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Q&A: Welsh Water’s Mike Pedley on the utility’s approach to energy

"Companies need to be prepared to use their assets as flexibly as possible." Mike Pedley, head of energy at Welsh Water. Image: Dŵr Cymru Welsh Water.

Dŵr Cymru Welsh Water’s new demand response deal with Open Energi is the latest energy initiative to be taken on by the not-for-profit utility. The agreement will see the company provide up to 5MW of demand response services in return for revenues from National Grid, delivered though aggregator Open Energi.

According to Mike Pedley, head of energy at Welsh Water, this kind of service is one that more companies should be using to benefit not only themselves but also the country. Speaking to Clean Energy News, he explained why the company had taken up the deal as part of its wide ranging energy strategy.

What attracted Welsh Water to this kind of demand response initiative?

We're aware that this demand response is increasingly important to National Grid and therefore the UK to help keep the lights on. But from our perspective it’s a potential way of getting more financial benefit from using our assets flexibly and if we benefit financially because of our not for profit model, where all our profits get reinvested, then our customers benefit directly as well.

We have only signed up to for one part of Open Energi's service - the frequency response part of it. We're happy with the projected returns for us signing up this amount of assets for that part of the service. We're only putting on roughly up to 5MW of demand; we think that provides an acceptable financial return for the company and its customers.

But more importantly it’s to recognise that increasingly in the UK now, companies need to be prepared to use their assets as flexibly as possible and that both helps the country and helps the company.

Would you expect a lot more utilities and other companies holding large asset portfolios to follow this model?

I would expect more companies to adopt this type of technology for some of their assets. Not all our assets are suitable and not all of other industrial companies' assets will be suitable but there are some types of assets that should work well with this technology. Where pumps can be operated a little bit faster or a little bit slower that doesn't impact directly on customers yet still provides a benefit through this service.

Do you expect to sign up more of Welsh Water’s assets to provide demand response?

We're currently finishing off a pilot and as a result of that have agreed a roll-out over about 5MW of assets. If that roll-out proves to be successful we'll look at the rest of our assets to see whether we can expand. We don't have plans at the moment - I think it's too early to say.

In addition to work being down with Open Energi, what other measures are Welsh Water taking on to address its energy usage?

It's very important to recognise that frequency response is only one part of a very wide strategy that Welsh Water currently has to invest in energy efficiency, energy generation and indeed other forms of tariff optimisation and demand response.

We've independently, not through an aggregator, contracted with National Grid for a couple of their demand response schemes – that’s why we’ve only signed up to part of Open Energi’s service as we’ve gone direct to National Grid for two of their schemes.

We're up to 56 sites generating renewable energy. We have about 25 sites with solar at just over 6MW of capacity. We have somewhere in the region of about 20 hydro of about 14MW and we've got around 11 anaerobic digestion sites.

We have continuing plans to roll-out renewable generation, albeit the landscape is more challenging with the reduction in subsidies. But we do have plans for further hydro and solar if they continue to provide acceptable returns for the company and our customers.

Has it been difficult to make those returns add up since the energy subsidy reset?

It is more difficult. The change in subsidies and the review of government energy policy has made it more difficult but not impossible. I think with any scheme you simply have to evaluate the costs and the benefits at the time and take a view, but clearly the cut in subsidies has made it more difficult but as a company we're still looking to invest in energy efficiency, in demand response and in energy generation.

It's all about finding at any point in time what is the best way of investing that money to the benefit of the company and our customers.

As well as generating your own energy, it’s always a positive action to reduce your energy bills by cutting consumption. Are there any specific energy efficiency technologies or programmes that have worked particularly well for you?

There's no magic bullet on energy efficiency. We've been putting in projects for many years, for example with lights we originally went to efficient tubes and now they're going to LEDs. So we do lighting upgrades, we're doing blower upgrades because you look to put in more efficiency motors.

It’s about finding what's the most appropriate solution for each of our 4,000 powered sites, which have been built over the last tens or even hundred years. There's no magic solution, it’s looking at each site and finding out what is the most appropriate.

Are there any difficulties in securing board level support for energy efficiency projects?

That's not the case in our company. There's a very positive atmosphere for energy efficiency but the key to it is our not for profit model, which helps the company take a long term view when it comes to investing in low carbon and sustainability and technologies such as hydro, which will run for many, many years and provide long term benefit for our customers.

Mike Pedley will be speaking at Clean Energy Live, taking place on 4-6 October at Birmingham's NEC, and offering advice on corporate energy management.