Fuelling the fire

Buro Happold

30/05/2012 Written by: Gavin Thompson No comments

Recently UK drivers experienced an automotive fuel shortage, except that there was no shortage of supply, either then or imminently. The UK Prime Minister merely said that with talks underway to avert a potential fuel tanker drivers strike (subject to a 7 day notice period) it would be sensible to" top up your fuel tanks."

What would you do; sit tight knowing there’s no real problem, or nip down to your local petrol station along with everyone else and make sure you get your fair share before the tanks run dry? No surprise that the British public chose the latter! And....with demand 80% above normal the distribution infrastructure couldn’t keep pace - bringing about a real shortage of fuel at the pumps! More panic! It makes you want to shout STOP!

Such behaviour makes you think, doesn't it?  If other fuel sources were to become scarce, how would we behave?

Let’s suppose electricity demand will outstrip supply in the majority of Western countries by 2020. Unrealistic? Well there are many examples today in the developing world where demand outstrips supply and in the developed world, with so many supply and demand variables in play coupled with continual change of government and hence agenda, writing a robust long range strategy is no mean feat. So it's not inconceivable that nations could get caught short. This is how the brownouts in Southern California came about ten years ago; deregulation, which allowed the hostile manipulation of fuel supplies to power plants by competing firms, led to demand outstripping supply, resulting in rolling blackouts.

So at a point in the future, demand outstrips supply, causing electricity prices to soar in response, in part to regulate demand (prices rose by 800% in the California crisis). What plans would you make? It's a fair bet that you would choose a combination of ways to source power as well as trying to use less without impacting on your lifestyle. But when would you make that change, now or carry on as normal for as long as possible?

During the recent UK fuel crisis it was reported that some drivers had found that by developing a lighter right foot their cars could achieve 60 mpg (4.7l/100km) - a case of real constraint influencing positive behaviour. At Buro Happold we already know, thanks to our own extensive POE (Post Occupancy Evaluation) work in the Commercial sector, that there is a largely untapped and quickly implementable series of measures linked to human behaviour that quickly reduces energy use in buildings.

Would you adapt by investing in FIT (Feed in Tariff) funded PV arrays to run your home and charge your electric car whilst also generating income through export? Would you let your neighbours borrow a few off-grid Kwhs? Will communities bind together to solve these problems, or will the needs of powerful individuals be allowed to prevail (also allowing them to pull up their 'energy drawbridges'), will local government lead the charge (no pun intended)? Lots of questions…

What if you were an entrepreneur? Well the real opportunity probably lies in the hands of developer landlords. Invest and operate in an independent distribution network, buy energy in bulk from the grid at reduced prices, or generate power from waste, biofuels, solar, hydro or wind and supply heat, power and cooling to your tenants at below market rates with higher resilience. Perhaps even store energy in the future?  In addition to taking your cut on the energy you supply, you drive higher occupancy rates and increased rents which enhance your asset value on your balance sheet which in turn allows you to leverage further investment to expand your network or buy up further property within your network. Neat!

We will see more and more developer landlords getting into the energy supply side, perhaps consolidating or merging with established ESCOs. Buro Happold is already advising in this space. Meanwhile those developers who fail to act now may well find themselves slinging an extension cord over their neighbour’s fence to keep their tenants happy - not a great place to be!

So standing on the side lines and shouting STOP, isn't going to solve big energy issues, human nature doesn't work that way.

One option is to allow energy prices to rise further through taxation; the tax revenue can then be ploughed into national energy investment to allow the UK energy grid network to operate more effectively in a two-way mode to handle distributed feed-in. There’s still scope to do this without risk of stalling economic recovery. A report published by Ernst and Young last month estimated that the cost to renew the UK electricity infrastructure could be halved by local Smart Grid technology; a sign of the need for more local joined-up thinking. Meanwhile in the US, the grid is significantly less stable than the UK’s and in need of proportionally even greater investment; indeed Smart Grid investment featured in the last stimulus package for these reasons.

So while higher energy prices can and will influence behaviour, the market itself needs help to realise the potential of deregulated community energy grids within a framework that can safeguard against the kind of manipulation that led to the California crisis. It’s a space full of opportunity that we at Buro Happold are certainly more than equipped to be part of and one we’re actively working in.