This is a question I’m asked often. You might be an energy manager, facilities manager or similar. You might have a dual role but your responsibilities are likely to include...
- Keeping your organisation's energy costs under control and as low as possible.
- Ensuring supplies are resilient and power disruptions are kept to a minimum.
- Reducing carbon emissions for your ISO14001 accreditation, Carbon Reduction Commitment or CSR policies.
- Finding new ways to generate site profit and achieve targets.
If you have exhausted the energy saving low-hanging fruit and no-cost/low-cost quick wins you’ll now be thinking of solutions requiring a greater level of capital investment with longer paybacks. This is where many projects can fall down if your financial director is not sufficiently convinced of the business case to commit the necessary funds.
It’s the FD’s role to manage the financial health of the organisation. He or she will rightly want to scrutinise any requests for capital expenditure, test the business case and compare against any other opportunities for investment.
The energy saving and revenue benefits alone may be enough. For many sites, we’re now seeing paybacks of approaching 3 or 4 years with Internal Rates of Return of 20% or more from:
- DUoS savings
- TNUoS savings
- Revenue from National Grid for Frequency Response and Capacity Market
- Optimisation of any onsite renewables (e.g. solar)
So, if you have identified that your organisation would benefit from a battery storage system, and the savings above still aren’t enough to win over the FD, let’s consider how we might persuade him or her.
Engage with your operations director. He or she will be very influential and your ally on the board. The operations director will have direct responsibility for:
- Overall productivity and achieving defined volume and profit targets.
- Cost control and specifically a cost per unit of output (of which energy is a major element after labour and raw materials).
Work with your operations director to calculate the cost of power outages. It’s widely recognised that we’re likely to see more power outages or short-term fluctuations in voltage or frequency that can be equally disruptive to many operations. How resilient is your organisation? In your deliberations consider:
- Would an unexpected power outage have knock-on effects up and down your supply chain?
- If systems are tripped, do they need a lengthy reset process to get them back on-line?
- Will product part-way through the manufacturing process be spoiled and wasted?
- Would a power outage affect customer relationships?
A recent report published by Centrica gives some surprising insights:
39% of businesses experienced unscheduled downtime because of energy-related failure.
23% of businesses suffered equipment damage.
14% lost inventory.
18% of businesses said outages damaged their brand.
19% feel relationships with customers soured consequently.
11% said that employees had been placed in dangerous or life-threatening situations because of power outages.
What was most surprising was the cost of a power outage ranged from 3% of annual turnover for an outage of only an hour, rising to 18% for outages lasting a day in some manufacturing businesses. In my opinion, the biggest likelihood is that businesses will experience short-duration outages but more frequently. Based on the above statistics, only 4 x 1hr outages a year could cost more than 10% of annual turnover and that’s a significant loss.
Assess your resilience strategy. Do you have one? Perhaps you rely on diesel back-up generators but are they properly maintained? Can you be certain they will operate when needed? Do they represent an inefficient use of capital given they might only operate on a few occasions?
Batteries can be a substitute for, or complement, other forms of back-up power but do not sit idle. Instead, they can be generating savings and revenue for much of the time. Batteries are not suitable for long power outages but they are certainly very cost effective for an hour or two.
If you’ve not already done so, now is the time to discuss your needs with Rock Clean Energy. We can undertake an initial feasibility study to determine an initial system specification, the indicative cost for a turnkey solution and the potential financial benefits.
Add those financial benefits in our report to the potential cost of power outages. I suspect the result will have improved from a 3-4 year payback to less than 3 years which is so often the hurdle cited by FD’s.
Compare against other projects likely to be competing for your organisation’s capital. Many FD’s will be considering other options such as investing in an increase in production capacity to make more product. However, is this a fair comparison? If you can make more product can you sell them? Is there sufficient market demand? Does your existing electrical supply have sufficient capacity? Could making more product risk driving down the price? The risks, rewards and realities of all options should be compared reasonably (compare apples with apples, not oranges).
The cost of inaction. Many of the projects we’re working on have the potential to add tens of £000’s to those organisations’ bottom line each month and that’s ignoring the potential consequences and costs of a power outage.
If the FD is still not persuaded (we’d be surprised), all is not lost. If the FD is still not able to commit the funds necessary, then Rock Clean Energy has two finance options under our Battery Energy Storage as a Service (BESaaS) scheme to help get your project underway:
- Lease purchase. Where the cost can be spread over up to 10 years. Using this option, payments are quarterly in arrears and so potentially cash positive from the off.
- Fully funded/Shared Opportunity. We have investors prepared to cover the full project cost (your organisation gets the battery for free) and the financial benefits (revenue and savings) are shared with you. In this case, the investor takes all the project risk.
The main thing is to speak to us early on. We can help you compile all the information you need to create your own bespoke business case for internal use.