A NIMBLE APPROACH TO ENERGY MANAGEMENT

What do we mean by Flexibility?

How flexibility can help you navigate energy price volatility

Traditionally all energy was bought at a fixed price at contract renewal. Volatility in prices however stimulated the use of longer-term market prices through flexible contracting, and skilled trading teams picking opportune moments to lock in commodity prices. All companies large or small have been able to access flexible contracting arrangements either through bespoke risk management solutions or collective purchasing groups.

Flexibility arrangements enable businesses to adjust their consumption volumes close to delivery in order to benefit from market movements or avoid punitive supplier costs.

Will this hinder renewable procurement?

Impact oN renewable energy growth

Is there any UK legislation for energy flexibility?

GREAT BRITAIN Flexibility development roadmap

The need for more connectivity to renewables, that are offshore or in remote areas that the GB grid was never designed for, has led the government to consider how to minimise costs to all energy consumers. The presumption that buyers of electricity will be prepared to change their consumption patterns driven by pricing has been key to proposed changes to the underlying regulatory and structural functioning of the market.

The government is currently undertaking an industry consultation and is likely to legislate to move from national balancing to local or nodal pricing points, with potentially large commodity price differentials across the country by the end of the decade. This would be the biggest change to the traded market in 25 years.



In addition, they want to encourage buyers to reduce consumption at points of demand in local networks where the system will be known to be under stress to mitigate the need for expensive grid system bolstering and to prevent outages. Localised flexibility demand reduction contracts have started to be auctioned via regional Distributed Network Operators. These will be increasingly important as a tool for larger consumers as part of their overall price management approach to mitigate risk and gain additional revenue streams as they proactively manage consumption.

Could onsite renewable energy generation be the answer?

Eliminate price volatility with renewable energy

In addition to reviewing how energy purchasing and consumption need to be managed, larger consumers with suitable facilities should be considering onsite generation and load shifting through battery energy storage technology.



Large intraday price differentials for those on flexible purchasing arrangements which include short term price management tools, could see opportunities to reduce or shift consumption and eliminate price volatility at certain points of the year. This presents both a financial opportunity but also the chance to help balance the system as we collectively strive for a low carbon economy in the UK. 

What does the future look like for energy consumption?

THE NEXT DECADE OF CONSUMPTION & COSTS

The management of energy consumption and commodity costs in the next decade is going to look very different to the historical buy and forget approach. Consumers should assess the opportunities and risks that will arise from Flexibility, and while gearing up for net zero-related investments, ensure that business models are adapted to a world of predominately renewable generated electricity.