5 ways Large Energy Users can support low-carbon security of supply

LEUs must look to introduce interim measures that ensure security of supply, while not increasing emissions.

Following recent geopolitical developments – namely, the war in Ukraine – and the subsequent supply chain disruption to energy resources here in Ireland, ensuring security of supply is a key focus. Growing energy demand whilst delivering on ambitious net zero targets set out in climate action policy means that the Irish government must balance:

• Ensuring security of supply whilst growing the digital economy, with
  
• Delivering a just, cost-effective transition to renewable energy.

With one of the highest ratios of energy import dependency in the EU, Ireland is more exposed than others to sudden shocks and disruption. As a result, embedding increased resilience in our energy system is a priority and something which was set out in the government’s Energy Security in Ireland to 2030² strategy.

Large Energy Users (LEUs) have a vital role to play in driving this resilience. Electricity demand is projected to grow significantly over the next number of years and LEUs account for a sizeable portion of this. With an annual usage of over 500,000 kWh, EirGrid estimates that, by 2031, LEUs will account for 28% of total demand. While the growing number of LEUs represents strong economic activity, it does mean that a small number of these large consumers are central to ensuring security of supply.

The issue then becomes how can this security be maintained without the cost of increased emissions? The electricity system must continue to be balanced – accounting for increasingly tight capacity margins, as highlighted in the annual Generation Capacity Statement³ – while LEUs must play their part in delivering on emissions reduction targets. With the number of system alerts forecast to increase – coupled with delays in connecting new generation capacity (due to planning permission, environmental impacts, and supply chain constraints) – LEUs must look to introduce interim measures now that, while ensuring security of supply, do not increase emissions.

Legislative and regulatory landscape

Climate Action Plan 2024 builds on initiatives mandated in the 2023 plan, including the introduction of incentives to drive low-carbon consumption and increase LEU flexibility in demand. The importance of implementing a demand side strategy – to better manage electricity demand and to facilitate zero-carbon demand – is, once again, highlighted. Following CAP23, the CRU published an initial view of this demand side strategy – the National Energy Demand Strategy⁴ (NEDS) – for consultation. NEDS proposes a range of initiatives, building on the ambition set out in the Energy Security in Ireland to 2030 strategy that highlights how LEUs “can lead and contribute to this transition by…shifting energy demand away from peak times or at times of system stress and moving demand to times of high renewable generation.”

A core tenet of NEDS is a review of LEUs’ connection policy, with the associated consultation⁵ closing in late February. This review will inform the development of a new pathway for LEUs to connect to the electricity and gas systems which will minimise carbon emission increases while accounting for system capacity. This review is very much in line with the Government Statement on the Role of Data Centres in Ireland’s Enterprise Strategy⁶, which sets out how new data centre sites will account for the additional demands placed on energy infrastructure, demonstrating a clear pathway to decarbonised services.

5 key measures

There are 5 measures LEUs can adopt now to support Ireland’s decarbonisation plans whilst ensuring security of supply:

Implementation of cost-effective alternatives to carbon-intensive back-up generation, including: 

• matching gas with domestic green gas certificates and 
• transitioning sites’ back-up generators to renewables-based, biodegradable fuels, such as hydrotreated vegetable oil.

Investment in on-site, behind-the-meter storage means LEUs can utilise stored energy at peak times and times of system stress. This ensures high network charges – those associated with electricity imported from the grid – are minimised, while LEUs can ‘sell’ stored energy back to the grid (thus creating an additional revenue stream and return on behind-the-meter storage investment).

At times of a security of supply related event, disruption to business-as-usual operations can lead to an increase in emissions. This can be minimised by unlocking flexibility in load: 

• Flexible load: Reducing reliance on the electricity system by using behind-the-meter generation and/or storage to meet electricity demand.
• Flexible load times: Rescheduling server load processing to a time when system congestion is lower, or renewables are more abundant on the system.
• Flexible load locations: Relocating server load processing from one data centre to another if there is lower demand – or higher renewables outputs – in the alternative location(s).

Arrangements whereby a company procures renewable electricity directly through a contractual agreement with a renewables-based generator are known as CPPAs. These are an attractive option for LEUs as they mitigate the impacts of energy price volatility whilst also reducing electricity-related emissions.

The new Corporate Sustainability Reporting Directive – coupled with broader ESG scrutiny – places additional demands on companies with respect to the disclosure of climate and environmental data. With mandatory requirements set to be introduced, LEUs should now begin to increase transparency/reporting around emissions and energy usage, starting with materiality/gap and ESG maturity assessments.

How can EY support?