The Business of Being an Aggregator
We’re at a tipping point in how electricity systems are balanced. Traditionally, supply and demand have been matched by turning large power plants up and down, with the occasional very large industrial customer, like a steel works, containing its demand to help balance the system. But over the last ten years we’ve seen a new breed of businesses – aggregators – bringing together hundreds and thousands of distributed assets to help the electricity systems stay balanced.
We’ve seen more and more aggregators emerging as markets have opened to distributed portfolios, with more than 70 appearing across Europe. Delta-ee Director Jon Slowe suggests “we are past the tipping point of this being a distinct sector in the energy market and there will be lots more action and development over the next years”.
So how can these businesses make sure they succeed?
An aggregator delivering demand response to National Grid in the GB market, Flexitricity, currently operates around 150 connected customer sites, connecting assets ranging from flexible industrial load, to combined heat and power generators, to standby generation and large energy storage batteries. Alastair Martin, Founder and Chief Strategy Officer, suggests a crucial factor in the success of aggregators is the understanding of customers.
“If you can’t tell the difference between how a data centre and a tomato farmer and a water treatment works then your customers are not going to stick with you, so customer interaction, getting that understanding right and teaching your system to behave in the appropriate way for each customer type, that to me, is the most important aspect of success.”
Pieter-Jan Mermans, Co-Founder and co-CEO, Centrica Business Solutions (previously REstore), adds that investment in the aggregator’s platform is essential:
“One of the lessons learnt for us is that quite early on we have started to invest a lot in the platform, in the software as such but also in the methods behind the software that we have started to patent.”
Mermans also emphasises the importance of an awareness of the ever-changing market.
“The markets and the monetisation side of things is something that’s prone to very sudden change, so especially in flexibility markets you cannot really trust that business model that you had last year which generated a lot of profits [and so you] have to adapt your business model all the time.”
The competitive environment for aggregators is changing quickly too. “We’re probably still in the phase where growing the size of the market is more important than fighting for market share”, says Jon Slowe. “But as mainstream energy companies start to see this as a core part of their business, the USP and competitive position of aggregation will become more important – whether you’re a specialist aggregator or a mainstream energy company”.
To find out more about what it takes to be a successful aggregator – and for an explanation of what an aggregator actually is – download the Aggregator episode of Talking New Energy, a Delta-ee podcast, available now.