Oct 16, 2020

World Kinect Energy Services: the distributed generation

World Kinect Energy Services
Hugo Logan
5 min
Why the current centralised system of electricity distribution must adapt and how the industry is meeting those challenges...

Ever since the end of the 19th century, when Thomas Edison’s direct current system was losing the ‘Battle of the Currents’ against George Westinghouse’s alternating current, most electricity networks globally have been centralised.  

And today we have large power stations producing huge quantities of power, and delivering it to consumers via transmission and then distribution networks.

Historically, a power purchase agreement was simply a contract by which a business bought electricity from such a power station.

In the 21st century, our networks need to adapt to a new reality.  

Decarbonisation is now law, and the technologies we use to meet those requirements need a change in approach.

The UK Net Zero 2050 policy leaves power generators and network operators in no doubt that the incumbent centralised system of electricity distribution will be forced to adapt.

IT professionals often talk about computer networks spreading all the way to ‘The Edge’, where users reside and devices are used, and electricity networks of the future may be not too dissimilar. 

With distributed renewable generators of all scales, as well as batteries and electric vehicles, all participating in a complex and dynamic system of storage and distribution at the edges of the network, rather than the centre.

One trend within this process is the emergence of a new generation of contemporary power purchase agreements (PPAs).

These are tools that can be deployed to accelerate the gradual transition from a centralised to a decentralised electricity system.

These agreements have arrived with myriad structures, couched in an assortment of varied, inconsistent and often baffling terminology.

They can be physical or virtual; synthetic, structured, sleeved or aggregated; private-wire, corporate, or even ‘consortium-driven’.

The importance of transparency

Whilst these titles offer some insight into how intricate the arrangements can be, they also add a degree of opacity that not every CEO or finance director has the time or inclination to contend with.  

Ultimately, they do the same thing that PPAs have always done – specify the terms under which one party supplies power to another.

Until relatively recently, renewable energy developers have relied on government subsidy to provide sufficient investment certainty to build large-scale renewable electricity generators. 

The nature of these subsidies has enabled wind and solar farms to be assigned as a long-term, low-risk asset class.  

A steady income stream over a long period was assured, and many project portfolios have subsequently been consolidated and traded in a secondary market on the basis of their predictable and guaranteed financial performance.

This stability is naturally important to investors, ensuring that reliable, predictable rates of return can be achieved.

In the post-subsidy landscape, power purchase agreements guarantee the bankability of a project in another way – by agreeing the future sale of the electricity prior to the asset coming onstream.  

So-called ‘private wire’ or physical PPAs have been available for some time under these terms, where the generator in question directly supplies a facility nearby, on the condition that the facility agrees to purchase the electricity at an established rate.

Risk you can live with

As virtual PPAs begin to gain traction, whether or not the generator is in the same location as the consumer no longer matters as much, because the purchase agreement can structure the transaction to achieve the desired result, regardless of where the generator is built.

In terms of pricing, the parties agree to a figure that reflects an allocation of risk they can live with, in exchange for the outcomes they desire.  

Developers use PPAs to demonstrate the commercial viability of a proposed project, securing access to funding in the process.

Consumers use them to demonstrate a strong commitment to decarbonisation at the same time as securing long-term price certainty and hedging against wholesale price volatility.  

As long as there are suitable offtakers, with the requisite high electricity demand and strong credit ratings, the cost reductions in renewables achieved over the past decade will continue to drive investment in this area.

Sophisticated renewable power purchase agreements within the corporate space have already superseded Government support in many instances, with companies that have made commitments to sustainability securing private, subsidy-free deals.

With the advent of subsidy-free renewables, the purchasing of power is being decentralised.  

In the decentralised electricity system, there are many opportunities for mutually beneficial agreements, but there are also considerable risks associated with getting it wrong.  

One of the main barriers to uptake at present is the longevity required by most corporate PPAs.

Complexity meets dynamism

These agreements, by their nature, tend to involve multi-year commitments, which demand thorough and often protracted contract negotiations from the outset.

Countless sources can now potentially feed electricity into the mix.  

This makes for a more complex and dynamic system, where competition increases both in terms of electricity prices on offer and what can loosely be termed the ‘green credentials’ - or energy attributes - associated with its method of generation. 

Energy attribute certificates are frequently decoupled from generation at source and traded as commodities in their own right.  

This means that under some circumstances you could be purchasing electricity directly from a wind or solar farm. 

It could even be built on your land, but you would still not be in a position to claim the decarbonisation credentials for yourself.  

When negotiated correctly, very large volumes can be secured under PPAs, making them an excellent tool for corporate sustainability strategies.  

They also provide some long-term price certainty, with all of the associated benefits which that clarity provides.

However, the price agreed within a PPA will reflect the market conditions at the time of signing, making it imperative to have a clear understanding of the current market and future prospects.  

As with any long-term contractual agreement, it is prudent to tread carefully and take advice before making any binding commitments.

The success, or otherwise, of this new generation of power purchase agreements will depend on the ability of developers to persuade offtakers that the risk allocation, and therefore price offered, for each type of agreement is fair and equitable, against a backdrop of fundamental changes in how we generate, trade and consume electricity.

Hugo Logan is a business developer working in the environment markets sector with World Kinect Energy Services.

For more information on business topics in Europe, Middle East and Africa please take a look at the latest edition of Business Chief EMEA.

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May 28, 2021

Automation of repetitive tasks leads to higher value work

Kate Birch
4 min
As a new report reveals most office workers are crushed by repetitive tasks, we talk the value of automation with UiPath’s MD of Northern Europe, Gavin Mee

Two-thirds of global office workers feel they are constantly doing the same tasks over and over again. That’s according to a new study (2021 Office Worker Survey) from automation software company UiPath.

Whether emailing, inputting data, or scheduling calls and meetings, the majority of those surveyed said they waste on average four and a half hours a week on time-consuming tasks that they think could be automated.

Not only is the undertaking of such repetitious and mundane tasks a waste of time for employees, and therefore for businesses, but it can also have a negative impact on employees’ motivation and productivity. And the research backs this up with more than half (58%) of those surveyed saying that undertaking such repetitive tasks doesn’t allow them to be as creative as they’d like to be.

When repetitive, unrewarding tasks are handled by people, it takes time and this can cause delays and reduce both employee and customer satisfaction,” Gavin Mee, Managing Director of UiPath Northern Europe tells Business Chief. “Repetitive tasks can also be tedious, which often leads to stress and an increased likelihood to leave a job.”

And these tasks exist at all levels within an organisation, right up to executive level, where there are “small daily tasks that can be automated, such as scheduling, logging onto systems and creating reports”, adds Mee.

Automation can free employees to focus on higher value work

By automating some or all of these repetitive tasks, employees at whatever level of the organisation are freed up to focus on meaningful work that is creative, collaborative and strategic, something that will not only help them feel more engaged, but also benefit the organisation.

“Automation can free people to do more engaging, rewarding and higher value work,” says Mee, highlighting that 68% of global workers believe automation will make them more productive and 60% of executives agree that automation will enable people to focus on more strategic work. “Importantly, 57% of executives also say that automation increases employee engagement, all important factors to achieving business objectives.”

These aren’t the only benefits, however. One of the problems with employees doing some of these repetitive tasks manually is that “people are fallible and make mistakes”, says Mee, whereas automation boosts accuracy and reduces manual errors by 57%, according to Forrester Research. Compliance is also improved, according to 92% of global organisations.

Repetitive tasks that can be automated

Any repetitive process can be automated, Mee explains, from paying invoices to dealing with enquiries, or authorising documents and managing insurance claims. “The process will vary from business to business, but office workers have identified and created software robots to assist with thousands of common tasks they want automated.”

These include inputting data or creating data sets, a time-consuming task that 59% of those surveyed globally said was the task they would most like to automate, with scheduling of calls and meetings (57%) and sending template or reminder emails (60%) also top of the automation list. Far fewer believed, however, that tasks such as liaising with their team or customers could be automated, illustrating the higher value of such tasks.

“By employing software robots to undertake such tasks, they can be handled much more quickly,” adds Mee pointing to OTP Bank Romania, which during the pandemic used an automation to process requests to postpone bank loan instalments. “This reduced the processing time of a single request from 10 minutes to 20 seconds, allowing the bank to cope with a 125% increase in the number of calls received by call centre agents.”

Mee says: “Automation accelerates digital transformation, according to 63% of global executives. It also drives major cost savings and improves business metrics, and because software robots can ramp-up quickly to meet spikes in demand, it improves resilience.

Five business areas that can be automated

Mee outlines five business areas where automation can really make a difference.

  1. Contact centres Whether a customer seeks help online, in-store or with an agent, the entire customer service journey can be automated – from initial interaction to reaching a satisfying outcome
  2. Finance and accounting Automation enables firms to manage tasks such as invoice processing, ensuring accuracy and preventing mistakes
  3. Human resources Automations can be used across the HR team to manage things like payroll, assessing job candidates, and on-boarding
  4. IT IT teams are often swamped in daily activity like on-boarding or off-boarding employees. Deploying virtual machines, provisioning, configuring, and maintaining infrastructure. These tasks are ideal for automation
  5. Legal There are many important administrative tasks undertaken by legal teams that can be automated. Often, legal professionals are creating their own robots to help them manage this work. In legal and compliance processes, that means attorneys and paralegals can respond more quickly to increasing demands from clients and internal stakeholders. Robots don’t store data, and the data they use is encrypted in transit and at rest, which improves risk profiling and compliance.

“To embark on an automation journey, organisations need to create a Centre of Excellence in which technical expertise is fostered,” explains Mee. “This group of experts can begin automating processes quickly to show return on investment and gain buy-in. This effort leads to greater interest from within the organisation, which often kick-starts a strategic focus on embedding automation.”


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