Business Evolution: Leading the Charge in Integrated Services

“According to Darwin’s Origin of Species, it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is best able to adapt and adjust to the changing environment in which it finds itself.” – Leon C Megginson (1963)

A professor of business management, borrowing from Charles Darwin’s theory of evolution, once said that those who are most responsive to change will be the ones best equipped to survive.

Prof Leon Megginson’s perceptive words came in the early 1960s, but they remain more relevant than ever in today’s constantly-changing corporate environment.

The lesson of evolution for businesses, which points to the need to change to survive and thrive is pivotal for Nomi Ahmad, former Head of Sembcorp’s energy business in the UK.

That is why Sembcorp believes in transforming to stay ahead and is placing a huge emphasis on renewable energy. After all, the world is moving increasingly towards more sustainable forms of energy.

In the UK, the transition began in 2003 when Sembcorp took the bold step to acquire the key energy-producing assets at the Wilton International manufacturing site on Teesside.

Wilton International: More than another Jurong Island
Wilton International, at nearly 2,000 acres, is one of the UK’s leading and biggest manufacturing sites.

It is home to a host of major international companies that produce chemicals, petrochemicals, energy, recycled plastic and biofuel products – firms that collectively generate hundreds of millions of pounds in export revenue for the UK economy each year.

Wilton’s story is similar to that of Singapore’s Jurong Island, which opened in 2000 and contains more than 100 global petroleum, petrochemical and speciality chemical companies.

At that time, Sembcorp stepped up to the role as main provider of support services for the Jurong Island hub, which is the cornerstone of Singapore’s energy and chemicals industry.

Following the success of Jurong Island, Sembcorp was keen to replicate the business model elsewhere.

“We were exploring globally where we could build on the success of our centralised utility facilities in Singapore, and we came across the Wilton assets,” shared Nomi.

“So we worked on a business model that was quite similar to Jurong Island.”

At that time, industrial customers at Wilton were being supplied steam and power by vintage coal-fired units that had originally been installed decades earlier and a fairly inefficient combined cycle plant, he recalled.

All of that was changed. Core to Sembcorp’s generation strategy was high efficiency units and, at that stage, renewable generation was becoming increasingly important to the company.

“The UK government had also set some fairly serious goals and incentives for renewables generation,” he added. “The entire country was going to be changing its fuel mix to be heavily reliant on renewable energy and that meant there was – and still is – impetus for expansion and growth.”

Since establishing its business at Wilton, Sembcorp has spent more than £300 million transforming the assets it acquired to provide a more sustainable, low-carbon future for its customers on the site.

The transformation included a £65 million investment in the UK’s first large-scale biomass power station. The plant is able to produce 35 megawatts (MW) of electricity – enough to power a small town – while contributing to the country’s quest for a low-carbon future.

Sembcorp also added two highly efficient gas turbine-based combined heat and power plants to provide steam and power supplies to our customers more reliably and securely.

In 2010, Sembcorp announced we were joining forces with Suez Environment and the Itochu Corporation to develop a new £250 million energy-from-waste facility on the site.

The plant uses over 440,000 tonnes of household residual waste from Merseyside – previously destined for landfill – as a sustainable fuel to generate 49 MW of electricity, the equivalent of the power typically used by around 63,000 households.

With generation from renewable resources such as wind and solar fast approaching grid parity, renewable energy generation is slated to form more than 50% of the UK energy mix by 2030.

But balancing these intermittent resources can create havoc on the UK grid and high volatility in prices.

“Unfortunately, it’s not windy all the time and, living in northeast England, I can also tell you that it is not sunny all the time! Whenever there’s intermittency, there’s price volatility in the market,” Nomi said.

Today, Wilton International is dubbed the Tees Valley’s “Green Renewable Hub”. The site is a leading name in sustainable power production, from biomass and energy-from-waste assets, as well as bioethanol for greener road fuel.

As Nomi puts it: “Wilton International is like a much smaller version of Jurong Island – with a substantial green footprint to boot.”

More room for growth in integrated energy operations
The northeast of England has seen some tough times in recent years, but is now poised for massive regeneration and investment.

For Sembcorp, this means more opportunities on the horizon. New customers mean higher demand and a pressing need for additional reliability and competitively priced power.

One potential way this could be met is through a new gas-fired power station. Sembcorp Utilities UK is currently in advanced stages of securing planning consent for such a new asset at Wilton International, with a capacity of up to 1,700 MW – the equivalent of the electricity needed to power 1.5 million households or 5 million people.

Earlier this year, Sembcorp acquired UK Power Reserve, the UK’s largest flexible distributed energy generator, for £216 million. The move instantly more than quadrupled its UK generating capacity to in excess of 800 MW.

With fast response generation from gas engines and batteries, UK Power Reserve focuses on enhancing the security of renewable energy supply by providing ancillary or balancing services to the grid.

The acquisition was aimed at beefing up Sembcorp’s merchant and retail business in the UK, enhancing competitiveness and returns, and strategically positioning the company to benefit from the global energy transition.

“Competition is there to provide consumers with greater efficiency, business and technological innovation and bring prices down. It’s already happening worldwide,” said Nomi.

He added that having relevant merchant capabilities, augmented by digitalisation, expertise and a first-mover advantage within the UK market will help future-proof the business in other markets where Sembcorp operates.

As the UK energy sector is diverse and comprises many different markets, it is crucial to cover all ground.

“Having a diversified suite of energy solutions geographically spread across different load centres, coupled with strong merchant and digital capabilities, will allow us to be present in the whole breadth of the market,” he said.

More broadly, the company is also open to the possibility of replicating its success in the UK in markets elsewhere over the longer term, as part of the Sembcorp business evolution plan.

“We’re paying a lot more attention to factors such as decentralisation, renewables, storage and digitalisation that will help us be ahead of the curve,” said Nomi.

“We want to be standing straight – like the modern human in evolution, and not the ape.”

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