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On-site generation on the agenda

22 September 2011

With long-term forecasts suggesting energy costs will continue their upward trend, businesses are increasingly looking at ways to both save money and ensure security of supply.

Staples anaerobic digestion plant (see case study)

While on-site Energy Generation Projects are by no means a new development, a combination of factors means they are an increasingly attractive option.

On top of rising energy prices, penalties and incentives aimed at reducing carbon emissions and internal pressures to demonstrate sustainability are seeing more businesses exploring on-site renewable energy projects. As well as the potential to reduce costs such projects can provide a valuable new income stream from any excess energy exported from site.

The Government’s support for the expansion of smaller-scale distributed generation through schemes such as the Feed-in Tariff and Renewable Heat Incentive also provides guaranteed returns.

Energy entrepreneurs

David Taylor, Deputy Vice President Sales and Marketing for SmartestEnergy, the UK’s leading purchaser and supplier of electricity from independent generators, believes interest in onsite generation is now coming from a much wider range of potential energy entrepreneurs.

"On-site generation used to be generally limited to large manufacturers but we are now also seeing increasing numbers of smaller companies looking to establish their own projects," commented Taylor. "The introduction of the Feedin Tariffs has played a significant role in providing greater security for businesses thinking of developing their own generation project. Under the scheme they can earn a generation tariff for the energy they produce even if they use it on their own site."

A wider range of on-site generation plants are also coming on stream. Many earlier projects were natural gas combined heat and power (CHP) plants but recent years have seen increasing numbers of renewable on-site projects. This is in part due to legislation aimed at encouraging sustainable energy production as well as the pressure to cut carbon footprints.

On-site generation can also be a highly costeffective way of dealing with waste material which is often able to provide a ready supply of fuel.

Generating new income streams

High energy prices and associated costs mean that businesses with on-site generation not only save more through buying less power from the grid but can also receive additional income from selling excess power.

Independent generators can sell their energy directly to end user consumers or to a licensed electricity supplier. The added complications and credit risks of selling direct to consumers means most on-site generators opt to sign a Power Purchase Agreement (PPA) with an electricity supplier such as SmartestEnergy.

PPAs can be for short or long term periods and range from simple fixed priced arrangements providing price certainty and a guaranteed level of income, to highly flexible contracts designed to maximise opportunities in volatile markets. PPA contracts can also be structured to satisfy funding conditions from lenders supporting an investment in a project.

While many businesses have successfully secured funding and developed their own on-site generation projects, there are also options to share risks with project developers or for others to take on all of the capital outlay.

For example Wind Direct, the on-site generation arm of leading renewables developer Wind Prospect, offers to develop and operate projects in return for a business leasing the land for the turbine and buying the electricity needed on a site.

Wind Direct works with SmartestEnergy on a number of sites including Solutia Chemicals (UK) in Newport, the largest on-site wind generation project in Wales with two 2.5MW wind turbines supplying up to a third of the company’s needs.

SmartestEnergy’s David Taylor predicts this kind of generation will continue to show strong growth in the years ahead.

"The environment for energy entrepreneurs in the UK is increasingly favourable and with continued pressure on businesses to reduce their costs and cut carbon emissions, on-site generation can prove a very practical solution."

Case Study

Staples Vegetables, which supplies many of the UK’s leading retailers with high quality brassicas, sprouts, cauliflowers and cabbages, has invested in an innovative anaerobic digestion plant which uses out-ofspecification vegetables.

The Boston-based grower is now able to produce 11 million kilowatt hours of electricity per year from the £6.5m facility which is capable of processing 40,000 tonnes of vegetables.

As well as generating electricity which is used on site, the process generates heat used for offices on the site and to chill processing areas via heat absorption coolers. Excess power is sold into the grid under a Power Purchase Agreement with SmartestEnergy.

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