Can a sharing economy approach to energy deliver a more sustainable future?

Sunshine through tree tops - green energy

As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?

Technology is shaping our lives like never before, making our world smarter, more efficient and more connected. In the last decade, it has fuelled an explosion of sharing economy business models — adopted by the likes of Uber, Airbnb and Zipcar — who in just a few short years have revolutionised established industries. But can a sharing economy approach help to tackle one of man-kind’s greatest challenges and deliver clean, affordable and secure energy to all?

Sharing economies are a consumer-led phenomenon which work by exploiting excess capacity or inefficiencies in existing systems for mutual benefit. Take Airbnb for example. The wasted asset is your property and the excess capacity is the space you are not using. By creating a user-friendly platform and giving homeowners the security they need Airbnb have built the biggest hotel chain in the world, surpassing the Intercontinental Group in less than four years. They have achieved this because they haven’t needed to construct a single thing.

So how could this apply to the energy industry? As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?

Since the world’s first power station was built in 1882 the global energy system has worked on the basis that supply must follow demand. Consumers — businesses and households — have been passive users of power, paying to use what they want when they want, whilst electricity supply has adapted to ensure the lights stay on. This has created inefficient systems built for periods of peak demand — in the UK this is typically between 4–7pm on a cold winter evening — which most of the time are massively underused.

But this is no longer the case. Today, our ability to connect and control anything from anywhere means we can manage our demand for electricity in previously unimaginable ways, and consumers are emerging as a driving force for change.

By connecting everyday equipment to a smart platform (just as you might upload your property to Airbnb), it’s now possible for consumers to take advantage of small amounts of “flexible demand” in their existing assets and processes — be it a fridge, a water pump, or an office air con unit — and sell it to organisations tasked with keeping the lights on — like National Grid.

Applying artificial intelligence and machine learning to govern when and for how long assets may respond gives consumers confidence their equipment’s performance will not be affected, and in return for sharing their “flexible demand”, they benefit from cost savings or direct payments.

This sharing economy approach relies on the power of tech and our ability to orchestrate many thousands of consumer devices at scale. Any one piece of equipment can only make small changes to the timing of its electricity consumption — e.g. delaying when a fridge motor comes on for a few minutes during a spike in electricity demand at the end of a football match — but collectively, the impact is transformational.

It means that when electricity demand is greater than supply, we don’t need to fire up fossil-fuelled power stations. Instead, we can reduce demand by asking non-time critical assets to power down for a short while.

If the wind is blowing and too much electricity is being supplied, we don’t need to let this clean, abundant power go to waste, but can ask equipment to shift its demand and make use of this power as it is available.

And we don’t need to keep building more power stations to meet occasional peaks in demand. Instead, we can distribute demand more intelligently throughout the day, reducing the size of these peaks and making better use of existing capacity.

In the UK, Open Energi’s analysis suggests there is 6 gigawatts of peak demand which can be shifted for up to an hour without impacting end users. Put into context, this is equivalent to roughly 10% of peak winter demand and larger than the expected output of the planned Hinkley Point C — the UK’s first new nuclear power station in generations.

This doesn’t make it easy. Unlike other sharing economy success stories, energy is a public good. The need for incredibly robust solutions means the barriers to entry are high. But, if we can get it right, the prize is enormous; a cleaner, cheaper, more secure energy system which gives consumers control of how, when, and from where they consume their energy.

Businesses have already recognised the power they hold and the benefits it can bring, with the likes of Sainsbury’s, Tarmac, United Utilities and Aggregate Industries adopting the tech and demonstrating what’s possible. Households look set to follow, but wherever the flexibility comes from, it’s clear that consumers and the environment will benefit from a sharing economy approach to energy.

David Hill is strategy director of Open Energi. He is an expert on electricity markets and demand-side flexibility, including demand-side response and energy storage. He joined Open Energi in 2010 after completing an MSc Energy, Trade & Finance at Cass Business School.

Demand flexibility is putting consumers in control

Tarmac has installed Demand Side Response at around 70 sites UK wide

A smart power revolution is underway putting your business in control of how, when and from where it consumes its energy. At last week’s Energy Live 2016 Open Energi’s David Hill explored how technology can unlock demand flexibility to deliver maximum value from your assets  – connecting industrial equipment, batteries and self-generation – and coordinating their behaviour in real-time to turn the vision of a smarter grid into reality.

David was joined by Steffan Eldred, Senior Energy Optimisation Manager at Tarmac, sharing their approach to demand flexibility.

Download a copy of the presentation.

The move to a low carbon economy coupled with rapid advances in technology and innovation are transforming electricity supply and demand. Grid agility and flexibility are essential as we move away from models of centrally dispatched generation and incorporate more intermittent renewable energy generation onto the system.

This flexibility can be provided in a variety of forms, from demand side response (DSR) and energy storage to new build gas generation. However, there is a clear merit order emerging in terms of both the carbon and consumer cost of these offerings.

DSR is the cheapest and cleanest form of flexibility. At its core, it is an intelligent approach to energy that enables aggregators to unlock flexibility in our demand for energy to build a smart, affordable and secure new energy economy.

Flexibility Merit Order shows Demand Side Response is lowest cost optionThe technology can be used to invisibly increase, decrease or shift users’ electricity consumption, enabling businesses and consumers to save on total energy costs and reduce their carbon footprints, while at the same time enabling National Grid to keep the system in balance.

It is part of a wider energy market picture that must focus on flexibility and achieving the lowest cost for consumers. If just 5 per cent of peak demand was met with flexible power, the response would be equivalent to the generation of a new nuclear power station, without the huge costs to consumers.

Tarmac is one business benefiting from this approach. The company has been a pioneer of DSR, partnering with Open Energi to install Dynamic Demand on over 200 bitumen tanks at 70 asphalt plans across the UK. What this means is the heating elements in each of those tanks, which keep the bitumen warm, can switch on or off in seconds to help National Grid balance electricity supply and demand.

Collectively Tarmac’s tanks are providing the grid with capacity that can be shifted in real-time, so they’re able to use more when there is a surplus – for example when it’s particularly windy – and less when there’s a shortfall. Its enabling Tarmac to help build a smarter, more responsive energy system which is paving the way for more renewable power and reducing the nation’s reliance on fossil fuelled power stations.

 

 

Ever ready: will batteries power up in 2016?

Open Energi Banner ADE

David Hill, Business Development Director, Open Energi

Open Energi tends to extol the virtues of Demand Side Response as a solution to the energy storage challenge.  It provides a no-build, sharing economy approach which is cheap, sustainable, scalable and secure.

By harnessing flexible demand and tapping into the thermal inertia of bitumen tanks or the pumped energy stored in a reservoir for example, we have created a distributed storage network able to provide flexible capacity to the grid in real-time without any impact on our customers.

But flexibility comes in many forms, and as the cost of energy storage systems tumble, it looks like 2016 might be the year when commercial batteries become a viable part of the UK’s electricity infrastructure, with recent analysis suggesting they could deliver 1.6GW of capacity by 2020, up from just 24MW today.

The price of energy storage systems is expected to fall sharply over the next three decades, with Bloomberg New Energy Finance predicting the average cost of residential energy storage systems will fall from $1,600 per KWh in 2015 to below $1,000 per KWh in 2020, and $260 per KWh in 2040.

As costs have fallen we have seen increasing interest from industrial and commercial customers keen to explore the benefits of installing batteries on-site and looking at systems capable of meeting 50%-100% of their peak demand – depending on their connection agreement (although it is worth noting an export licence is not a prerequisite).

In addition to providing security in the event of power outages, battery systems can help companies to reduce their demand during peak price periods, enabling them to seamlessly slash the astronomical costs – and forecasting difficulties – associated with Triads, and minimise their DUoS Red Band charges.

When they aren’t supporting peak price avoidance – which may be only 10% of the time – batteries can help to balance the grid – earning revenue for participating in National Grid’s frequency response markets. For example, discharging power to the system if the frequency drops below 50 Hertz and charging when the frequency rises above 50 Hertz.

National Grid’s new Enhanced Frequency Response market has been developed with battery systems in mind – requiring full response within 1 second – but isn’t expected to be up and running for a year or more.

In the meantime battery systems can generate significant revenues today via National Grid’s Dynamic Firm Frequency Response market, tendering alongside loads from companies like Sainsbury’s, United Utilities and Aggregate Industries, to help balance the grid, 24/7, 365 days a year.  And in the longer term the opportunity exists for companies to trade their batteries’ capacity in wholesale electricity markets.

With these saving and revenue opportunities in mind, we’re now at a point where battery systems can be installed behind-the-meter and deliver a ROI within 3-5 years for industrial and commercial sites. The ROI will be subject to certain factors, such as geographic location, connection size and of course the cost of the battery system itself, but these figures would have been unthinkable only a few years ago.

There are important technical factors to consider, including both the battery sizing in terms of its kW power rating and kWhr energy storage capacity, and also the underlying battery chemistry.  By taking into account the physical location of the battery along with models of different markets that it will operate in, it is possible to narrow down to the most appropriate technical parameters.  Another consideration is the gradual effect of wear and tear on the battery with continuous usage.  By analysing these effects it is possible to reduce some of the uncertainty around battery lifecycles (likely to be in the region of 10 years) and get better predictions of the likely revenue in each year of operation.

But whilst a payback of 5 years seems reasonable from an energy infrastructure perspective (where 15-20 years is more typical) for most companies used to a ROI within 2-3 years on energy projects it is not easy financing battery systems.

Some larger, capital rich companies may have the appetite and money to finance these projects themselves, but the majority of the companies we are talking to are keen to take these assets off balance sheet and finance installations via banks and other investors under third party ownership.

In these circumstances, managing the performance of battery systems – so that they meet their warranty and their lifecycle is maximised – whilst optimising their potential as a flexible resource able to cut energy costs, earn revenue and deliver a vital uninterruptible power supply  during outages will be key to their commercial success and scale of deployment.

The Challenges of Device Management in Energy

The Challenges of Device Management in Energy

1248 CEO Pilgrim Beart chats with David Hill, Business Development Director at Open Energi.

P: “David, tell us a bit about what you’re trying to achieve at Open Energi”

D: Open Energi is deploying ‘Internet of Things’ software within electricity consuming assets and paving the way for a new energy system; a system that is cleaner, cheaper, more efficient and more secure than the system we have today.

Our software is able to measure and monitor machine and appliance behaviour in real-time and subtly adjust electricity consumption in response to signals from the market, preventing fossil fuelled power stations from coming online and maximising our use of renewable energy, without any impact on consumer living standards or business productivity.

Every appliance or machine that we connect to using our Dynamic Demand software is another step towards removing power stations from the electricity system all together – and the money that would have been paid to those power stations is instead paid to British businesses.

P: “That sounds like a classic IoT application to me – making better use of a resource, with benefit to all the parties concerned – and helping address climate change too. What stage have you’ve reached in this ambitious goal?”

D: To date we have signed over 25 customers and deployed our software within over 1230 individual assets across 275 sites. Appliances range from Heating, Ventilation and Refrigeration Appliances in Sainsbury’s, to Water Pumps and Waste Management Equipment in United Utilities. The total power of all the devices that Open Energi interacts with is about 45MW, of which we currently bid about 15MW – around 30% – into energy markets operated by National Grid.

30% represents what is typically flexible at any given moment in time. The remaining power is being used for its primary purpose, e.g. heating supermarkets or pumping water. It is only by being able to identify flexibility on a second by second basis that we are able to provide this service.

P:”And can you give us some idea of the sort of challenges that you’ve encountered as you’ve grown in scale?”

One of the key challenges we face is being able to interface with different industrial and commercial processes – ranging from water pumps to bitumen storage tanks to refrigeration systems.  These systems operate in very different ways and generate different kinds of data, so a key challenge for us is being able to collect and view this data in a coherent way, and then understand how all these different processes are consuming energy. 

Overcoming this problem is an essential part of how we can provide a consistent and reliable service to National Grid from many thousands of individual assets.  Today many aspects of our interface with each of these processes inevitably become bespoke, which then leads to challenges in how we maintain and operate the software on all of our devices, particularly as we scale up.

P: “Your growing need for device management rings very true for us – it’s a common story as a connected service starts to achieve scale. We encountered something similar at AlertMe as we scaled from 1,000 to 10,000 devices, which is why we decided to focus on that challenge at 1248. Can you put some more meat on the bones for us?”

A key area for us is being able to simplify how we connect and exchange information with so many different control systems and processes.  Standards could play a key part here – both in terms of how we connect to other devices and what information we exchange.  This would ease the process of connecting and maintaining devices as we scale up and allow us to focus on getting the maximum value out of the energy flexibility that we’re tapping into.

For example, in the future we believe that all appliances with the ability to provide flexibility to the electricity market will come with those principles built in off-the-shelf, so that an air conditioning controller designed to maintain room temperature is every bit as used to responding to electricity market signals as it is to temperature, likewise with water pumps and bitumen tanks.

Device management is very important when trying to operate service based on very large numbers of connected devices; we can only understand and quantify energy flexibility if we have an accurate understanding of which devices are online, and whether they are functioning correctly. Moving from the world we are in now, to the future I just outlined, will need collaboration with companies like 1248.

P: “David, thanks so much for sharing this with us.”

This blog post was originally featured on www.1248.io

The alternative to a power station has already arrived

Green Fields with sunrise - green energy
Transforming the UK’s energy future

Demand side response and energy storage technologies can unlock power in our energy system.

COP21 is focused on how to generate more and cleaner energy to power a low carbon world. But what if we also set about dramatically changing how we use the energy already available to us? Our creaking systems of power generation have in-built flexibility that needs unlocking so we don’t have to always turn to the option of building another expensive power plant.

Looking back to the time of Thomas Edison, we have made only incremental improvements in actually using the infrastructure we use to generate energy. With only a 6 per cent increase in load factor in 130 years, focusing on building more power stations alone is not a smart solution.

Instead, Open Energi is rolling out invisible and automated technology that allows large industrial consumers to align their energy use with available supply. If just 5 per cent of peak demand is met with flexible power, the response would be equivalent to the generation of a new nuclear power station.

With traditional power infrastructure, it has been especially difficult to store electricity. Today however, batteries are fast becoming a megatrend- allowing consumers to store low cost and renewable energy and deliver it back at times of peak demand. People don’t look out their window to see if the sun is shining or the wind is blowing before putting their kettle on, which means we need a new way of making electricity flexible. Arenko is building a portfolio of energy storage assets which puts the power back into the consumer’s hands whilst providing reinforcement to the electricity grid and reducing the need for significant and costly grid upgrades.

With the exciting growth of new technologies for managing demand it is important not to forget that people are at the heart of the energy system. Energy tech start-up Open Utility is trialling its first service, called Piclo, with Good Energy. The 100 per cent renewable energy marketplace connects wind, solar and hydro generators with businesses that want to cut their carbon emissions by buying clean energy. We’re moving towards democratised and decentralised energy systems, and we need platforms that let people take part. We’re moving away from large power stations, to people generating energy in their back yards, and selling to their neighbour, local school, hospital or workplace. International targets and pledges for cutting carbon emissions can seem quite abstract and unconnected to the everyday person. The advent of an online marketplace puts people back into the equation, giving them the choice to buy local green energy – and play their own part in combating climate change.

With the energy system already transitioning away from traditional models dominated by power stations, Open Energi, Arenko and Open Utility are pioneering a consumer-led, decentralised approach- providing flexible capacity which is exponentially cheaper than the alternatives.

By Open Energi’s David Hill, Arenko’s Rupert Newland and Open Utility’s James Johnston

Demand Response: how much is your flexible demand worth?

David Hill Headshot

Our energy system is changing and this is creating new opportunities for businesses to turn their energy use into an asset. By harnessing flexibility  in your electricity consumption, demand response can provide a new source of income and help build a cleaner, more secure and affordable energy system. Open Energi’s Business Development Director, David Hill explores how energy and technology are converging and putting you in charge of transforming our energy future.

Future proofing London: Regeneration in the age of IOT

Storage London Skyline of Gherkin

July 2015: David Hill, Business Development Director, Open Energi

Planning for the redevelopment of London’s Old Oak Common is now in full swing with the appointment of the Old Oak and Park Royal Development Corporation (OPDC) board. What lessons can the team behind the project learn to ensure the scheme is futureproofed and can meet the needs of Londoners for generations to come?

In February 2015, London’s population reached a new high of 8.6 million people, exceeding the previous record set back in 1939. The city’s population is set to continue to expand, with current estimates predicting it will reach 11 million by 2050.

There is an urgent need for new housing in the UK capital to help manage this growth. The Greater London Authority (GLA) has outlined ambitious investment plans to improve the capital’s infrastructure which could require £1.3tn of spending from now until 2050, most of which needs to go on housing and transport.  As part of one of the largest regeneration schemes in London for decades, plans are now fully afoot to transform brownfield land in Old Oak Common and Park Royal into a sustainable New Town close to the heart of the city.

At present, the Mayor of London’s office suggests that development in north-west London will create up to 24,000 homes and more than 55,000 jobs. According to the GLA, the scheme will be an exemplar in accessible, high quality and ‘smart’ regeneration which, over the next 20 years, will strengthen London’s role as a global city.

Within this wider regeneration project in the currently underutilised region of west London, plans are also being drawn up by the London Sustainable Development Commission (LSDC) to create a world-leading clean tech hub. LSDC, which advises the Mayor on the city’s low carbon economy, hopes the hub will attract forward-thinking start-ups and large green companies from across Europe, especially once major planned train lines open, including Crossrail and HS2.

Accordingly, the GLA’s Draft Old Oak and Park Royal Opportunity Area Planning Framework (OAPF), which was produced with contributions from Transport for London (TfL) and the London Boroughs of Brent, Ealing and Hammersmith & Fulham sets out an ambitious vision to ensure that the Old Oak and Park Royal area is an exemplar of low carbon development.

The GLA has already committed to achieving the highest standards of energy efficiency and low carbon technology and, to this end, has pledged to produce an Energy Strategy and subsequent Energy Masterplan for the area.

The Mayor has set a target for London to self-generate 25% of all electricity consumption by 2025 to improve system resilience and reduce the cost of transmission. Local energy in London includes solar power and heating networks supplied by plants which are close to where energy is used and which generate heat and power at the same time.

The problem with these approaches is that they require space, which is already at a premium in London. Added to this, not only is gas for combined heat and power (CHP) tied in to volatile global energy prices, but it is also carbon emitting – a particularly problematic scenario for a city which is already struggling with an air pollution crisis. The city is in urgent need of a high-tech energy solution and, as this swathe of London begins its transformation, it is essential that the GLA fully embraces the huge opportunity for system change to ensure the scheme is futureproofed and can meet the needs of Londoners for generations to come.

Cutting edge software and an Internet of Things approach to energy-consuming assets are enabling advanced forms of demand response technology to be rolled out across a range of equipment – including heaters, pumps, chillers, refrigerators and air conditioning units – turning them into smart, automated and autonomous devices that can react instantly to changes in electricity supply and demand across the network to free up capacity, while also delivering new revenues for consumers in return for this improved grid resilience.

The UK has historically tried to deal with capacity issues by increasing supply rather than addressing the root of the problem but, to illustrate the potential scale of success, we should look to the US, where the use of demand response technology has already shaved off ten per cent of the country’s peak energy demand.

In the UK, National Grid urgently needs more flexibility from the demand side to support intermittent renewable use and meet rising energy demand, and has already announced targets to increase demand side balancing capacity from 700MW to 3GW by 2020. In London alone, there is around 250MW (equivalent to five per cent of peak demand) of flexibility in our energy system that could be easily utilised using demand response.  This would effectively remove one whole peaking power station from the grid. Of the £1.3 trillion OPDC infrastructure plan, £150 billion of spending is slated for energy. If we apply the five per cent flexibility logic above, this equates to instant savings of £7.5 billion.

Demand flexibility resides in a range of city areas. For example, eighteen per cent of London‘s energy consumption comes from commercial buildings, of which at least twenty per cent is flexible.  Two per cent of power consumption comes from the water sector, of which eighty per cent is flexible.  In aggregate, this flexibility can provide London with a ‘Virtual Power Plant’, meeting the needs of the growing population without the need for any new infrastructure.

The business case for demand response already exists without any need for intervention or support – and is already being applied effectively by organisations from National Grid to energy intensive corporates, such as Sainsbury’s. From a sustainability perspective, too, demand response makes sense in enabling businesses to move beyond their own footprint and supply chains to help deliver system-wide change.

As development progresses, the Old Oak Common and Park Royal project is a prime candidate for smart grids and demand side response at both building (new and retrofitting existing) and aggregate levels to optimise capacity investment, reduce energy demand, balance local energy supply and demand, including peak energy across the site, and reduce the need for network reinforcement.

HyperCat City’s work in promoting IOT standards, and then involving these in planning and design phases already provide OPDC with some of the crucial tools needed to deliver real cost reduction benefits.

As London expands there is a huge opportunity to capitalise on power demand flexibility to drive major cost and carbon efficiency benefits for the city. To achieve that we must first create a comprehensive map of where flexibility currently resides in the system which will show the level of generation actually required to power new build projects, such as Old Oak Common and Park Royal.  Those new build projects present the opportunity to map demand flexibility at a highly granular level, i.e. by building, which will creates a true image of where capacity lies, as well as building in resilience from the ground up.

Is demand response the Airbnb of energy?

In recent years we’ve learned to find spare capacity in all kinds of places, not least our homes. Imagine if we could do the same with our energy use? David Hill explains why Demand Response could be the Airbnb of the energy market.

The Internet of Things is enabling us to exploit tiny kilowatts of flexible capacity from everyday equipment to build a virtual power station and sell the aggregated energy back to National Grid.