Energy Volatility, the Spark Gap, and What It Means for Schools
Oil prices have risen sharply in recent weeks, driven by escalating geopolitical tensions in the Middle East that have disrupted shipping routes through the Strait of Hormuz, a critical artery for global energy exports. At the same time, the conflict has halted liquefied natural gas (LNG) production at QatarEnergy, which supplies around 20% of global demand.
Wholesale markets have reacted almost immediately, with both gas and electricity experiencing significant intraday volatility.
What Could This Mean for Your Current Contract?
We asked a colleague with extensive experience in energy procurement to interpret the situation in practical terms for education settings:
“This is not a short-term risk. Schools and colleges will feel the impact depending on their current contract terms. It’s important to understand where risk sits within your contract, so increases can be managed effectively.
Just as importantly, be clear on renewal timelines. Some suppliers have reopened contracts this year to reconcile non-commodity costs, so having full visibility of your agreement is crucial.”
If you are unsure about your current position, it is worth taking advice. We have a procurement specialist available to support these conversations.
Start with Control, Not Replacement
Before considering large-scale decarbonisation, it is worth focusing on something more immediate: eliminating waste.
In many schools, heating systems run longer than required, serve unoccupied zones, or operate at unnecessarily high temperatures. It is not uncommon for buildings to be heated during evenings or holidays, or for staff to open windows because classrooms are overheated while boilers continue firing.
This is rarely a plant failure. It is a control issue.
Modern boiler optimisation systems can be integrated into existing plant with minimal disruption. They enhance, rather than replace, current controls and typically enable schools to:
- Optimise boiler sequencing
- Reduce short cycling
- Lower flow temperatures
- Prevent heating outside occupied hours
- Improve temperature stability
- Monitor gas and electrical consumption in real time
These systems can be introduced incrementally. For example, a school might start with boiler plant optimisation, then add zone temperature monitoring and electrical load tracking.
Because the technology is wireless and cloud-based, installation is low-disruption and significantly more affordable than full BMS replacement.
Savings often begin immediately once unnecessary run-hours are identified. Just as importantly, schools gain visibility.
Heating and hot water account for the majority of non-electrical energy use in education buildings, yet many estates teams have limited insight into when systems are running or how energy is consumed across sites.
In light of the Department for Education’s recent estate strategy, this visibility is becoming essential. Schools and trusts will increasingly need robust data to:
- Inform investment decisions
- Strengthen funding applications
- Develop phased decarbonisation plans
- Demonstrate effective estate management
After all, you cannot manage what you cannot see.
The Spark Gap Is Shifting – and Gas Volatility Changes the Equation
For years, the “spark gap” – the price difference between electricity and gas – has made heat pumps harder to justify financially.
Electricity has typically been more expensive per kilowatt hour than gas. Even though heat pumps can operate at efficiencies above 300% (delivering more than 3kWh of heat for every 1kWh of electricity consumed), relatively low gas prices often weakened the economic case.
That equation begins to change when gas prices rise sharply and unpredictably.
Sustained upward pressure on wholesale gas prices erodes the historic cost advantage of remaining fully gas-dependent. As gas prices increase, the effective gap narrows.
A heat pump delivering a seasonal coefficient of performance (COP) of 3.0 effectively multiplies each unit of electricity into three units of heat. As gas becomes more expensive, that efficiency advantage becomes financially significant.
In practical terms:
- Higher gas prices reduce the security of remaining fully gas-dependent
- Heat pumps become more competitive on operating cost
- The return-on-investment case strengthens – particularly in hybrid configurations
What may not have stacked up two years ago can begin to make sense today.
Hybrid Heat Pumps: A Sensible Step Forward
Full electrification can feel daunting, particularly for older estates. Electrical infrastructure, distribution systems and spatial constraints all present challenges.
Hybrid systems offer a pragmatic alternative.
A modestly sized heat pump installed alongside an existing gas or oil boiler can:
- Displace base-load heating
- Reduce fossil fuel consumption
- Lower peak gas demand
- Avoid major pipework alterations
- Minimise electrical upgrade requirements
This allows schools to reduce dependency gradually, rather than committing to wholesale replacement.
Crucially, improved control and reduced demand – achieved through boiler optimisation – make hybrid solutions more viable and easier to size correctly.
Solar PV as Risk Management
Solar photovoltaic systems are often framed purely in carbon terms. In reality, they are also a hedge against volatility.
On-site generation can:
- Offset daytime electrical demand
- Support heat pump operation
- Reduce exposure to wholesale electricity price spikes
- Provide capacity for gradual electrification
When combined with improved heating control and phased electrification, solar strengthens long-term resilience.
From Ambition to Protection
Energy efficiency and decarbonisation are often framed as environmental commitments. While carbon reduction remains essential, financial resilience is now equally critical.
Schools operate within fixed budgets and cannot absorb repeated external shocks indefinitely. Reducing reliance on fossil fuels reduces exposure to forces beyond their control.
The most effective approach is rarely radical transformation overnight, but structured progression:
- Improve control and eliminate waste
- Gain visibility of gas and electrical consumption
- Introduce on-site generation where viable
- Deploy hybrid heat pump solutions strategically
- Plan long-term electrification in line with infrastructure readiness and market conditions
Energy volatility is unlikely to disappear. But exposure to it can be reduced.
And for schools and colleges, reducing that exposure protects not just budgets – but educational outcomes.
Contact me for more james@warnefordconsulting.com
