Revenue Streams from Onsite Renewables

Not only does generating energy from renewable sources reduce an organisations scope 2 emissions (scope 3 of their customers) but they also make great financial sense when sized correctly.

The financial benefits consist of energy cost savings and revenue generating opportunities such as grid services, and market-based incentives. By combining 2 or more of these revenue streams, energy consumers can maximise the financial returns from onsite (behind the meter) renewable energy projects.

 

Energy cost savings

• Reducing energy bill costs: By installing onsite renewable energy technology such as solar PV, wind turbines and battery storage, the user benefits by reducing their reliance on grid supplied electricity, therefore lowering the costs incurred by purchasing this energy. Instead, the consumer uses electricity generated onsite, leading to large cost savings over time. 
• Reduce demand charges: Consumers can utilise their battery to reduce their peak demand consumption by discharging stored energy during periods of high electricity use, thus lowering demand charges on energy bills.

 

Grid Import and Export 

• Power Purchase Agreements (PPAs): PPA’s are a great way for both the business who owns the renewable energy system and the customer who buys the energy directly from them. Businesses can sell energy at a pre-agreed rate which provides predictable revenue and a fixed price to the customer to avoid wholesale electricity market price volatility. 
• Smart Export Guarantee’s (SEGs): When signed up to a SEG, participants will automatically export excess solar generation back to the grid. This happens when generation exceeds energy demand. Revenue is generated by the SEG when electricity suppliers pay an export tariff for the electricity exported by the customer (in kWh). To qualify for a SEG, you must have a smart meter.
  • If the rate is 5p/kWh and you export 1,000 kWh in a year, you will earn £50.

 

Revenue from Grid Services

• Frequency Response Services: Batteries can provide grid frequency response services, which helps the national grid to maintain the balance and supply of electricity in real time. It is possible to earn revenue from participating in schemes such as Dynamic Containment and/or Dynamic Regulation.
  • Dynamic Containment: This is a fast-acting frequency response service which aims to quickly stabilise the grid when there is a frequency deviation. This service will help keep frequency deviations within safe operating limits in the event of unexpected generation losses at grid level.
    • Revenue from this service: Payments for availability can be made to contributors who make their assets available to respond when needed. A separate payment can be made for when their service is actually needed to help contain a frequency deviation (paid per MW of response provided). 
  • Dynamic Regulation: Another form of frequency response service that focuses on maintaining the grid frequency within a target range over a longer period (seconds to minutes). Dynamic Regulation deals with smaller frequency fluctuations that occur during normal grid operations, whereas dynamic containment deals with large scale disturbances. 
    • Revenue from this service: Ongoing payments to providers can be made for making their assets continually available to help balance the grid over a longer time period. Payments can also be made based on the response speed and quality. Large industrial facilities can earn by adjusting their power usage in response to grid signals by either reducing demand or load shifting.
• Capacity Market Payments: By participating in the Capacity Market, the business commits to providing electricity or reducing demand when the grid is under stress, receiving capacity payments in return. This is usually a long-term contract between the participating body and the energy supplier. Capacity market payments are made to ensure there is enough grid capacity to meet peak demand.
• Demand Side Response (DSR): The business can participate in DSR programs by reducing or shifting its electricity use during peak periods in response to signals from the grid operator, earning payments for doing so. Whilst DSR shares similarities to dynamic regulation and capacity market, it is inherently different. DSR focuses solely on the demand side by encouraging consumers to shift or reduce their electricity demand to help balance the grid.

 

Revenue from Market Participation

• Arbitrage:  Batteries can be used to buy electricity from the grid when prices are low (during off peak hours) and sell it back when prices are high (during peak hours). This method is known as energy arbitrage.
• Wholesale Market Participation: Participating directly in the wholesale electricity market, either independently or through an aggregator, to sell excess energy generated by the solar system.

 

Incentives & Subsidies

• Carbon Credits: If you have a renewable energy system, you can capitalise on this by selling carbon credits or Renewable Energy Guarantees of Origin (REGO) certificates to companies looking to offset their own carbon emissions. REGOs are issued to companies per MWh of electricity. This enables suppliers to demonstrate their commitment to providing green energy, helping consumers to make more informed decisions.
• Contracts for Difference (CfD): While CfD is more commonly used for larger generators, small generators might access similar schemes or benefits through aggregation of systems. CfD guarantees revenue certainty for generated electricity from renewable energy projects, making it easier to secure finance.
  • In the UK, the government agrees to pay the difference between the “strike price” (a pre-agreed price for energy) and the “reference price” (current market price for electricity). This fixed price mechanism ensures that the project remains financially viable despite market volatility.

 

Leasing Space for Renewables and EV Charge Points

• It is possible for property owners to lease their land or roof space to third parties for the installation of suitable renewable energy systems. This will provide a passive and predictable income stream without having to fork out the investment for the project itself.

 

Microgrid Solutions

• Owners of microgrid infrastructure can set up an energy supply agreement to customers for the electricity they provide from the microgrid. This is particularly beneficial for customers in rural areas where grid power is unstable, and they cannot afford to pay the high upfront costs for these systems. Revenue is sustainable and predictable for the supplier and customers can benefit from reliable, high quality energy.

 

The UK is currently undergoing a major transition in grid infrastructure, where reliable forms of traditional thermal electricity generation like coal are being replaced by intermittent forms of renewable energy (e.g. solar and wind). As a result, balancing the supply and demand of the gird becomes more difficult.

This creates the perfect opportunity for organisations to generate additional revenue streams from implementing their own renewable energy projects. By providing grid services such as DSR and frequency response, organisations will be financially compensated for this. Not only will this create additional revenue streams, but this will also contribute towards reaching net zero emissions, saving on energy costs by generating your own energy and guarantee’s energy security in a currently volatile energy market.

The sooner organisations invest in modern energy technology, the sooner they will reap the many financial benefits they will bring in the short and long term. 

OnGen is helping organisations across the UK on their renewable energy journey. Contact us to see how we can help you exploit the many benefits of renewable energy. 

Get ahead of the curve.