Stephan Marty, CEO, Wattstor

The world’s commitment to reducing CO2 emissions to fight climate change has fuelled a surge in renewable energy, particularly wind and solar power. Corporate investment in energy generation assets has accelerated rapidly in recent years, and it’s expected to increase at pace, driven not just by environmental concerns but also by the strategic and economic benefits renewable power offers businesses.

The movement towards onsite power generation has the capacity to reshape how companies think about and manage their energy needs, but as more businesses follow suit, how can renewable energy generation remain profitable and market resilient?

Using available renewable resources

Commercial and industrial organisations can benefit from onsite generation in a number of ways. After the initial investment has been paid, renewable energy generation assets have extremely low costs for producing electricity. Unlike fossil fuels such as gas or coal, there are no additional charges to source sunshine or wind. Once installed, the energy system can generate electricity at almost no expense, meaning that even at very low electricity prices, it is still profitable to generate renewable electricity onsite.

As well as a reduction in bills, businesses can benefit further by lowering their carbon emissions to support sustainability goals. They can increase their energy security by reducing their reliance on the grid for power, and any surplus electricity produced can be sold through a PPA, providing an extra source of revenue.

Too much of a good thing?

Considering all the benefits renewable energy can provide, it’s no surprise that 25% of businesses in the UK are investing in onsite power generation. However, as more companies join in and bring projects online, businesses need to consider any potential barriers that may arise when implementing an energy system.

At grid level, one potential challenge with renewable electricity generation is that it can’t be stored without the use of battery storage. Without it, the amount of electricity being generated and used needs to be balanced on a second-by-second basis. Businesses often have a PPA agreement to export any excess power into the market or to local businesses to support demand.

However, with an increased number of independent power generators exporting surplus power, the volatility of electricity prices has also increased over the past few years. We’re already seeing increased periods in Europe where the wholesale price of electricity is either zero or negative.

This is a phenomenon known as “solar price cannibalisation”.

Typically, solar price cannibalisation occurs during periods of high sunshine and wind, when renewable energy sources are abundant, or at times of low electricity demand such as on a Sunday or during the summer holidays.

If electricity prices are zero or negative, any electricity that is exported to the market and not locked into long-term PPAs has no value. In the future, this could mean securing a premium PPA could prove more difficult for generators.

Solar price cannibalisation could also make businesses less motivated to invest in onsite generation. If periods of zero electricity prices become more common, organisations may prioritise purchasing cheap or even free grid power at certain times, rather than focusing their investment on their renewable generation assets.

Investing in battery storage

Thankfully, there are relatively simple ways to avoid the negative consequences of solar price cannibalisation. One way to future-proof renewable energy build outs and maximise return on investment is to add battery energy storage. Adding battery storage means that the energy generated onsite can be stored and used at a later time to power operations, heat or cool business premises, charge EVs and more – rather than be sold to the market for little or no money.

Battery storage also allows businesses to store electricity for later use when simultaneous consumption and generation are not possible, such as during nighttime operations when there is no sunshine or on a sunny weekend when offices are closed. This reduces businesses’ need to rely on the grid for surplus electricity during periods of no energy generation. Additionally, battery storage allows for delayed exporting onto the grid to support peak demand.

Investing in renewable energy is essential to achieve zero emissions, and is the best way for businesses to mitigate the cost volatility of fossil fuels. However, when looking at the long-term return of a project, the cannibalisation effect should be considered. When investing in renewable energy, it is vital to consider battery storage as part of a whole system solution.

Although the upfront costs may be a concern, Wattstor’s fully funded energy systems enable sites to create significant savings, make money from electricity markets, boost their ESG credentials, and stabilise their electricity prices, all without risk.

Find out more about implementing renewable energy projects at https://wattstor.com/renewable-onsite-energy-guide/

This article appeared in the May 2024 issue of Energy Manager magazine. Subscribe here.