The energy emergency: energy rationing a real possibility

Posted on 5 Jun 2013 by Tim Brown

Over the next decade, unless something is done very quickly to speed up construction of energy generation infrastructure, there is a real possibility that energy may need to be rationed.

Britain risks running out of energy generating capacity in the winter of 2015-16, according to the energy regulator Ofgem.

Brown outs (an intentional or unintentional drop in voltage used for load reduction in an emergency) could spell the end of 24 hour operations with domestic users likely to take precedent over industrial energy users at peak times. And prices are set to sky rocket by as much as 70% within the next five to seven years as demand outstrips supply.

Its report predicted that the amount of spare capacity could fall from 14% now to only 4% in three years. Ofgem  blames the risk on coal-fired power stations being closed sooner than expected and EU environmental legislation and says this would leave Britain relying more on imported gas, which would make price rises more likely.

The government has said that its Energy Bill, which passed the House of Commons yesterday, will ensure that there is secure supply. But with a strike price agreement to stimulate the construction of renewable and new nuclear power generation infrastructure still yet to be decided, and a failture to extend carbon targets beyond 2025, this promise seems quite hollow.

As dim, pun intended, as the prospect of a future deprived of free-flowing electricity may seem, it is not a fait accompli.

Dr Nigel Davies, manufacturing and technical director at malt products producer Muntons
Dr Nigel Davies, manufacturing and technical director at malt products producer Muntons

Dr Nigel Davies, manufacturing and technical director at Muntons, and speaker at the upcoming Future Factory: Energy Conference 2013, has seen the benefits of an effective energy strategy first hand.

The company achieved 13th place in this year’s Sunday Times Green List and were the highest placed Food and Drink Company.

Since it launched its energy efficiency strategy 13 years ago, malt products producer Muntons has managed to steadily balance sustainable measures and decreased costs.

Following the introduction of the climate change levy in 2000 and the subsequent introduction of the company’s energy strategy, Muntons has reduced the company’s energy consumption by 12%. Taking into account energy cost inflation Dr Davies says this has equated to a saving of several million pounds.

“When we started off, we created a ten year energy plan and put pay backs next to all of those items and anything that required a payback below three years we tackled first,” says Dr Davies. “We then moved on to a number of cumulative small targets such as changing to higher efficiency motors, looking at leaks, and other similar projects.”

Muntons implemented energy monitoring and targeting at a cost of £100,000 and re-couped the investment in six months.
Muntons implemented energy monitoring and targeting at a cost of £100,000 and re-couped the investment in six months.

Dr Davies says the company then moved on to energy monitoring and targeting and the company identified leaks and erroneous readings which had not been detected by conventional testing. “It cost £100,000 to install but it certainly paid for itself well within a year, probably six months.”

From the information uncovered by the monitoring, Muntons undertook to revamp the process by which it heats its kilns which are involved in the final stage of the malt creation process.

“We switched from a hot water radiator to a type of heater called a Varicon. That was just over a million pound investment. The idea was that it would save 8% of gas but actually because it was such an efficient bit of kit, we didn’t have to pay the European green taxation on it so we saved the carbon credits. We were then able to also increase production because we could run the kiln much quicker. When you put all that together, it was a zero year payback project.”

Dr Davies says the company benefited from a time when carbon credits were valued at about 12 euros a tonne. Now the credits are priced at below four euros a tonne, which makes similar projects less attractive. But even aside from that, the increased productivity due the reduced cycle time was something the team at Muntons had not anticipated and which has proved to be a huge benefit to the company.

“Often you think you have factored in all the costs when you are doing the capital appraisal but that was one we hadn’t anticipated would have such a big impact because until you’ve got it in and running it is difficult to call.”

Davies believes that going forward companies involved in European carbon schemes are going to experience about a 20% increase in emission targets that will drive the price of carbon up.

“There has been talk for many years that carbon needs to be about 40 euros a tonne but it will take a while to get there,” says Dr Davies. “However, if it does, there will be a lot of projects that will be justified on selling the carbon credits.”

But what is the cost of going green?

“I get a bit fed up with people saying that ‘green initiatives always cost’,” says Davies. “I’ve heard that far too many times and I always counter that for us green always pays. We have never yet done a green project which hasn’t paid for itself. If you are careful in the way you invest then you’ll find that the green projects, no matter if it is waste or energy saving.”

The company has another project, which has been recently approved,  to install an anaerobic digester which will provide twenty-five per cent of our electricity on site. The project is expected to cost £5m but will turn the cost of taking sludge off-site (£750,000 per annum) into a £1.2m income in just over four years time.

Muntons has targets set for reduction in gas and electricity usage under the climate change agreement and is looking to to reduce its dependency on traditional grid electricity in an effort to reduce costs in the long-term and safeguard its supply.

“We’re looking to source wind power for one of our plants where one wind turbine would provide the entire electricity for our North Yorkshire plant. We were looking to put it on the land but there was local objection to that. So we’re now instead looking at buying the electricity which is generated a few miles away. That will be supplied by a company called Wind Energy Direct.”

But when it comes to cost, says Davies, it is not just about reducing energy use but also improving purchasing strategies. Admitting that Muntons is not a company particularly expert in the intricacies of  trading, he says the company works in this area with Schneider Electric, who are also speaking at the Energy Conference 2013.

“We decide at budgeting time the appetite for risk that we have got and the total value of our electricity and gas portfolio. This is something that companies tend not to do. They often think they can be more clever on the spot market.

“Instead of doing this we have set risk limits so that if the price hits the higher buffer level, it triggers a fixing of all the purchasing that we need. This means that once we have budgeted, we will never go above the maximum level that we budgeted for. That is a pretty good way of purchasing and a safer way of budgeting.”

Schneider has also acted as the agent to sell excess carbon credits when Muntons are not using them.

It is clear that more investment is needed in building fresh generating capacity in the UK. But it is entirely possible that government action will prove too slow to ensure security of supply for UK manufacturers. As such, companies need to work towards implementing their own energy strategy to assist to reduce the strain on existing infrastructure and to ensure their own energy supply is secure.


Need help improving your energy strategy?

The Future Factory: Energy Conference 2013 will give you practical ideas and strategies to design, develop and implement an effective energy strategy.  Through case studies and expert knowledge the conference will show the steps needed to create your own energy management route map, the core ideas for reducing energy consumption, how to improve their effectiveness  in energy procurement and provide insight into energy generation technology.

Keynotes, case studies and industry experts will provide deep understanding and knowledge in three key areas:

  1. Energy Efficiency
  2. Energy Purchasing
  3. Energy Generation Technologies

Interested in attending? Click here to register.

Book and pay before 14th June and SAVE £100* per delegate. Plus book two people to attend and receive a third place free.

*manufacturing delegates only