Rapidly rising energy prices, inflation, the Russian invasion of Ukraine and the long-term need to fight climate change have all focused businesses’ attention on energy costs. Manufacturers in particular are struggling. Ryszard Stefański, director of the business development department at EWE Polska, talks to the BPCC’s Michael Dembinski, about how businesses can cut energy costs by investing in renewable sources, as well as doing more to save energy.
Returns on investment on renewable energy projects are looking more interesting as higher energy prices rise. For any business that needs to power its factory, warehouse or office, what are the most attractive investments that they could be making? How quickly do those investments pay for themselves?
Green energy, generated on your own has a much higher value for your company than the same energy evacuated to the power grid. Your own consumption allows you to avoid many of the costs related to the purchase of energy from the grid, such as the energy itself, the additional costs imposed on energy sellers (colour certificates), variable distribution fees along with the costs of renewable energy and co-generation support, and the power fee. In the case of selling electricity to the grid, only revenues from the sale of energy are obtained, decreased by the costs of access to the market. The greater the percentage of energy used on site, the greater is the profitability of investing in renewable energy.
Therefore, the key issue is to properly match the power of the installation to the energy consumption profile. In the case of a photovoltaic (PV) installation located on the roof of the building or on the ground adjacent to the building, with a well-designed investment, the discounted payback period is around five to six years. This is a very good result for an installation that will be operated for 20-30 years. It is important that the PV installation ensures the expected productivity in the coming years (it should slowly but in a controlled way decrease). The return on investment for installations created together with the building (or, say, a carpark) is slightly shorter than in the case of installations added to existing facilities.
These are investments with a very low level of risk. The lack of variable costs (fuel) means that the sensitivity of investment projects to changes in market parameters is limited. The current “distance law” regarding wind farms in practice excludes the possibility of using wind energy for one’s own purposes. With the long-awaited change to the 10H rule (10 times the height of the wind turbine as distance to residential buildings), the use of wind will be possible again. The payback period for self-consumption wind projects in this case will be similar to the payback period from PV installations.
Energy saving makes more sense than ever before. What are the ‘low-hanging fruit’ that can show the biggest savings? Where are the less-obvious areas where energy could be saved? Can even small offices make meaningful bottom-line savings through a conscious reduction in energy use?
The “low-hanging fruit” comes in the form of non-investment reduction of energy costs: both the volumes of energy consumed and the charges for using the energy. Saving energy primarily means reducing unproductive consumption: lighting unused rooms, keeping devices idling, lowering the room temperature in winter and raising it in summer. It may also be important to reduce costs by selecting the appropriate tariff and obtaining the best offer for the purchase of electricity or gas, tailored to the needs of the company. Flattening the daily profile of electricity consumption allows, in turn, to reduce the power fee. Subsequent activities to be used are related to the control of energy consumption, replacing devices with less energy-consuming ones (such as electric motors, reduction of compressed air losses, thermo-modernisation) or the production of electricity and heat in cogeneration powered by natural gas.
These activities vary in different companies; to implement them effectively, you need the assistance of an experienced energy consultant who will propose measures and rank their profitability.
Even small offices can also achieve significant savings by reducing energy consumption and the right way to buy it. Because costs of electricity and gas in such businesses were previously low, saving them was usually not a priority action. It’s now worth taking a look at it and start saving.
The Polish government could make things easier with a few legislative changes, such as making it easier to obtain permission for on-shore wind farms and grid connections for prosumers (energy users who produce as well as consumer power)? What should be Poland’s energy priorities right now?
Yes, the government can remove the barriers it creates for the development of green energy in Poland. The government should also move away from inhibiting the implementation of EU directives in Polish law supporting the development of renewable energy sources. It is a cost-free action for the state and taxpayers, without which the development of the Polish economy cannot be expected. Financial resources for financing renewable energy sources are easily available – it’s enough to lift the blockades and investments will start dynamically.
The development of renewable energy sources will slowly not only lower energy prices in Poland, but will also enable further cooperation and export of products and semi-finished products to other countries of the global north, whose goods with a high carbon footprint will be successively driven out of the market.
The priorities for today are primarily: changing the 10H rule and unlocking the possibility of designing new wind turbines, enabling the construction of direct lines between large energy consumers and nearby wind or solar farms, implementing a peer-to-peer mechanism, in which prosumers can share the locally generated energy, and preparing regulations that support biomethane introduced into the gas network.
Another priority is the modernisation and expansion of power grids. The current state of the electrical grid blocks the possibility of connecting new renewable energy sources in many regions of Poland. Due to the fluctuations in electricity production from solar and wind, transmission capacity must be much greater than in the traditional system of energy production from coal and gas, resistant to production fluctuations and capable of eliminating power surges. These investments are the responsibility of energy system operators who need both financial resources (for example EU support) and formal facilitations in obtaining building permits. Once again, I’ll stress that generating electricity and consuming on site in the company or in the vicinity via a direct connection doesn’t overload the grid.
The storage of surplus energy from renewable sources, on sunny or windy days, when too much power is being generated for the grid to cope, is a major technical challenge. Lithium-ion (Li-ion) batteries are becoming cheaper and ever-more efficient, but even so are unable to store power generated in summer for use in winter. Pumped-storage hydroelectric power is an alternative but poses engineering and environmental challenges, compressed-air storage is another.
Storing surplus energy from renewable sources on sunny or windy days when too much electricity is produced to be evacuated into the grid is indeed a challenge. Lithium-ion (Li-ion) batteries are cheaper and more efficient, but can’t store electricity for any length of time.
Currently, there is no real possibility within an acceptable cost, of storing electricity generated in summer in batteries and using it in winter. The is also no research in this regard. Pumped storage power plants also operate on a daily basis, not across the seasons. Storing electricity in a pumped storage power plant from the summer to winter would be so expensive (losing the benefits of working daily or weekly) that it would be cheaper to produce it in any other way in winter.
Energy storage in enterprises becomes more and more profitable due to the possibility of flattening the energy consumption profile and lowering distribution costs by reducing the ordered power and reducing the cost of the power fee. On the one hand, lithium-ion batteries are systematically cheaper, and on the other hand, distribution and related fees are growing. The more irregular the electricity consumption profile of a company, the higher the profitability of investment in batteries can be.
Batteries with adequate power also protect against voltage fluctuations in the electrical grid, which cause switching off of technical devices in the plant, which in some regions of Poland is a nuisance for industrial and service-sector businesses.
One solution in this field may be to store energy in the form of hydrogen in underground salt caverns. Due to the large capacity of caverns, it may be the cheapest way to store energy for a longer period. The first underground hydrogen storage facility in Europe, owned by EWE, was recently built near Berlin.
‘Green hydrogen’ has potential, again using surplus renewable energy to convert water into hydrogen. Yet this is still a technology in its infancy – what are the prospects for this – and why do you consider ‘brown hydrogen’ to be a waste of time?
The green hydrogen, produced from surplus of renewable energy, is the future we should strive for. It is worth emphasising that surpluses of green energy are necessary here, and in Poland and many other European countries we are currently talking about a shortage of green energy, not about surpluses. The priority at present is to generate green energy, in the next step to convert it into hydrogen. Starting with hydrogen-powered vehicles in the absence of green hydrogen is harmful for the environment.
Brown and grey hydrogen are made from hard coal or natural gas using a very large amount of energy to produce water vapour. In this way, hydrogen is obtained and the carbon dioxide is emitted into the atmosphere. The emission of carbon dioxide in such a process is much greater than in the case of traditional combustion of coal or gas in appropriate boilers, and there is also emission in the production of equipment for this process, hydrogen storage, etc. It is therefore a solution that requires investment expenditure and significantly increases the emission of carbon dioxide to atmosphere, and this is not what the idea of hydrogen is all about. The negative effects on the climate can be significantly reduced by capturing the carbon dioxide, but carbon dioxide can be also captured during burning coal or gas and there is much less of it in this way because the primary energy is not used to heat the steam.
How will the REpowerEU programme hasten the transition from Russian fossil fuels to fossil fuels from other sources and ultimately to renewable energy? Is this something that private-sector businesses can benefit from, or will it mainly affect national infrastructure providers? What is your overall assessment of the plan?
The REpowerEU programme is a very good programme. It is a pity that it was not implemented earlier. In the first step, access to natural gas from directions other than Russia should be provided to the countries of Western Europe and Central and Eastern Europe. The first major investment to ensure gas supplies to Western and Central and Eastern Europe is the construction of a gas pipeline from Spain to France. Spain has high liquid natural gas (LNG) regasification capacity and network connections to North Africa, while there is a lack of LNG terminals north of the Pyrenees. However, this does not solve all the problems due to the limited possibilities of liquefying gas in exporting countries. For example, President Biden’s declaration of a rapid increase in LNG exports from the US to Europe surprised American gas operators. Increasing the supply of LNG on a global scale requires the implementation of many investments that were not previously implemented due to cheap gas and low profitability.
Now these investments will be implemented in rush for energy-security reasons with less attention to profitability. Obtaining crude oil from countries other than Russia is much easier. The existing transport infrastructure is sufficient to change the direction of imports. However, this requires the modernisation of refineries, for example in Poland and Germany, necessary when changing the type of crude oil used.
At the same time, the process of green transformation will be accelerated. This applies to both new investments in renewable energy from wind, solar and biogas as well as investments in the improvement of energy efficiency reducing the European demand for primary energy. Due to the strategically important for Europe divesting from Russian fossil fuels, we should expect strong financial support for such investments, both at the investment and operational stage. Both infrastructure companies and final energy consumers will be will be the beneficiaries of this.
The accelerated green transition will also improve the competitiveness of the European economy by lowering the carbon footprint of European products. Overall, I rate the plan very high – now it is the time for details. I hope that this plan can also be implemented in Poland.