As we seek to embrace the potential of renewable energy, electricity grids are becoming increasingly reliant on mutually beneficial relationships between user, technology and local regulations. The financial and environmental incentives on offer are very compelling, and the manufacturing sector is perfectly positioned to reap these rewards.
For the second consecutive year, the T-4 Great Britain Capacity Market auction has cleared at a new record high price of £65,000 per MW, underlining the importance placed on this virtual safety net that protects the electricity grid from black-outs.
Introduced by HM Government in 2014, the Capacity Market is a last line of defence that, thus far, we have never had to resort to. Nonetheless, participants are paid for enabling this essential service, irrespective of whether there is a grid emergency or not.
Who are these hidden heroes that keep the lights on? Most are hiding in plain sight. In fact, any business with high energy consumption and the ability to temporarily reduce the power to non-essential process or switch to a back-up power supply, can help to create a more resilient electricity grid. And a more resilient grid means a more resilient economy.
The Capacity market also plays an important role in the journey to Net Zero. As we seek to embrace the huge potential of renewable energy, imbalances in supply and demand can occur due to the intermittent nature of wind and solar electricity generation. In the past, fossil fuel power plants have been our go-to solution to restore balance on the grid. However, this is a highly costly and carbon intensive answer to a problem that the Capacity Market can help to solve more efficiently.
For example, common manufacturing processes and infrastructure, such as freezing, heating, HVAC and compressors, offer opportunities for temporary energy reduction making those businesses ideal for Capacity Market participation. Through the Capacity Market, they are incentivised to sell this energy flexibility. In doing so, the revenue earned helps to insulate them from the impact of energy market volatility and to maintain a competitive cost base. In some cases, the additional revenue is used to fund projects that advance the businesses Net Zero and ESG commitments. Ultimately, Capacity Market participation helps to protect energy security and business continuity for us all.
