How to fight rising business energy costs: use battery storage.

How to fight rising business energy costs: use battery storage.

How are you preparing for a huge increase in your business energy costs? Because it’s coming.

After three quiet years, electricity prices are on the rise again. And at a pace similar to 2008 when oil shot up to nearly $150 a barrel and every other fuel followed in the wake.

Fortunately, this time there’s a new string ready for your energy-cost-control bow:

Battery storage.

That’s right. The latest commercial-grade battery storage can shield your business’s energy costs from rising prices. And we’re offering a free feasibility study to see if battery storage is right for your business.

But first, here’s a run-through what’s pushing up UK business electricity prices.

Electricity prices are rising in painfully large increments.

Energy is making headlines again for all the wrong reasons. Double digit price rises.

The biggest so far has been Npower’s whopping 15% increase to its standard consumer electricity tariff.

No I haven’t left out a decimal point. That really is fifteen per cent.

And they’re not alone. Scottish Power’s increase is 11%. EDF Energy’s 8.4%.

British Gas is holding off until August but the other energy suppliers will probably push up their prices soon enough. Not because they are in cahoots. The reality is they all face the same costs sooner or later.

Businesses face the sharpest energy price rises.

But 15% is not a patch on the price increases that have hit businesses. If you renegotiated your electricity supply contract after mid-2016, you know what I mean. That’s when the wholesale power cost started its fast and furious rise.

You feel changes in UK wholesale power costs quickly for two reasons:

  1. It accounts for some 45% of your electricity price.
  2. Suppliers base your price on the market rate on the day you ask for a quote.

As this chart shows, these wholesale power costs ended 2016 some 35% higher than they started the year. The bad news for your business energy costs is they’ve held up around the £50/MWh level so far in 2017.

Chart of UK wholesale power costs in 2016

Source: N2EX spot market prices 

(Want to know what’s behind that rise and why it’s unlikely to be a short-term spike? Read this explanation from EDF Energy.)

Alas that’s only half the story.

The other 55% of your business electricity price is made up of a bundle of third party charges. These mostly cover your business’s use of the grid and the cost of government schemes to decarbonise the UK’s electricity supply and ensure there is sufficient supply capacity in future. They’re often called non-energy costs or non-commodity costs.

They are rising quickly too.

Budget on a 27% increase in these costs over the next 2 years. That’s the recent forecast for medium to large businesses from the independent energy market analysis firm, Cornwall Energy.

Exactly how electricity suppliers factor changes in third party charges into your electricity price depends on their own forecasts.

Thankfully several suppliers make their forecasts available to their customers. Here is Smartest Energy’s. EDF Energy’s are in their Market Insight service. Npower’s are in their Risk Navigator service.

So you really need a new string to your bow.

Over the last few years falling wholesale costs have, by and large, balanced out the effect that rising third party charges have had on the prices you’ve received from your business electricity supplier.

UK wholesale power price fall for 3 yearss
Source: N2EX spot market prices and Ofgem data portal

But now every major cost within your electricity price is rising fast. And it looks unlikely that trend will relent any time soon. So the answer isn’t ‘find a better energy purchasing strategy to beat the market’. It’s find a new energy cost control technique.

Chart shows all components of UK business electricity price to rise dramatically

A new way to control your business energy costs: battery storage.

Rapid energy price rises can wreak havoc on business profitability. We believe businesses need to think differently to limit the damage in 2017 and beyond.

Thankfully there is an easy and cost-effective way to reduce your exposure to the worst of those cost increases. And not just for a year or two, but for the long term.

Commercial-grade battery storage.

This technology has come of age. It’s no longer just for utility-scale pilot projects like UK Power Networks’ installation at Leighton Buzzard. An investment of £18.7 million for a 6MW/12MWh battery that takes up three tennis courts is simply out of the league of most businesses.

Battery storage now presents a commercially viable energy cost management technique for a business premise that uses as little as 1.5GWh of electricity per year. That’s an annual electricity spend of roughly £150,000. Something you’d expect of a medium to large retail outlet.

For such a business, Tesla forecast an investment payback of less than 4 to 6 years (depending on where you are in the country) for its commercial-grade battery storage product: the Tesla Powerpack.

Tesla Powerpack, battery storage

Battery storage empowers your building to:

  1. Earn revenue through the premium demand response schemes such as FFR (Fast Frequency Response). Best of all, with batteries, you don’t have to change any on site practices to take part in demand response. That means you can easily overcome the usual opposition from your operations people. They often fear they will lose control of the electricity supply which will interrupt the business’s operations, whether that’s churning out goods or providing a service.
  1. Reduce the amount of electricity your site imports from the grid at peak times when electricity costs are highest. This technique of peak shaving shields your business from the electricity cost factors that are highest and rising fastest.
  1. Get a better return from solar PV panels. Not only can a battery smooth the output of your solar panels, but you can use more of the power you generate rather than exporting to the grid at lower rates than you pay for imported electricity.

There are other benefits too. The most obvious is dealing with the risk and costs of power outages.

For some businesses power cuts are more than an inconvenience for staff and customers. Take businesses that run manufacturing heat-based processes with narrow operational tolerances. In these cases, even a short power cut can lead to destroyed stock on the production line and extended down time to clean equipment of damaged raw material. Those are very real and immediate costs. And the opportunity cost of inconvenience exists too. The Powerpack can work as a site-wide UPS that provides an instantaneous back-up supply that can run for hours. That setup eliminates the risk of power cuts during production runs.

And the Powerpack is compact. You don’t need three tennis courts of spare land. A 210kWh Powerpack cell is about the size an American style fridge. Plus it can live outside.

Is battery storage right for you? Get a free feasibility check.

Last year Poweri installed the UK’s first Tesla Powerpack. We were so impressed with the technology and the speed of supply that we believe many businesses and renewable generators could easily add battery storage to their facilities.

Interested in seeing whether battery storage would suit your business? Give us a little electricity use data and we’ll give you an initial feasibility study free of charge.

Get your free battery storage feasibility study.

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