What is Decentralised Energy and Why is it Important?

May 15, 2019


Decentralised energy is energy that is generated off the main grid and produced close to where it will be used rather than at a large plant elsewhere and sent through the national grid. Decentralised energy generation involves using a variety of smaller power generation plants and storage units that can be grid connected to provide power supply.

The energy that is generated off the main grid, can include micro-renewables, heating and cooling. Decentralised energy can refer to energy created from waste plants, combined heat and power, district heating and cooling, as well as geothermal, biomass or solar energy. Schemes can serve a single building, a whole community or be built out across an entire city.

Benefits of Decentralised Energy

Among the advantages of decentralising energy is a reduction in transmission losses, making the system more efficient than centralised energy. Security of supply is increased nationally as customers don’t have to share a supply or rely on relatively few, large and remote power stations.

There can be economic benefits too. Long term decentralized energy can offer more competitive prices than traditional energy. While initial installation costs may be higher, a special decentralized energy tariff creates more stable pricing.

It also helps to reduce carbon emissions as many decentralised energy systems are powered by renewable sources. These are more reliable and less vulnerable than centralised energy systems.

Energy Crisis

The drivers behind this new energy revolution are clear. Energy insecurity carries a massive social and economic cost. The consequences of the lights going out in our towns and cities would clearly be disastrous. Even before those consequences are felt, limited energy capacity will mean limited growth.

Energy planning in UK cities reveal that projected increases in demand far exceed current capacity. With the automotive sector’s requirement for a roll out of car chargers in the UK and the issue of a 5-6pm charging time as motorists return home from work; peak time demands are likely to increase substantially in the coming years.

Decentralised energy is a rapidly deployable and efficient way to meet that demand, whilst improving energy security and sustainability at the same time. More households and businesses self-supplying their own power means less pressure on the distribution grid.

How we generate and consume energy is perhaps the most significant threat to economic and social wellbeing that we face today. High energy prices are predicted to keep rising and our current use of fossil fuels is unsustainable. Fuel poverty is having a huge social impact in the UK, the latest data suggests that the number of households in fuel poverty in England is estimated at 2.55 million, representing approximately 11.1% of all English households. According to Age UK, there are an average of 26,700 ‘excess winter deaths’ every year in England and Wales, mostly occurring among the elderly. These are shocking statistics in this day and age.

Local Solutions to Local Energy Needs

Politicians are deadlocked over the future of the country’s energy infrastructure. This is an alarming situation, but local authorities across the UK are beginning to see an alternative. They are taking control of their own energy future and investing in decentralised networks that bring down prices, improve energy security, cut carbon and make communities more prosperous and resilient.

Although the private sector is developing many decentralised energy projects across the county, local authorities are in a unique position to effect change in the sector. Perhaps the most significant development in financing decentralised energy is the recognition among a number of public bodies that they can actually do it themselves. By wholly or partly financing projects, using capital reserves or cheap public borrowing, local authorities are looking to tap into a new revenue stream by generating and selling low-carbon energy.

The most common form of decentralised energy is district heating. While there has been concerns expressed from consumers about district heating systems in the past relating to heat loss and waste, networks are now built with highly-insulated pipes and connections, and high-performance engines, making those problems a thing of the past.

Making Money through Decentralised Energy Generation

Along with increasingly empowered consumers and communities, shifts in the basic cost parameters of many sources of energy allow generation to be built closer to where it is used. Decentralised energy is a proven and deliverable investment opportunity for local authorities. By investing now, local authorities are able to make significant savings and take advantage of the newly streamlined process. The benefits extend beyond simply satisfying customers, offering large energy users the chance to turn their energy assets into an additional revenue stream by selling excess capacity to the grid.

The advantages of such a system could be enormous – more competition, lower cost infrastructure and more efficient use of resources. Each of those outcomes would have benefits for consumers, and the combination of all three could transform the industry and the role of consumers in it.

There is another critically important way that a decentralised energy market has the potential to be more competitive than the centralised model. The core principle of the centralised model is that power flows in one direction, from a small number of large generators to a large number of small consumers, whereas in a decentralised market power flows in both directions. Overall demand might stay the same (or even increase), demand for energy from large-scale generators might fall, and that creates a supply and demand imbalance that puts downward pressure on electricity prices.

Decentralised projects can be delivered through a different ownership model because they are an inherently lower-cost form of infrastructure. The operating costs of renewable energy projects are typically significantly lower than for the same capacity of thermal plant, primarily because there is no direct fuel cost associated with most renewable energy technologies such as wind, solar and hydro.

A district, with an abundance of wind generation capacity but relatively small local demand due to small population size, could be a great asset to a neighbouring district as a source of low-cost power.

Decentralized energy is reaching a share of 30% of the European electricity generation and should further increase, according to the European targets aiming at a low carbon energy future. Therefore, technological, economic and environmental assessments of promising Distributed Generation systems are necessary to define roadmaps and possible scenarios for the future.

Learn More with Therma Mech

Whether or not the spread of low-cost energy storage will result in households disconnecting from the distribution grid entirely remains to be seen. Perhaps a more likely scenario is that households will stay on the grid, but that the role of grid-supplied power will be inverted, from the primary source of power, supplemented by locally generated energy, to a safety net supplier of last resort, with local decentralised energy generation being the primary source of power.

As can be seen with the district heating projects springing up across the country, there are benefits in meeting a local community’s energy needs with local solutions. Start-up costs can be high, and suppliers need to be responsible with their pricing policy given their potentially monopolistic position. That said, the potential security of supply, efficiency, long term economic gains and green credentials associated with decentralised energy generation make it an attractive option for the nation’s future energy supply strategy.

To learn more, get in touch with our team here at Therma-Mech.