The Power Utilities Death Spiral and What it Means for Health and Safety

Neil HartleyHealth & Safety Issues/TrendsLeave a Comment

Wildpoldsried Bavaria

Normally business investments are made in a climate of growth with some level of stability and predictability. But, what happens when a sector is faced with massive change and an existing business model that is trending towards zero, e.g. “the utility death spiral”?

That was the topic of a recent research report by Banyard Solutions, “UK Utilities: Yes, Investment is Tough but Ignore Health and Safety at your Peril”, and which focussed specifically on the asset-heavy end of the Power Utilities sector.

Whilst the report is focused on one particular sector, the lessons around competing for investment and many of the health and safety challenges are applicable across many, if not all, sectors.

Firstly, let’s look at the health and safety statistics in the UK Utilities sector over the past five years. Unfortunately, the HSE and RIDDOR data don’t use consistent definitions for industry sectors so it’s difficult to be exact when comparing health and safety performance in UK utilities with other sectors and draw definitive conclusions.

The HSE fatality rates for 2017/18 use the sector definition ‘Electricity, Gas, Steam and Air Conditioning’ which had a fatality rate of 0.51 per 100,000 workers compared with an overall UK average of 0.45. Over the past 5 years these figures are 0.87 and 0.45 respectively.

In examining accident rates, RIDDOR reporting groups UK utilities within the top-level industry ‘Gas, Electricity and Water Supply; Sewerage, Waste and Recycling’ which is unhelpful given how broad it is but also because sewerage, waste and recycling are particularly dangerous industries and will skew the numbers.

Given the variance in sector definitions and, in any case, the broadness of the categories beyond the ‘power utilities’ focus of the report (and including ‘Waste collection, treatment and disposal activities; materials recovery’ which are notoriously hazardous), it does seem reasonable to say that accident rates in UK utilities are ‘broadly in line’ with industry standards.

However, the UK power utilities industry, together with those in most of the rest of the developed world, is undergoing a period of disruptive change driven by many factors ranging from macro-economic trends to technological innovations such as renewables and energy efficiencies.

These changes have created an extremely difficult climate for investment, but without continued investment the incident, accident and fatality rates experienced over the past 5 years cannot be improved. Or can they?

The Utility Death Spiral

While the UK is still heavily reliant on fossil fuels, the indications are that this will change over the next 10-15 years. Research conducted by the Centre for Climate Finance & Investment at Imperial College Business School found that households in London will be able to profit from renewable energy by 2030.

In other words, London households will soon be able to generate and store more energy from renewable sources than they need. As a result, they will no longer rely on the grid. Even though this research only focused on London, the impact will apply to the rest of the UK too.

Small villages in Germany (and elsewhere globally) are already profiting from their own investment in solar energy. For example, Wildpoldsried in Bavaria (pop. 2600) receives an annual rebate from the utility companies of €6m (2016).

Energy sector experts call this move towards non-reliance on the grid as the “utility death spiral”. So, the more successful the push towards renewable energy becomes, the less likely there will be a need for an electricity sector as we know it today. In fact, the wholesale price of electricity will probably get closer to zero the closer renewable energy gets to achieving 100% market share.

Energy efficiency is having an arguably larger impact than renewables. A recent report states that while renewables have contributed the equivalent of 95 terawatt hours between 2005 and now, energy efficiencies (such as the humble LED bulb) have cut demand by 103 TWh over the same period.

Health and Safety Implications

This ‘utility death spiral’ will impact health and safety in multiple ways. For example, the handling and decommissioning of infrastructure as it becomes obsolete; the increasing fragmentation of the industry to the point it is unrecognisable; and the impact of a significantly altered workforce.

For these reasons, investment in the traditional energy industry will become much more challenging, leaving fewer resources (or incentives) for companies to innovate and improve.

The good news for health and safety is that there is still significant scope to innovate and improve without the need for major investment. A great example is permit to work where removing well intended/badly implemented paper processes and replacing with electronic PTW (e-permits) can be easily achieved in a cost neutral way while preserving the good intentions of the original system design. Digitalisation of permit to work reduces the disconnect between policy, procedure and what’s happening on the ground by automating procedures to reflect policy and rules in day-to-day activity.

You can download a copy of the report here UK Utilities: Yes, Investment is Tough but Ignore Health and Safety at your Peril.

You can watch a webinar on e-permits at Is It Time To Consign Paper PTW To The Bin?

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