How the rise of ‘Energy as a Service’ can power decarbonisation

open energi wind farm

Energy as a Service is the latest business model innovation to arrive in the energy supply industry. In short it is all about moving away from buying energy on a per unit (p/kWh) basis and moving towards a fixed fee per month within certain volume thresholds; akin to how we pay for mobile phone contracts. Energy as a Service has emerged off the back of disruption to the way we supply, consume and now ultimately buy energy, which has fundamentally changed energy market economics.

This disruption is the result of four major technology-driven trends:

  • Decarbonisation – The growth of energy supply from zero marginal cost renewable resources
  • Decentralisation – The growth in energy generated from smaller scale low carbon resources either on customer sites (Behind-the-Meter) or at the Distribution Level (Distributed Energy)
  • Digitisation – The ability to measure and monitor machine behaviour in real-time and automate how we use and supply energy
  • Democratisation – The rise in consumer participation, control and choice which is increasingly determining how energy is bought and used

Traditional per unit models work where the dominant cost in delivery of the product or service scales according to the volume used. This was true when the majority of power supplied came from sources that required a fuel input e.g. coal and gas. The more energy consumed the greater the proportional cost of buying and burning that fuel to generate more kWhs of power.  Other components which make up the total ‘at-the-meter’ price have also been charged on a per unit basis to ensure those who use more of the electricity network pay more for it; government taxes, utility profit margins and network charges (with some time-of-use element).

However, when you start to use zero marginal cost power the economics get flipped on their head. Renewable ‘fuel’ is free, so the dominant cost in consuming energy becomes the infrastructure needed to deliver it. Wind turbines, PV panels, transmission and distribution cables have low operational costs once built, so the initial capital expenditure is where the dominant cost lies.

Across Europe average wholesale prices now reflect wind and sun patterns more than the cost of coal and gas, and at periods of low demand and high renewable output we consistently see negative prices. Clearly change is needed as consuming more energy at these times is beneficial to the whole system but a per unit charging mechanism disincentivises users from doing that.

Enter, Energy as a Service. Already we are seeing a shift in network charging towards capacity-based charges instead of use-of-system charges. Wholesale prices are not far behind; the task becomes providing the flexibility to firm up renewable output. Thanks to the digital revolution described above this flexibility can come from consumers’ demand, cost-effectively tapping into flexibility inherent in distributed energy resources behind-the-meter.

Take a given offshore wind site, with known capacity factors of about 50%. It is possible to quantify the amount of flexible energy needed to ensure 99% of customer demand is met at all times. Using existing business assets means it is possible to take advantage of zero marginal cost flexibility in everyday processes (such as heating, cooling, pumping, battery storage and CHPs), avoid unnecessary infrastructure upgrades and minimise efficiency losses in transporting power. Once it is understood how much flexible power is needed to firm up the output of renewable generation the next task is what technologies do you use to meet that flexibility requirement.

Artificial intelligence-powered flexibility platforms – like Open Energi’s Dynamic Demand 2.0 technology – which can manage distributed energy resources in real-time, are critical. They can evaluate the amount of flexibility in existing power-consuming assets and processes – in addition to any battery storage and/or flexible generation (such as CHPs) – and map demand to supply. This then becomes a constant, real-time scheduling problem for the platform to manage; invisibly ramping processes up when wind is abundant and storing as much power as possible, or turning processes down to a stable minimum and discharging batteries or using a CHP when wind output is low.  If real-time scheduling isn’t maintained, the cost structure breaks down, so the reliability of these platforms is critical.

What is important to recognise here is that below a certain demand threshold the marginal cost of putting in place this service is the cost of operating the wind and the software required to schedule behind-the-meter flexibility. This is why Europe’s utilities are making huge investments and acquisitions in virtual power plant technology.

By doing so the costs of delivering energy become fixed and predictable and scale with size of connection instead of actual usage. Exactly like the mobile phone industry where the marginal cost of sending a packet of data is immaterial in comparison to network costs of all infrastructure.

For Open Energi Energy as a Service has always been the natural end-game in maximising the value of Demand Response. It shelters consumers from the continuously changing and complex incentives of the existing Demand Response markets, and instead offers a simple proposition: “By installing demand response software across a range of assets you can pay a lower fixed monthly fee for your energy”.

The clarity and certainty offered by Energy as a Service makes it easy to structure simple, long-term financing solutions for different technologies – e.g. solar PV, energy storage, CHP – and allows businesses to concentrate on what they do best.  All the complexities of power procurement and demand response markets are removed in place of a known fixed fee per month that ensures reliable, clean and affordable energy. 

David Hill, Commercial Director, Open Energi

This blog was originally posted on Current News.

Discover the value of your demand flexibility – explore our VR world!

Open Energi VR landscape

Your electricity demand may be more flexible than you realise. Our analysis suggests that on average up to 50% of a business’ electricity demand can be shifted for up to one hour, with zero disruption to operational performance.

This flexibility is vital to support more renewable power and create a sustainable energy future.

In the UK, it’s created a £9 billion market opportunity. But how much could it be worth to your business?

Explore our Virtual Reality world to find out:

vr.openenergi.com 

Open Energi’s Flexible Energy Survey service provides an accurate, independent assessment of your site’s total demand flexibility and the commercial opportunity it represents for your business.

It includes:

  • Comprehensive site survey carried out by qualified engineers with unique experience assessing distributed energy resources for demand-side incentives.
  • Detailed feasibility report identifying the total flexibility of your site, asset-specific strategies, integration solutions and commercial benefits.

For more details or to arrange a survey, please get in touch.

Open Energi VR works well on desktop, better on mobile and best with a VR headset. Please note, the figures used in this VR are based on current market data and Open Energi’s experience with similar assets and processes across a wide range of sectors. They are intended only as a guide and are no guarantee of future value.

 

Innovative research project aims to support greater local integration of Solar PV

solar panels

Increasing levels of solar PV are having a growing impact on the operation of the low voltage (LV) network. The need for new grid connections has impacted project viability and in some areas of the country Distribution Network Operators (DNOs) have been forced to limit new solar integration. However, new technologies are introducing ways to make smarter use of the abundant free energy provided by the sun and deliver new revenue streams, without the need for costly infrastructure upgrades.

Funded by Innovate UK, this innovative research project aims to support greater solar PV integration, by forecasting solar output in near-time with better accuracy, and enabling generation to interact dynamically with demand.

In the South West of England, where these challenges are particularly acute due to a constrained network, Meniscus Systems, BRE National Solar Centre, Cornwall Council and Open Energi are collaborating to create short-interval (every 5 minutes), location-specific solar intensity and power predictions that will improve local grid operation, optimise the performance of solar farms and enable operators to participate in Demand Side Response (DSR) schemes to maximise revenue, with or without energy storage.

Cornwall has the fewest grid interconnections with the largest solar PV installed capacity – over 475MW of large-scale (1MW+) solar farms – leading to network operating problems. Resulting constraints imposed by the DNO make it harder to connect large scale renewable generation. The ability to better predict and manage the performance of solar PV on the LV network is an important step towards the creation of local energy markets, and will help to ensure that Cornwall’s residents, communities and local economy benefit from the low carbon energy transition.

The project will make use of:

  • Real-time and historic satellite based imagery to predict solar intensity for any location at intervals of 5 minutes on an hour ahead basis.
  • Historic and near real-time PV data from the Cornwall Council solar farm at Cornwall Airport Newquay (CAN) to test and demonstrate the system and explore the role of on-site battery storage.
  • Open Energi’s expertise to deliver accurate, real-time PV-based DSR solutions to DNOs and owner/operators of solar farms to more efficiently manage local networks.

Accurately modelling the commercial benefits of solar PV and battery storage will be an important aspect of the project. If predicted solar generation is higher than the export limit of the site, a battery can be charged instead of curtailing generation, discharged to grid during a later period of high demand, and in the meantime the battery can be employed for DSR. For a site with no installed storage, generation can be curtailed at times when the network is constrained in response to DSR signals, such as Demand Turn-Up. Accurate predictions allow the DNO or Transmission System Operator (National Grid) to efficiently manage their network

With the UK’s solar capacity forecast to rise to 15.7GW by 2020 – from just over 9.3GW at present – using advanced technology to more efficiently integrate and optimise solar PV sites is vital to create a more sustainable energy future. Due for completion in early 2019, this project aims to pave the way for the smarter use of solar PV via peer-to-peer energy markets that benefit local communities, delivering a smarter, more flexible energy system across the UK.

The lead Project Team comprise:

  • Meniscus Systems – Project Lead and delivery of solar intensity predictions in a form that will allow integration with the DSR market.
  • Cornwall Council – owner/operator of solar farm which will be used to test and demonstrate the system.
  • BRE National Solar Centre – responsible for ensuring the system meets the requirements of the PV industry and validating the system’s performance.
  • Open Energi – DSR aggregator responsible for identifying DSR revenue opportunities and systems needed to deliver this capability.

For more details, please get in touch.

Robyn Lucas is Head of Data Science, Open Energi

Securing Digital Distributed Energy Infrastructure

Open Energi Engineer

The Internet of Things (IoT), a term used to denote the digital infrastructure where any digitalised asset, no matter how small, can connect to an invisible mesh of other assets through the internet, has recently become synonymous with security breaches and exploitation. This is true not just in a domestic setting, where flaws in Samsung’s ‘Smart Home’ let hackers unlock doors and set off fire alarms[1], but also in industrial IoT systems, where hackers were able to change the levels of chemicals being used to treat tap water[2]. While security breaches in websites are common, with credit card details frequently stolen, breaches to industrial systems connected to the internet are fewer and more recent, as such systems were previously isolated from public networks.

In the world of Demand Side Response (DSR), security is one of the priorities of most asset owners. DSR assets have a core purpose other than helping to balance the energy system, so a DSR provider must be able to demonstrate that they will never prevent the safe and correct operation of the asset, be that treating wastewater in a sewage treatment facility or refrigerating food in a supermarket. This condition must hold even in the presence of bugs in the DSR provider’s software, and even if their own systems are penetrated by hackers. The usual practices of data encryption, strong access controls and network segregation only provide part of the answer, as they still don’t guarantee safe operation under all possible failure modes.

This condition may seem unreasonable, but in critical systems development it is crucial. A nuclear facility operating normally is run through a software system, but all safety-critical checks are duplicated in hardware interlocks that take over should the software fail in any way[3]. These interlocks are immutable and thus immune to hacking or software bugs. In space missions, NASA has since the Challenger and Columbia incidents started to use consensus of multiple software systems developed by several independent teams to control rocket operation to eliminate the possibility that a single bug could affect the mission[4].

As the DSR industry progresses towards standardisation and common best practice guidelines, a key safety requirement must be safe operation of the asset under any failure mode. Open Energi on-site controllers are always supplemented by independent hardware or software interlocks that cannot be modified by us, creating an orthogonal layer of control required to operate critical assets. For example, on asphalt sites, we supplement our own controls with hardware interlocks to disable our control should the temperature of the tank increase beyond a safe limit. On water sites, we augment our controls with independently developed PLC code that checks that the asset is still within its control parameters and disables our control immediately if not. This dual layer of security means that even if our systems are compromised by an attacker, the DSR assets will continue to operate safely.

Michael Bironneau is Technical Director at Open Energi.

[1]     Wired Magazine. May 2016. ‘Flaws in Samsung Smart home let hackers unlock doors and set off fire alarms’. https://www.wired.com/2016/05/flaws-samsungs-smart-home-let-hackers-unlock-doors-set-off-fire-alarms/

[2]     The Register. March 2016. ‘Water treatment plant hacked, chemical mix changed for tap supplies’. http://www.theregister.co.uk/2016/03/24/water_utility_hacked/

[3]     L.J. Jardine and M.M. Moshkov. Nuclear Materials Safety Management, Vol 2. 1998. See eg. p.151.

[4]     Organizational Learning at NASA: The Challenger and Columbia Incidents. 1989. J. Mahler. See eg. p.63.

How demand flexibility can boost the benefit of a Corporate PPA

solar panels

More and more companies are turning to corporate PPAs as a way to power their business sustainably and manage their long-term energy costs. Using demand flexibility to help align patterns of supply and demand can boost the benefits all round, as Open Energi’s Commercial Analyst, Dago Cedillos, explains.

The rise of corporate PPAs

The increasing cost competitiveness of renewables and the desire from many businesses to strengthen their sustainability credentials has led to the rise in popularity of the corporate PPA. Through a corporate Power Purchase Agreement (PPA), a company agrees to purchase the energy produced by a renewable project(s). This helps businesses to meet their sustainability goals whilst enabling them to hedge against future energy prices and even bring down the cost of their current energy bill.

Renewable developers have turned to corporate PPAs as a means to enable the delivery of their pipelines. With the removal of subsidies such as the Feed-in Tariffs (FiTs) here in the UK, PPAs can help developers  finance and develop projects by securing long-term energy sale contracts which guarantee revenue for a substantial part of the project lifetime.

How does a corporate PPA work?

A corporate PPA is a contract between a renewable power producer and a corporate, agreeing to supply a specified volume of electricity at an agreed price. It is usually structured to last for 10 years or more, considerably longer than an energy supply tariff which tend to be for one to three years.

There’s no need for the corporate and the renewable project to be located near one another – they could be next door to each other or located on opposite sides of the country.

Of course a company’s demand will not always match a project’s generation. To manage this disparity companies have to go through a licensed supplier who will trade and settle in the market the surplus energy they do not use and/or the additional energy they may require, guaranteeing power delivery and assuming responsibility for issuing the corporate’s electricity. Suppliers take a fee or a premium for administration and taking the risk of balancing the residual of the renewable generation and the company’s electricity demand.

Aligning supply and demand

For example: let’s say a factory with demand profile X (blue line) agrees a PPA with a small solar farm with generation profile Y (grey line). The factory effectively consumes energy generated by the solar farm represented by shaded area A. The area B represents the additional energy that must be bought by the supplier to meet the factory’s demand, whilst the area C represents the surplus renewable energy that is sold to another party as the site’s demand has already been met.

Matching factory demand and renewable generation

The cost of this residual balancing will be affected by market dynamics and the premium charged by the supplier for managing this process.

The overall business benefit of a PPA will be determined by a number of factors, including the demand profile of the site, generation profile of the asset, market prices and the structure of the agreement with the supplier. But the more responsive a corporate’s demand can be to these factors, the better positioned they will be to maximise the benefits of a PPA.

Cutting costs with demand flexibility

This is where demand side response (DSR) and energy storage come in; shifting demand to more closely match the project’s renewable generation profile could maximise the effective consumption of this energy real-time and result in lower residual balancing. This would mean having to buy less energy during the shortage periods, which might be more expensive than that offered by the PPA, and selling back less energy during the surplus periods. Additionally, it could help decrease the imbalance risk of the supplier and make the case for a lower fee or premium.

Demand flexibility and corporate PPAsIt could also present arbitrage opportunities for the business. By shifting consumption away from peak times to cheaper periods, surplus energy from the PPA can be sold on at a high rate, while avoiding punishing network and capacity market charges which occur at the same time. Flexibility could even be used to respond to instantaneous market opportunities, such as high system prices occurring with mismatch in supply and demand, much in the way the trading team of a supplier would do today with large generators.

Optimising a PPA with demand flexibilityThe value of this balancing achieved through flexibility with storage and DSR will vary across hours, days and seasons according to changing market conditions and patterns of supply and demand. What’s needed is technology that can evaluate these parameters in real-time, and optimise a business’ demand accordingly. This is where Open Energi comes in. We’re using our advanced technology, data-driven insight and experience of invisibly managing demand flexibility to help corporates make the most of their PPA.

Our solutions not only help to balance the grid, but can also balance demand real-time against PPA generation. This means businesses can make better use of cheap, renewable energy when it’s there, lower costs for suppliers, and ultimately bring their own energy bills down.

Dago Cedillos is a Commercial Analyst at Open Energi, where he focuses on innovative methods and business models to enable a more flexible energy system. Prior to Open Energi, Dago was part of a clean-tech startup working on a novel carbon-negative electricity generation technology. Dago has an MSc in Sustainable Energy Futures from Imperial College London, and has published a paper on investment strategies for decarbonisation and decentralized energy systems.

The 4th industrial revolution: a smart power revolution?

Sainsbury's deliver demand side response from its stores UK wide

On the 8th September, James Heappey, Conservative MP for Wells took part in a House of Commons debate on the 4th Industrial Revolution.

In his speech he talked about the “smart energy revolution” that is underway in the UK today, and highlighted the pioneering work of two of Open Energi’s customers, Sainsbury’s and Aggregate Industries. Here’s what he had to say:

Speaking twice in 25 hours is a record for me, and I am grateful for the opportunity. I congratulate my hon. Friend Mr Mak, who has secured a worthwhile debate and opened it brilliantly. I apologise for being late, but I was working on the Energy and Climate Change Committee’s paper on renewable heat and transport targets, which will be released this evening. I commend it to the House: it is probably one of the most insightful Select Committee reports that Members will read all year. Indeed, all of our Committee’s reports are insightful.

In summing up yesterday’s debate, the Minister used some fantastic theatrical references, which I hope will become a tradition of his summing-up speeches. He has an encyclopaedic knowledge of the theatre, so we look forward to that. Today, I present, to use my own theatrical reference, the second part of my play in two parts, in which I will talk about the energy opportunities provided by the collision of emerging technologies and our existing energy infrastructure.

There is some dispute over whether this is the third or fourth industrial revolution. A book by Professor Jeremy Rifkin has become a bit of a bible for me, as I have sought to develop my thinking on how energy policy might evolve. He thinks that this is the third industrial revolution, but none the less it is an excellent read that very much pulls in the same direction as those who are advocating the fourth industrial revolution.

Ministers will already have looked in great detail at the National Infrastructure Commission’s “Smart Power” report, which is a fantastic publication setting out how we can harness all these wonderful technologies as we digitise the energy system. The reality, as the report observes, is that we could save £8 billion a year for the UK economy if we digitise our energy system and harness those technologies. That figure represents not just immediate savings on our energy bills, but gains in productivity.

Nicola Shaw, the head of National Grid, told the BBC “Today” programme last week that we are seeing

“a smart energy revolution across the country with consumption adjustments reflecting when energy is cheapest”.

The idea that we have to change our consumption habits to meet a changing energy market sounds like a nightmare to most people, but the reality is that we already have many of the technologies in our homes. Most major white goods manufacturers are producing smart appliances already: they are in our shops and, probably unknowingly, we already have them in our homes. Through the internet of things, they will all start to speak to one another to make sure that they operate at the most efficient and cost-effective time. They also report faults, so people will not have to carry on for years with a fridge that uses more power than it should, because it will already have flagged up its fault to whoever manufactured it. These are exciting times and the technologies already exist. It is not, in my view, going to be a case of opting into them, because manufacturers are building them as standard and they will increasingly do so.

The Government face a challenge in preparing our homes, businesses and society for the internet of things from an energy perspective, so I will give my thoughts on our system preparedness before moving on to examples of where we are already seeing the huge economic advantages.

As Ministers know only too well, the smart meter programme is the keystone in achieving the digitisation of our energy system, and I know that they will be keen to push on with that roll-out at best speed. Everything that we seek to do in bringing technological innovation into the energy space depends on those smart meters being in place to digitise the system. Similarly, on the way in which our grid is put together, we want all our generational capacity—from the smallest to the largest—to be able to speak in real time about what it is producing, so that we can have a more dynamic generation system. We also need to sort out the regulatory framework for storage, because at the moment people have, in effect, to pay for their energy twice: first when it is generated, and secondly when it is released from storage. Surely, that cannot continue for much longer.

We also have to make sure that our distribution networks—the substations in our communities—are capable of dealing with more dynamic demand and clustered demand, particularly overnight, when people might be taking advantage of cheap energy to charge cars, run the washing machine and tumble dryer, and heat immersion tanks. None of that will happen automatically without the Government paving the way. Thereafter, however, I am sure that these technologies will find their place in the market by themselves. They will make life better, and people will buy them as a result. The Government do not need to encourage people every year or so to change their mobile phone, because people just want to have the latest technology at their disposal. I am sure that that will be the case in this area if the Government create the right regulatory framework with energy policy.

I turn to storage. The price of storage has already come down from $3,000 per kWh to about $200 today, and it will come down even more quickly still. We saw over the summer reports about the Tesla Panasonic factory in Colorado, the construction of which is being accelerated quite rapidly given the increase in demand. These are exciting times, because storage is the key to flattening the energy supply curve and unlocking the real potential of renewables.

The real technological wizardry, however, is demand-side response. That may be a combination of words that many in the Chamber have not heard before, but it needs to be at the forefront of the way in which we discuss energy. Flattening the supply curve through the availability of storage deals with only half the problem; flattening the demand curve through demand-side management is equally important.

I have been hugely impressed as I have become enthused about DSR, and as I have gone around various companies that are delivering it, by the scale of the savings that it is bringing to businesses. Marriott hotels have signed up to a DSR contract that saves them hundreds of thousands of dollars a year. Workers at Aggregate Industries’ bitumen plants used to just turn up in the morning and fire up the boilers to get the bitumen tanks up to heat. They would operate over the course of the day, and then they would be switched off. Aggregate Industries now employs technologies that allow it to say, “Our tolerance is that we need to keep these tanks at a certain temperature, and provided that they are at that temperature, we can release energy back to the grid.” It does so, and it gets money for nothing as a result. By employing those technologies, it can sell back energy that it does not need, which it would otherwise just have paid for and wasted. That creates a huge saving.

Similarly, refrigeration is a massive cost for supermarkets and the food industry in general. Sainsbury’s has employed demand-side response, and the store in my constituency in Street, Somerset has released 20 kW of capacity back to the grid simply from DSR. That is extraordinary.

The other area that I want to touch on was the electrification of the transport system. I had to check very carefully with the Clerk of the Energy and Climate Change Committee about when I would find myself in contempt of Parliament, but I understand that if I draw on the evidence rather than on the report itself, it is fine. This is a hugely exciting opportunity for us to employ electric cars and electric haulage systems in the UK. The problem is that I am not sure that we yet have the infrastructure in place to support them, and I am not sure that we have the right fiscal structure to support them either.

I tried to buy an electric car over the summer, and sadly I found that their range was probably not quite enough to allow me to do my duties around my rural Somerset constituency. They are getting there, however, and we just need to incentivise the acceleration of the technology, so that we get beyond the 100-mile range to a range of 200 or 300 miles. If that happens, I think that people will, all of a sudden, go for electric cars quite quickly. All the incentives that the Government have in place—the £4,500 that they contribute towards the car and the contribution they make towards a charging point at the buyer’s home—are fantastic. The Government’s emphasis on establishing a charging infrastructure at motorway service stations and on main roads is also fantastic, but we really need to grow the infrastructure much more if people are to buy the cars and make the saving that we hope they will. The argument is that electric cars will make us more productive as well, particularly when we go beyond merely electric cars to electric autonomous cars, and we find that we can move around our towns and cities much more freely.

Interestingly, in the United States, Coca-Cola has employed hydrogen-electric hybrid vehicles for its entire fleet, and it has made a 20% reduction on its fuel costs. It made that huge saving by employing those technologies and electrifying its transport fleet, which is very exciting. We should look across at that and realise that this is not just something that people do if they are green and they want to be environmentally sensitive. It is something that an individual or a business can do if they want to reduce their operating costs—technology colliding with energy generation and energy consumption to make us more efficient and more cost-effective, and to make all our operating costs that bit cheaper.

Mr Deputy Speaker, you encouraged us to keep within 10 minutes, so I will summarise, rather than go into the many more examples that I am itching to provide. The bottom line is that, while we will focus very much on our digital infrastructure with broadband and 5G mobile phones and we will worry very much about the preparedness of our airports and air routes, as well as of our roads and rail, the energy infrastructure is just as important. In my view, alongside the broadband and mobile phone networks, the three sets of infrastructure of telecoms, broadband and energy will drive the fourth—or third—industrial revolution and allow us to harness all these fantastic technologies. We should seek to do so not just because we are seeking to arrest climate change, but because it is cost-effective, makes business sense, will increase productivity and, ultimately, will be great for our economy.

Access the full debate here.