Wholesale prices get the headlines, but grid capacity, fixed charges and data now decide what a processor pays for power. David Kipling, CEO of On-Site Energy, explores this further.
For most of the last decade, energy strategy at a UK plastics or rubber processor meant buying well. You locked in a price at the right moment, avoided the worst of the winter peaks and got on with running the machines. That approach has run out of road. A manufacturer’s energy cost now depends as much on its bill structure, grid connection and data as on the wholesale price.
Start with the bill. On a typical industrial electricity invoice, the energy itself is now only around half the cost or less. The rest is network charges, policy levies and balancing costs, and some of these have become fixed. Since 2022, a large part of network cost has been recovered through a standing charge set by the size of a site’s connection. A factory that halves its consumption can find that line unchanged.
Some relief is coming. The British Industrial Competitiveness Scheme is intended to remove several policy levies from the electricity bills of eligible manufacturers from 2027. For an extrusion or moulding site running around the clock, that could be worth a lot. I would check now whether your site qualifies and how your supplier will pass the relief through, rather than assume it will arrive on its own.
The second challenge is capacity. Anyone who has asked their network operator for a bigger connection recently will know the answer can be years away. The connection queue is being reformed, but data centres, battery projects and new housing all want the same substations. A processor planning a new line, an all-electric press hall or a heat pump may find the grid sets the timetable, not the capital budget.
This is why more manufacturers are generating on site. It avoids a lot of the recharge items in the bill and gives them capacity the grid cannot offer. Rooftop solar, batteries that trim peaks and firm generation such as fuel cells or engines each do a different job. The right mix depends on the site energy demand profile. An analysis of underlying data is needed to make the correct choices.
Carbon too needs attention. The grid has decarbonised quickly, and burning gas on site can raise a factory’s reported emissions even while it cuts cost. That does not rule gas out. There are ways to reduce the carbon footprint of your gas consumption with biomethane – perhaps utilising some of the savings from efficiency gains or electrification written into the contract from day one.
Plastics processors start with an advantage. Much of the sector’s energy is already electric, through barrel heaters, drives, chillers and compressed air, so efficiency gains are easy to measure and quick to bank. Servo-driven machines, free cooling for chillers in winter and a proper compressed air leak survey are still among the cheapest megawatt-hours available.
How projects are paid for is changing, too. At On-Site Energy, we pay for, build and run on-site plant under long-term energy services agreements, so the customer pays only for the energy delivered and the equipment stays on our balance sheet. For a processor whose capital is earmarked for tooling and machines, it’s worth a conversation.
