The built environment is only part of the puzzle. We are seeing an increase in demand for energy due to automation, electric fleets and 24/7 working patterns. This is placing a huge demand on the UK power network, National Grid, which will only increase as the rate of electrification increases.
The Committee on Climate Change has highlighted that the growing reliance on electricity as part of the energy mix leaves us more exposed to power cuts and climate risks. As a result, the importance of having an electricity supply (or supplies) which support operational resilience whilst also underpinning the ability to achieve net zero is a balancing act which organisations need to consider carefully.
The ability to secure an economically viable grid connection has become a fundamental consideration as part of the planning and development process – not only for new developments but also for redevelopment of existing stock where an increase in connection capacity may be required.
The UK electricity grid has evolved significantly over the last ten years. There has been a move away from a relatively small number of predictable, large-scale, inertia driven power stations to a system where there is a significant proportion of intermittent renewable generation. Whilst largely positive in terms of reducing the carbon intensity of generation, the shift has created numerous issues for National Grid and also for the Distribution Network Operators (DNOs) who provide regional power dissemination.
The ability to secure an economically viable grid connection has become a fundamental consideration as part of the planning and development process.
Whilst DNOs are under an obligation supply power to a site, the increase in demand – and in some cases, the need for substantial reinforcement of the grid network – the costs of connection can be huge and are borne by the party requesting the connection, risking the viability of a development. According to Roadnight Taylor, only approximately 10% of connection applications across the UK are successful.
These risks are primarily cost driven; however they can also affect a developer’s programme. Delays to the practical completion of installing the connection are common, with several challenging elements within a multifaceted process. Street works, for example, are often difficult to book in due to congested scheduling schemes and strict policies, elongating the delivery time.
Source: Avison Young
The route to renewable energy is almost impossible without this investment. Large-scale batteries will support grids in adoption of renewable energy by reducing intermittency.
PROSUMER CONFIDENCE
Advancements in energy generation and storage technologies, decreasing costs and increasing efficiencies, have enabled consumers to take charge of their power needs like never before. ‘Behind the meter’ solutions, where self-generation and storage occurs within the consumer’s own local network without the involvement of the grid, can help to reduce electricity costs and increase energy security – highly prized in 24-hour warehouses and power-hungry datacentres.
The two most easily deployable technologies for the industrial sector are solar PV and Battery Energy Storage Systems (BESS), which provide energy storage. Combining the two in a ‘behind the meter’ configuration can compound the benefits.
Unit 9, as part of a government grant funded consortium with Avison Young, has developed a smart platform which enables rapid feasibility and ROI for energy generation, battery storge and EV charging in combination with flexibility services on the grid.
Self-generation and energy storage systems can save costs by deploying self-generated stored power at peak times, while also increasing energy security by decreasing reliance on the grid. As well as cost savings, additional revenue can also be sourced by selling surplus power back to the grid or to other end-users through various mechanisms including Purchase Power Agreements. And this is potentially the greatest opportunity and upside – the increase in ‘prosumerism’ where building owners and occupiers can become an active part of the energy market.
Other onsite power generation technologies are also available, such as small-scale hydroelectric facilities, combined heat and power (CHP) plants, or wind turbines. Waste-to-energy and anaerobic digestion systems may also be well-suited for businesses which generate a waste stream which can be used as a fuel, thus providing the further benefit of saving on waste disposal costs.
In the majority of cases, batteries will be beneficial to both consumers and electricity suppliers, with wide-scale local BESS adoption helping to cut demand peaks, reducing a considerable and expensive risk for suppliers. Large-scale batteries can also provide a means of regulating the intermittent supply of power from renewable sources across the grid, collecting energy while the sun shines and the wind blows to provide consistent access to green electricity. This synergy is essential for maintaining energy security in a net zero economy5, and there is already evidence that BESS and renewable power facilities are creating additional demand for land.
Renewable UK identified 16.1GW of battery capacity in operation, under construction or in planning across 729 sites in the UK as of February 2021. Just over a year earlier in December 2019, this figure was only 10.5GW across 600 sites, with only 2MW back in 20126. This impressive rate of expansion reflects the key role battery facilities will play in the future energy system of the UK – and the opportunity that this presents for real estate.
ELECTRIC AVENUE
While the technology around hydrogen powered vehicles and HGVs is still yet to be developed; Mobility is undergoing a battery-driven electrification revolution. Electric vehicles (EVs) are becoming commonplace in the automobile market, fuelled thus far by consumer demand but now government legislation is accelerating the trend. In the UK, the sale of new diesel and petrol cars will be banned in 2030, with the EU likely to impose similar measures.
Beyond reducing transport emissions, several pilot studies are underway exploring how the batteries which power EVs could play a central role in the move to a net zero economy, acting as mobile BESS facilities. One such scheme sees the EV being charged up at work during the off-peak day hours before being driven home and plugged in to provide power for the house during the peak hours using the electricity gathered through the day. The EV then recharges off-peak overnight, ready to drive to work again the following day.
Although their place in the future grid is not yet certain, the rise of the EV is well underway. The infrastructure required to produce EV-specific parts – namely battery-making gigafactories – is therefore a key area of growth in the industrial real estate outlook. Combined with the central utility of BESS and renewable generation in domestic and national power networks, we expect considerable demand to be sourced from the battery production industry in the UK and globally. By just 2025, the global battery market will be worth over £8 billion7, bringing considerable implications for real estate.
Landlords may see self-generation and BESS as almost essential, and certainly a number are baking it into their net zero plans8. According to the Economist, even a couple of years ago, two thirds of companies were thinking about self-generation9 and see it as the best bet towards becoming net zero10. In addition, the ability to harness self-generated renewable energy creates insulation against some of the energy prices shocks seen in recent years, and likely to continue well into 2022. These technologies also provide considerable appeal for the developing world, helping to increase the reliability of the power supply and energy security11. It is almost certain that energy self-generation and storage will become must-have amenities in terms of future demand requirements of both domestic and commercial real estate.
REFERENCES
5https://futurepresent.economist.com/distributed-generation-beyond-the-numbers/
6https://www.renewableuk.com/news/550773/UKs-total-pipeline-of-battery-storage-projects-now-stands-at-over-16-gigawatts.htm
7https://www.power-technology.com/comment/global-battery-energy-storage-market
8https://www.mandg.com/dam/investments/institutional/shared/documents/insights/2021/q1/our-real-estate-journey-to-net-zero-final-global.pdf
9https://futurepresent.economist.com/infographic-the-outlook-for-self-generation/
10https://futurepresent.economist.com/wp-content/uploads/2019/11/readyforchange.pdf
11https://www.energyforgrowth.org/memo/the-impact-of-self-generation-on-firms/