Don’t get caught out by thinking this is something for the future. It’s happening now. Local optimisation of supply and demand is on the rise, and will accelerate. In this blog I set out the five reasons why.
If you agree with these, and you are in the active in the energy value chain, you need to take an active position on what this means for your business. There is a whole host of start-ups and companies from outside the traditional utility sector (as well as your traditional competitors) starting to target the opportunities arising from localisation of energy.
I’ll write about what the different positions a company could take in a future blog. Here are my five reasons why localisation of energy is on the rise.
1. The growth in distributed assets – and it’s certainly not just about PV. Connected or connectable assets such as EVs, electric heating appliances, batteries, and commercial HVAC systems are following a hockey-stick curve.
Much of the attention, rightly, is on shiny new assets – such as connected EV chargepoints, connected batteries installed with PV, or hybrid heat pumps. But there is also 100s of GW of connected or connectable assets already installed in European buildings, with companies now starting to retrofit and tap into this huge resource. This type of resource simply hasn’t been available to the energy system in the past, aside from crude direct load control or fixed time of use tariffs. I see more and more companies learning how to generate value from optimising these assets and using data to deliver value for customers.
2. Changes to market structures & regulation are seeing more value opportunities from balancing of demand and supply using distributed assets, often on a local basis.
These range from implicit incentives to self-consumed, locally generated energy, to DSOs using flexible demand to defer or avoid local network reinforcement, to incentives for collective self-consumption of renewables. This is just the beginning – market structures and regulation are still heavily weighted towards a centralised system. This is inevitable, as market structures and regulations will rightly always lag innovation. But I see these starting to move across many European markets.
3. The infrastructure for distributed energy is industrializing – connecting assets, managing data flows and optimising operation.
Companies, often start-ups, have been innovating with building this infrastructure over the last twenty years. Some of these companies have now got several years of experience under their belt with a variety of distributed assets, experiences in multiple markets, and big backers. It is a complex area – with competing standards, protocols and architectures. But a lot of hard lessons have been learnt, and developments in connectivity, AI and machine learning are accelerating progress.
4. A wave of business model innovation is being unleashed – some (but unfortunately not all) with compelling customer propositions.
The amount of innovation in business models at the customer end of the energy value chain is astounding. Much of it is, unfortunately, still led by ‘technology push’. But an increasing proportion is built around customer needs, using local balancing of supply and demand to deliver a compelling customer proposition. What I’ve seen over the last years gives me plenty of confidence that enough of this business model innovation will succeed and stick, and start to grow from their niches and beachhead markets.
5. Customer groups are increasingly motivated to play an active role in the energy transition – be they villages, towns, new developments, university campuses or industrial estates.
Many people mistake ‘playing an active role’ with ‘engaging every day with energy’. Not even I can be bothered to engage every day with my hybrid heat pump, exciting though it is. But the underlying desire to play a role in creating a more sustainable energy system is there, as our customer research demonstrates. It’s the job of the energy sector to tap into this and deliver something that is highly complex in an engaging and simple way that delivers value to customer groups.
To find out more about how energy communities can fund the energy transition, download Delta-EE's new whitepaper.