The Retailer Winter Edition 2022

THE RE TA I L ER

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MITIGATING YOUR EXPOSURE TO THE ENERGY MARKET

Lisa Bunting Business Development, Energy and Technology Arcus FM

N ot every KWH is the same. Facilities Management without accounting for energy price fluctuations can be catastrophic in a retail estate. Cost savings made in energy efficiency or optimi sation can far outstrip main tenance savings. However the two are inextricably linked. The price paid for a kWh depends on geograph ical location, time of day and the type of energy contract you have. Therefore, maintenance should be scheduled to take account of energy price implications. In business there is nothing more stressful than uncertainty; watching costs spiral that are beyond your control. Yet in 2021we observed exactly this volatility in the energymarket. This article aims to explore ways that we can miti gate our exposure to higher energy costs and indeed take advantage of flexible energy usage. In 2021, it seemed like power system price records were being broken month on month. Energy trading on the wholesale market was extraordinary. On 2nd November last year, the maximum system price (intraday) reached £3916/MWh and the minimum on 7th Novemberwas -£70/MWh. Most business supply contracts are based on the day ahead market but even this reached a maximum of £307/MWh on 15th November, which is quad ruple the value of November 2020. Energy suppliers that couldn’t cope with these violent price swings have collapsed. The cost of balanc ing the gridwas higher than projected, leading to formal investigations all whilst the carbon price (EUAs) continued an upward trajectory of €75 per tonne with a prediction of hitting €100 per tonne by the end of 2021. Furthermore, gas prices soared roughly by 57% in 2021 with a high of £452 per therm in December amid dwindling inventories, insuf ficient supplies from Russia, and colder than usual weather. Upside risks also came from rising geopolitical tensions in Eastern Europe and delays in the approval of the Nord Stream 2 pipeline.

So how can we help to mitigate this exposure in the future?

If your energy contract is flexible, many sup pliers will allow you to sell back energy when the system price goes high and create reve nue. There are also many demand response schemes you can participate in, by flexing your energy consumption. Working with a partner that understands your energy contract, your assets performance/maintenance and has the technology to respond quickly and manage global commands is vital. Local generation advantages — Onsite gen eration (preferably renewable), reduces your exposure to non-commodity costs included in your grid contracts. Monitoring generation and detecting degradation quickly is key to your ROI. Operations and maintenance must be agile and adaptable to multiple moving variables – requiring a vast amount of data and secure logics to process it. Digitisation, big data and modelling — Of course, different assets have an energy inter relationship and for that we need modelling. For example, comparing an increase in store temperaturewith the additional energy require ment of supermarket refrigeration. Thankfully, digitalisation means we can monitor this data, use logics to predict savings and send energy strategies to assets securely, whilst providing feet on the ground to maintain these systems and avoid operational disruption. In summary, the volatility we’re seeing in the energymarket is a storm to beweathered. But where businesses take the time to understand their estates, embed real-time monitoring across their assets, and are proactive inmaking maintenance and investment decisions sup porting renewable on-site generation, then they will succeed. Arcus FM works in true partnership with cus tomers to ensure their retail estates’ energy consumption is monitored, reported, and reviewed in real-time. To learn more about our integrated FM services please visit arcusfm. com/services/

Be Efficient and monitor — Baselining con sumption and seekingways to be more efficient can reduce the number kWh used or wasted. Keeping up your planned preventative main tenance schedule for machinery and building fabric inspections is essential. Use an inde pendent company to monitor and champion individuals in the organisation to instil a strong culture of energy preservation. If you generate on-site, performance monitoring at a granular level is crucial because for every minute of non-generation you will have to pay for grid electricity. Understand your assets — Can your assets be optimised to use less energy through more efficient motors, adjusting temperature set tings or by adding sensors to ensure energy is used only when necessary? Leveraging dig ital telemetry from these sensors provides scope for predictive maintenance and devising algorithms for remote monitoring to minimise energy consumption. Understand your flexibility — Can your plant be flexed to use energy at different times of the day without affecting operations to avoid power price peaks? Many companies will have considered flexibility as part of Triad or DUoS avoidance. When flexing systems, it is vital to have resilience and maintenance regimes in place to bring equipment back online safely, without costing you more overall. Under the Targeted Charging Review, the recovery of DUoS charges will move to a newfixed charge fromApril 2022, meaning the value recovered through the existing red/amber/green rates will fall significantly. If you can flexibly shift production schedules, avoiding the 4-7pm weekday peak times at your operational sites is beneficial until then. From1st April 2023 (subject toOfgemapproval), the recovery of TNUoS charges will move to a fixed charge, which will remove the value in Triad Avoidance. TNUoS charges vary on a site-by-site basis and through a banding struc ture developed by National Grid. Most energy suppliers and/or brokers run Triad Warning Alerts throughout the Triad Seasons to assist with operational planning and avoiding Triads in this final season.