Demand side response as an effective approach to shift peak load and reduce network congestion, has been perceived as a promising trend for energy management and supply.
Residential demand response (DR) is starting to attract widespread attention, following on from steady growth in commercial and industrial demand response. We explore how developed residential DR is, and the size and nature of the opportunity.
Key assets for residential demand response – HVAC, EVs and stationary batteries
In our view there are three key asset types when it comes to residential DR: HVAC, electric vehicles and residential batteries. These can be broken down and characterised as follows.
- Room heaters: direct electric, storage heaters, reversible AC
- Whole house heating: heat pumps, direct electric central heating
Space cooling: room air conditioners or whole house air conditioning
- Electricity as the main source (direct electric, heat pump that also serves space heating, or heat pump water heaters
- Electric heating as a backup source (often known as an immersion heater, a heating element in a hot water tank)
2. Electric Vehicles
The majority of EV charging is likely to be carried out at home. This is usually done with a dedicated EV charger. Currently there are two main approaches for EV demand response:
- Smart charging: enables the rate of charging to be controlled or influenced
- Vehicle to grid: enables power to flow from the car to the house / grid. This is in its infancy.
3. Stationary Batteries
Residential-scale batteries are mainly used for self-consumption purpose – storing energy from solar PV. Some are also starting to be used for interface with the wider electricity system and with time-of-use tariff.
Other forms of loads like refrigeration, washing machine and even lightning are not major focus for residential DR today due to:
- They only account for a small amount of power
- There is limited ability to shift their operation
That might change in the future, but we don't expect these loads to significantly contribute to residential DR in the next five years.
Across these three asset types, how much capacity is installed today? Unsurprisingly HVAC assets account for the largest proportion of the installed base across key EU markets (see below), with over 90% of total capacity; if companies can tap into this installed base, there is a lot of capacity available. Stationary (residential) batteries and EVs are small in comparison today.
Source: European Alternative Fuels Observatory; Delta-ee, Connected Home Service, Energy Storage Research service
Residential demand response today
We hear a lot of discussion about residential demand response – but how mature is it? Is it just talk and trials or is there much commercial opportunity? Our research finds that:
- The current market size of residential demand response in the EU is at just under 1.5GW of capacity. This is a very small number compared to both conventional power generation, and the installed base of assets that could readily be used for demand response.
- 16 companies are currently providing 30 ‘commercial’ residential DR projects across 9 EU markets; another 30 trials are nearing commercialisation.
- One company, Voltalis, dominates residential DR capacity today, with close to 1 GW of capacity.
- New technology platforms are emerging by partnering with existing aggregators and energy suppliers.
Commercial activities are certainly happening, though at an infancy stage, with more potential to be explored in the next few years.
The residential demand response market has certainly begun, but is still at a very early stage, both in terms of technology and customer engagement. We believe the market is opening and barriers for entrants are slowly falling away. We have compiled over 60 entries in our residential DR infobase – a sign that many players are working hard to drive this market.
Looking forward, we are excited to see that there is an emerging potential for the residential demand response market. With 12GW of new residential - assets across HVAC, EV chargers and batteries - being installed in the next five years, we expect the market to become much more significant and active soon.
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