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Energy crisis hastens the need for companies to embrace sector coupling

Phil Kane

Monday Insight


The switch to electric vehicles will be a defining feature of this decade. Photo: Stock image

The switch to electric vehicles will be a defining feature of this decade. Photo: Stock image

The switch to electric vehicles will be a defining feature of this decade. Photo: Stock image

Europe’s energy markets are suffering from extreme malaise.

Symptoms range from geopolitical tensions to media reports of imminent power blackouts in Austria and Switzerland to price pressures that have forced some of the continent’s smaller energy suppliers to cease trading.

While blackout reports are overstated, it is fair to say that many businesses were unprepared for steep price hikes.

Data from Eurostat, the statistical office of the EU, shows how gas and electricity prices have remained remarkably stable for much of the past decade, particularly in the five years to 2019, so it’s easy to see why some complacency has crept in.

What’s causing the turbulence? The pandemic has caused unusual price fluctuations, which should begin to level out, but there is no quick cure for the ills that beset the European energy industry.

Natural gas prices have spiralled upward, rising to levels that have been as much as six times higher than they were a year ago.

Some of this is due to the reduced availability of gas due to higher usage during the prolonged cold weather across much of Europe last winter, with reduced gas supply from Russia also a constraint.

The outcome of all this is a considerable decrease in the EU’s stores of natural gas, which have fallen by as much as 25pc over the last year. As a proportion of Europe’s electricity is generated from natural gas, this has had a knock-on effect on electricity pricing.

Another strand of that knot of problems is the need for public and private investment in decarbonisation projects to meet targets that are either mandatory, or set to be mandatory, across Europe.

Governments met late last year at the UN’s COP26 climate talks in Scotland to agree global targets for carbon-emission reduction. Inevitably, there has been discussion of the role renewables will play in meeting the ever-growing demand for power.

Renewables will be key to decarbonisation in most European countries, which is how that issue of grid resilience creeps into the frame.

As new sources of power, such as solar and wind farms, are connected to the grid, problems can arise with grid capacity. This means that the physical infrastructure, the power lines themselves, must be upgraded to increase capacity to manage the new power supplies.

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Although most countries have mechanisms to cope with power shortages, it remains the case that switching to commercial renewable sources could be a bumpy ride.

Energy transition is increasingly non-negotiable across Europe, mandated in various forms by governments within and outside the EU, and across virtually every sector of the economy.

Sector coupling is the term that describes how energy-consuming sectors can be linked with energy-producing sectors to make the most of all available power, particularly renewable power.

At Eaton, our recently launched ‘Buildings as a Grid’ approach to energy transition unites the power needs of buildings and electric vehicles (EVs) with on-site renewable energy generation, and it is based on sector coupling.

At an enterprise level, the Buildings as a Grid approach means businesses can use digitally controlled energy storage to manage power and reduce costs within the confines of their building or site. At its most basic, the approach involves taking off-peak energy from the grid and storing it for use when needed. This can be done quickly, without grid upgrades.

The power industry refers to everything that is the responsibility of energy users as ‘behind the meter’. This can be anything from machinery to heating and lighting, and it includes EV charging and energy storage.

Behind the meter, businesses are in control. Energy storage and on-site renewables are key tools they can choose to combat higher energy prices in the short term and build a greater degree of self-sufficiency in the mid- to long-term.

The switch to EVs will be a defining feature of this decade. BloombergNEF, the clean energy primary research provider, said in its Electric Vehicle Outlook 2020 report that the number of EVs globally is expected to jump from 8.5 million in 2020 to 116 million in 2030.

As more drivers switch to EVs, they will need charging wherever they go. Premises that host business, commercial, or similar, will need to provide EV charging, as will companies that manage residential apartment buildings.

Buildings as a Grid can manage bidirectional energy flows that include the flow of power between EVs and buildings to make the most of EV battery capacity. This can be highly effective wherever there is extensive vehicle parking, and particularly valuable as part of an EV fleet-charging strategy.

The uncertain energy outlook has left many leaders pondering how to shield their businesses from price rises and power outages, and what they can do to manage energy and meet decarbonisation goals. Sector coupling is a route they can choose now.

Phil Kane is the country manager for electrical systems company Eaton in Ireland

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