and do not allow the situation to escalate further.

Five steps to achieving the 1.5°C have been announced:

  1. Global emissions of CO2 need to decline by 45% from 2010 levels by 2030
  2. Renewables are estimated to provide up to 85% of global electricity by 2050
  3. Coal is expected to reduce to close to zero
  4. Up to seven million sq km of land will be needed for energy crops (a bit less than the size of Australia)
  5. Global net zero emissions by 2050.

Paris Agreement

The Paris Agreement brings together nations towards a common cause to undertake ambitious efforts to combat climate change. It was originally signed by 196 countries back in 2016.

In line with the IPCC report its core aim is to keep the global temperature increase this century well below 2°C above pre-industrial levels. In particular, to pursue efforts to limit the temperature increase even further to 1.5°C.

2019 – a watershed year for climate change?

Together with the impact of Greta Thunberg – the 16 year old Swedish activist – there have been a number of key factors driving the climate change movement this year. At Glastonbury festival in June 2019, 2,000 festival goers joined protestors to stage a procession across the site.

At the United Nations Climate Action Summit in late September you may have missed the news that Russia, the world’s fourth largest polluter will finally join the agreement. This announcement was overshadowed by the stirring “You have stolen my dreams” headlines surrounding Greta Thunberg’s appearance. Hailed as “the voice of the planet” she’s already been nominated for the Nobel Peace Prize.

Despite the raised awareness there are real fears that most of the world’s biggest firms are ‘unlikely’ to meet the targets set. Only a fifth of companies remain on track according to fresh analysis by investment data provider Arabesque S-Ray. Of 3,000 listed business only 18% have disclosed their plans.

UK reaction

In reaction to the IPCC report, UN Paris Agreement and other related research findings and movements, the UK public sector is taking positive, proactive steps to mitigate climate change risks.

Councillor Carla Danyer led the charge in Bristol by first declaring a climate emergency and this has sparked a wave of similar responses.

In June 2019, the UK became the first major economy to pass a net zero emissions law. The new target will require the UK to bring all greenhouse gas emissions to net zero by 2050. Net zero means any emissions would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere, such as planting trees or using technology like carbon capture and storage. Other countries setting similar targets include Ireland, Denmark, Sweden and France as well as the US state of California.

Many UK councils, NHS Trusts and universities have publically declared their long term targets. Some aiming for speedier action by declaring net zero 2030 targets. These include Ipswich Borough, Vale of Glamorgan and Telford & Wrekin councils.

Unsurprisingly, Bristol University is one of the leading educational facilities leading the way. To date they’ve cut carbon emissions by 27% and are well on their way to achieving their target to become carbon neutral by 2030. The University of Cambridge, along with others, has set a net zero target of 2038 and has announced it is adopting science-based targets. On one website – climateemergency.uk – 228 councils are listed as having signed up to the targets.

In Boris Johnson’s first speech as Prime Minister, he affirmed the UKs commitment to a net zero future. Johnson proclaimed “Our Kingdom in 2050… will no longer make any contribution whatsoever to the destruction of our precious planet brought about by carbon emissions,” he said. “Because we will have led the world in delivering that net zero target.”

Steps towards a better future

According to the Centre for Alternative Technology (CATs) Zero Carbon Britain research a modern, zero emissions society is possible using technology available today.

Below we’ve outlined some key initiatives that can help the UK achieve its net zero ambitions:

  • Businesses implementing science-based targets.
  • Improving built environment efficiencies. Upgrading old buildings and ensuring new buildings must meet higher energy efficiency standards.
  • A shift to electric vehicles and the continued battery storage revolution.
  • Decentralised energy. Home and local energy generation.
  • Shift to renewable energy sources.
  • New policy.

The Aldersgate Group issued a green policy manifesto to Boris Johnson on 1 August 2019. They are a politically impartial, multi-stakeholder alliance championing a competitive and environmentally sustainable economy. Members of the group include Friends of the Earth, BT, M&S, Tesco, National Grid and Sky. Their green manifesto focuses on 4 key areas for the government to take decisive action and provide greater policy detail:

  • Delivering a Clean Growth Strategy Plus (CGS+) that matches the ambition of the net zero target. This should consist of a targeted update to the existing Clean Growth Strategy to increase ambition where required (for example on zero emission vehicle roll-out). Plus it should incorporate concrete policies that accelerate private sector investment to decarbonise priority sectors. These include surface transport, buildings and support the competitiveness of industry during this transition.
  • Passing an ambitious Environment Bill that safeguards environmental protections currently enshrined in EU law. They believe it must set ambitious and legally binding targets for environmental improvements in line with the vision of the 25 Year Environment Plan.
  • Implementing the Resources and Waste Strategy, through the introduction of detailed regulatory measures and fiscal incentives that drive greater resource efficiency and cut waste across the economy.
  • Building on the Green Finance Strategy, to rapidly grow private capital flows into the green infrastructure required to deliver the UK’s net zero target and the objectives set out in the 25 Year Environment Plan.

Our view

At EIC we believe new government policy is one of the most important steps needed to turn sentiment into action. Legislation relating to major energy users such as ESOS and SECR are steps in the right direction but they aren’t enough. Without doubt more effective policy is needed, to not only ensure energy and carbon is measured, but also that carbon reduction strategies are developed and implemented across the UK. Too often business cases for energy and carbon reduction are created and filed, never to be signed off.

Be prepared for Triad season

A crucial time in the UK energy calendar, Triad season, begins in just a matter of weeks. The Triad season runs from 1 November to the end of February. Three half hour periods during this phase are used to calculate transmission charges for the entire year by National Grid. This is part of the Transmission Network Use of System (TNUoS) scheme. If your electricity contract allows it, reducing your demand at these specific points will result in lower transmission charges. However, knowing when Triads occur is a complex business.

To help our clients, EIC provides a Triad Alert service. We have successfully forecast each of the three Triad periods for the last 7 years. By predicting Triads each winter, EIC has saved customers millions of pounds in transmission charges.

WHAT ARE TRIADS?

Triads are three half-hour periods with the highest electricity demand between 1 November and 28 February. Each Triad must be separated by at least 10 clear days. This means consecutive days of high demand won’t result in multiple Triads.

A NEW LOW?

The 2018/19 Triad season saw electricity demand fall to a new all-time low. Peak electricity demand for the three half hour periods averaged 45.6 GW, with the third Triad occurring as demand was just 45.0 GW.

By comparison in 2017/18 average demand for the Triads was 47.5 GW. Maximum Triad demand has fallen by over 11 GW (~20%) in the last ten years. This reflects an overall trend towards lower electricity consumption. Major advances in technology and energy efficiency for appliances, as well as a move to smarter lighting are contributing to sustained year-on-year demand reduction.

EIC historic Triad demand graph

This trend provides an opportunity for an even lower Triad figure this year. Weekly peak power demand during 2019 has so far been lower than its equivalent week from 2018 on two-thirds of occasions.

EIC power demand Triad graph

Greater role for wind

Another factor contributing to the decline in demand is the increase in installed wind capacity over the past decade and the increasing share of the fuel mix secured by renewable generation. The latest BEIS figures from Q2 2019 showed renewables capacity rising 8% year-on-year, with its share of the fuel mix reaching new highs of 35.5%.

Most of this capacity is connected to the Grid so does not impact demand. However, around 6 GW (~30%) of wind capacity is embedded – it is connected to local distribution networks. As a result, it can influence outturn demand. Each MW of embedded wind generation is a MW of demand which otherwise would need to be provided by the transmission network. Therefore on days of high wind generation there may be a reduction in demand, triggered by the extra embedded wind levels. Average embedded wind output has increased by more than 1 GW over the past 10 years, contributing to the steady trend in demand reduction.

Last year the level of embedded wind generation varied by 3 GW, depending on nationwide wind conditions. This led to a demand swing of the same amount. This is having a growing influence on Triad forecasting as the increasing demand swing reduces the risk of a Triad occurring on days with high wind output. As a consequence, Triads are more likely to occur on days of very low wind generation. This was the case last year when each Triad occurred on a day with less than 1 GW of embedded wind generation.

HOW MANY MORE TRIADS?

The success of Triad avoidance in reducing costs for the end user has forced regulator Ofgem to undertake a change to the charging methodology for distribution costs. A consultation launched in December 2018 proposed changes which could remove the incentive for Triad Avoidance.

The Targeted Charging Review aims to introduce a charge that Ofgem considers is fair to all consumers and not just those able to reduce consumption during peak periods. Under current proposals, Triads would change to a fixed or agreed capacity, eliminating the need for avoidance in the future. Ofgem originally nominated a deadline for the reforms for April 2020. However, a recently released updated timeline has indicated that the regulator is now aiming for an implementation date of April 2023. As a result, it is possible that there will be a maximum of four winters remaining available for Triad forecasting, including the upcoming season. The removal of the Triad scheme will increase costs for business that currently benefit from Triad avoidance.

EIC TRACK RECORD OF SUCCESS

EIC has an in-house model which has successfully forecast every triad period for the last seven years. We provide clients with comprehensive alerts advising when a Triad is forecast, so they can reduce consumption accordingly.

Our Triad Alert Service forecasts the likelihood of any particular day being a Triad and sends alerts before 10am. This allows businesses to take informed action to avoid high usage during these half-hour periods. It also minimises disruption to their everyday activity. We monitor the market throughout the day and in the event of significant change will send out another alert in the afternoon. The daily report includes foresight of the next 14 days alongside a long-term winter outlook allowing clients to plan ahead.

Calling an alert every weekday would generate a 100% success rate, however we recognise the negative impact this could have on our clients. Organisations would incur major damage to revenues if required to turn down their production each day for 4 months ‘just in case”. At EIC our aim is to provide as few alerts as possible.

Last year we successfully predicted all three half-hour periods. The only tracked TPI or supplier which issued fewer alerts than EIC failed to predict all of the Triad periods.

HOW WE CAN HELP

We have helped hundreds of clients avoid these transmission costs by providing them with the tools needed, giving EIC an enviable track record in Triad prediction.

For those that took action last year, demand was cut by an average of 41% compared to standard winter peak-period half-hour consumption.

This resulted in significant cost savings, with clients who responded to our Triad Alerts saving on average £180,000. The best result last winter saw a client saving just shy of £1 million in TNUoS charges.

The Triad season begins on 1 November. To find out more about our Triad Alert service click here or call 01527 511 757.

ESOS Phase 2 – Deadline Approaching

By this date (5th December 2019) all companies that qualify for ESOS must have submitted notification of their compliance with the Environment Agency (EA) or risk enforcement action. There is still a considerable amount of work to do to ensure that all of the ~10,000 qualifying organisations are fully compliant.

Penalties for non-compliance are high

Fines for non-compliance could be severe and scheme regulators will issue fixed penalties for a variety of offences. These include:

  • Failing to notify of compliance or to maintain sufficient records (up to £5,000)
  • Failing to undertake compliance activities or making misleading statements (up to £50,000 plus £500 per day up to 80 days)

Businesses that are subject to a penalty will have their details published online.

An arduous task if not prepared

In order to ensure compliance, businesses need to calculate their total energy consumption; this can be an onerous task if sound internal data collection processes are not already in place. Appropriate compliance activities should then be completed covering significant energy consumption or 90% of total energy consumption. Finally, ESOS compliance must be reviewed and signed-off by a qualified Lead Assessor, of which there are a limited number.

Environment Agency external audit

ESOS compliance is subject to an external audit by the Environment Agency (EA). As such it is critical for businesses to ensure compliance activities are delivered to a high standard. In ESOS Phase 1, the Environment Agency audited approximately 1 in 20 businesses that notified compliance. Many of the enforcement penalties related to maintenance and accuracy of records.

Leniency is unlikely

Regulators are less likely to be lenient in this phase of ESOS than they were in Phase 1. This applies to both late compliance and the standard of compliance activity such as energy audits. The deadline is in just two months and businesses that qualify still have an opportunity to ensure compliance, although quick action is required.

The benefits of ESOS

If engaged with effectively, ESOS serves as an excellent way for businesses to identify ways in which they can reduce their energy consumption as well as associated costs and carbon emissions. EIC have engaged with many businesses that have implemented energy saving opportunities following their ESOS Phase 1 compliance activities.

Why choose EIC?

Whether it’s ESOS, SECR, or CCAs, EIC will work with you to reach compliance deadlines and targets. In Phase 1 of ESOS our team identified 2,829 individual energy efficiency opportunities, equivalent to 461GWh or £43.9m of annual savings across 1,148 individual audits. We also helped over 300 ESOS Phase 1 clients avoid combined penalties of over £48m, based on maximum fines.

To find out more about how we can help you comply and implement recommendations post ESOS compliance, call us on 01527 511 757 or email esos@eic.co.uk

The Energy Awards Shortlist Success

Category 1 – Energy Buying Team of the Year

We’re here to simplify the process of buying and managing energy. We match clients with the right contract for their business. The Energy Awards recognised our success in this field and have shortlisted EIC for Energy Buying Team of the Year for our flexible procurement offering.

Flexible Procurement

Our flexible purchasing solutions begin with a strategy development workshop with our clients. We conduct a detailed discussion of the client’s business objectives and appetite for risk, seeking to identify their key priorities for the contract. We also review their current situation and any upcoming projects that could affect their portfolio or consumption.

Public Sector Portfolio

Our Public Sector Portfolio is an OJEU compliant group flexible purchasing solution. It adds value by removing the administrative burden faced by public sector organisations when procuring contracts, and reduces the timeframes when securing their supply agreement. This has proven a real hit with universities, councils and NHS Trusts.

A team effort

There are multiple teams working collaboratively to make the flexible procurement service a success. Our clients are fully supported throughout the procurement process with a dedicated Account Management team. Traders work within the parameters of a client’s strategy making decisions based on insight from our Market Intelligence team.

Trading success

In just one week our flexible procurement traders locked in a massive £343,000 for our flexible procurement clients. In fact in a single month – March 2019 – savings topped £771,000. What’s more, calendar year savings have exceeded a staggering £2.1million for the period January – August.

Category 2 – Energy Data Collection and Analysis

Our shortlist for the Energy Data Collection and Analysis award focuses on our 360 Strategic Energy Review along with our Triad model and alerts.

360 Strategic Review

Our 360 Strategic Review is a powerful data tool created to unearth hidden savings potential for our clients. We take half-hourly data and analyse it on a site-by-site basis. We focus on where reductions in usage can be made and the associated cost savings. It looks at shifting consumption to avoid the peak Distribution Use of System (DUoS) charges, reducing consumption in the winter to mitigate Transmission Network Use of System (TNUoS) charges, and assessing usage against operational hours to identify out of hours wastage. On average we’ve identified savings of £130,639 per customer so far.

Triad model and alerts

National Grid identifies three Triads each year in order to calculate the Transmission Network Use of System (TNUoS) charges an organisation will incur. Such transmission costs can be reduced if demand is decreased when a Triad is expected. Our Triad model and alerts help clients plan their electricity usage around these dates in order to lower their energy bills.

Our model used from 1 November to the end of February,  identifies which days and what time periods on those days could be a Triad. We then inform our clients using our alert service whether they need to take action to reduce demand and avoid a Triad. We have issued an alert on all three Triad dates for the past 7 years. Last year we issued 24 alerts compared to suppliers who had similar results issuing on average 29 alerts. It’s vitally important for us to issue as few alerts as possible to avoid any unnecessary client interventions.

Awards Ceremony

Our teams work really hard every day to ensure our clients get the right solutions for their businesses. It’s great to have been recognised for our efforts. We’re looking forward to the awards ceremony which take place on Thursday 21 November at the London Hilton on Park Lane. We’ll keep you posted on our success.