The energy revolution is not just a green one

One cold night in early 1974 I bought a ticket to see the legendary guitarist Gordon Giltrap at a venue in South London. At the time the generation of electricity was severely restricted due to industrial action by coal miners and railway workers, and commercial users of electricity were limited to three specified consecutive days’ consumption each week. All supply was restricted on a rota basis to 3-hour long cuts in supply.

We did get to see Gordon eventually, but the start time had to wait for nearly two hours for the restoration of power. And the venue when we finally got inside was ice cold. It was still a great gig though.

I think this was probably the last period of time in our history that there were material outages of power from our grid. The “3-day week” preceded privatisation which brought about a universal fall in prices, and heralded a long period of quietly efficient obscurity for our power generation as a nation.

Until Russia invaded Ukraine that is. Adam Baker of energy consultants eEnergy summarises it well when he says “In the period between 2008 and 2021 an energy price of £100 for a megawatt Hour (MWH) became a high-water mark from which market volatility – mostly in a downward range of between £40 and £60 per MWH was measured. The invasion of Ukraine triggered an energy crisis which saw prices reach almost £700 per MWH, a scale of difference that could scarcely have been imagined by energy professionals.”

Things have calmed significantly since, but there are other things happening in energy markets which now bring a fresh level of uncertainty. The key element of these is climate change. The Conservative Party has committed that grid emissions will be net zero by 2035. Labour by 2030. This has caused a major re-think about power generation.

Thousands of renewable energy sources (mainly wind and solar power) need to be plugged into a grid that was built primarily for large scale generators. With an enormous surge in demand expected as we switch to electric vehicles and heat-pumps some experts predict that the grid needs to be scaled by a factor of more than seven against its existing capacity by the end of the decade. Part of National Grid is due to be re-nationalised this year to allow the government more control over its strategy, but environmental campaigners say that the entire organisation needs to be fully nationalised now to ensure that all the resources available are focused on the gargantuan rewiring task ahead.

The grid is also inefficient today because much renewable generation happens a long way from the peak areas of consumption. Scottish wind-farmers are paid to actually switch off their turbines when the wind blows strongly because the grid does not have the capacity to send all the power they generate to consumers. This problem may eventually drive a change in regulation that will create a much more flexible market with localised pricing, which in turn could make the business case for local generation much more attractive in some geographies.

The phasing out of fossil fuels will ultimately deliver clean and low-cost energy to all our homes and businesses. The interesting part will be the transition, and within that the key task for generators/the grid of matching supply, distribution and demand. For this reason it feels highly likely to me that energy will not return to the sleepy and predictable market we all loved in the first two decades after the millennium.

As a result, we hospitality operators need to value energy differently. Adam Baker again: “For operators, it obviously remains important to buy energy well. But perhaps even more critically it’s vital not to waste any energy, which requires a much more data driven approach than is commonly undertaken in hospitality. Energy use encompasses heating, air conditioning, extraction, water, lighting, cooking and equipment performance all of which need to be understood in terms of ongoing consumption if waste is to be effectively eliminated.”

I think Adam is right. Every day many (though not all) hospitality operators run inefficient equipment, leave machinery running when not in use, or fail to invest in effective heat management systems - literally burning cash that could otherwise be invested in the business. Solutions exist now that monitor, identify and eliminate waste. This is not just about training staff to turn the lights off – it’s tackling equipment specification and maintenance, and actively seeking real-time data to understand every point where energy can be used more efficiently. When energy was plentiful and cheap one could see the argument to focus time, effort and cash in other directions that generate more cash. But in the face of a green revolution that will likely put stress on energy prices once again it feels inadvisable not to act now.