Business Parks Off-Grid Trend - A Utility Disruption

Business parks are becoming energy independent to enjoy financial sustainability and utilities should find market gaps.
Published: Fri 04 Sep 2015

With electricity costs escalating and reliability sometimes questionable, energy hungry firms have a growing incentive to go off the grid.

The dipping costs of solar technology and installation is highly attractive for today’s businesses, not to mention the low energy costs after installation and tax benefits in response to energy efficiency savings. Also, with the world becoming more environmentally responsible, it makes sense for businesses to do something about their environmental footprint.

In Germany, Europe’s largest economy, approximately 16% of German companies were producing their own power by 2013, according to the German Chamber of Commerce. This grew from about 10% from the year before. An additional 23% of companies are considering joining the fray.

These firms are incentivised to go off grid due to climbing electricity rates—driven in part by a 22% government-mandated levy to fund renewable-energy sources. This move shields them from the government surcharge, but also makes them eligible for subsidies designed to encourage energy efficiency and so-called green electricity production. Michael Salcher, head of the energy and natural resources practice at consultancy KPMG in Germany, estimates that companies that avoid the surcharge and receive subsidies can cut their electricity bills by around 50%.

With this trend growing amongst individual businesses, it would make sense for business parks to join in the move towards energy independency. These parks create a natural space for developing essentially what you would call a microgrid.

Self-sustainable business parks

The new £660,000 three acre Solar Panel Farm at Ransom Wood Business Park in Mansfield, Nottinghamshire is thought to be the UK’s only self sustaining business park when it comes to power supply.

The new Solar Farm’s 2,000-plus PV panels will provide up to 450kW of power. Ransom Wood Business Park spans some 10219 square meters of which over 6967 square meters is occupied office space, a restaurant and a nursery; all of which will be power by the solar panel farm. The offices, restaurant and nursery require an average of 50-400kW when fully functioning; which means that the solar panel farm will be able to produce enough electricity to power all the businesses on the park – something that is thought to be unique in the UK.

Another unique characteristic is that the park is re-using early 20th century buildings instead of erecting purpose built ones.

James Cannon, a Director of Ransom Wood Estates (business park management firm), says that the solar panel farm will have multiple benefits for tenants and the wider community surrounding Ransom Wood.There are over 60 different businesses housed on the business park, with between 700 to 900 people using the park on a daily basis.

He explains: "We believe that we are leading the way in environmental management and business support. We reused the old buildings we inherited on the site and have incorporated sound environmental policies wherever appropriate to benefit tenants. They will be able to power their businesses in the knowledge that no fossil fuels are being used to keep them running. With the solar farm on-line, we will be able to run the business park in a self-sustaining way when it comes to energy use, reducing carbon emissions by thousands of tonnes each year."

Mr Cannon says the decision to set up the solar panel farm was as much about ethics as it was economics and environmental management.

Another good example is an office park in Observatory, Cape Town, South Africa which has just become the first of its kind to feed electricity into Cape Town’s distribution network.

The 1.2MW Black River Park Solar Project is also the largest rooftop integrated PV plant in Africa and one of the largest in the world, according to the developers, who say it’s able generate 2,000MWh per year from its 5,500 modules.

The initial 700kW installation has been operating above expectation and feeds electricity into the city’s grid during off-peak demand periods by businesses at the park. Phase two, consisting of a further 500kW of solar power, was approved without any subsidies because of the performance of phase one.

Energy independent customers-opportunity for utilities

The move to energy independence should be viewed as a business disruption not just a technology play.Growth of distributed energy will force change on utilities' business models.

Utilities’ most profitable customers will reduce their regular power consumption from the central grid in favour of locally produced power. These customers may still depend on the central grid for their emergency or peak use, so utilities will have to maintain their costly infrastructure and power generating capabilities even as revenues from consumption decline.

In many markets, utilities are working with regulators to adapt to this structural change by promoting a pricing model based more on connectivity and capacity and less on usage.[Report Shows Utilities How to Escape the “Death Spiral” in 5 Steps.]

To prosper in this new dynamic, utility executives will need to understand the value chain of distributed energy and related business opportunities. They may need to develop or acquire new capabilities, as well as secure regulatory support, as they move from a focus on centralized generation to models that rely on more customer interaction, commercial and energy services and information management.[New Business Models For The Evolving Utility]and [From Utility to Energy Services Company – Fighting Back with New Ideas.]

There are a number of opportunities for the utility. For instance, there are utilities that are already offering services such as planning, installation, operations and maintenance, load management or demand management. Utilities could act as contractor to manage the energy efficiency of these commercial and industrial buildings.

The sooner utilities identify the opportunities that this trend offers, the more likely they are to get ahead of other companies and capture the profits available to them.

Further reading

Bain & Company-Distributed energy: Disrupting the utility business model