The interactions between HEM, the electricity system and energy communities
As my colleague Alix Weil explained in her blog, a strong growth is expected in the market of Home Energy Management (HEM) and we believe over 2.3M homes will be equipped by 2023. This is mostly driven by the optimisation of self-consumption and of dynamic electricity tariffs.
We defined HEM as optimising the energy flows in the home, and this is only a part of a wider trend towards a more distributed, democratised energy system. Particularly linked to HEM, two other elements of the energy transition can see huge benefits from managing energy in the home:
- The electricity system
- Energy communities
Optimising the energy flows in the electricity system
With the rising penetration of distributed energy and EVs for example, the resilience of electricity networks is facing more challenges.
Transmission System Operators (TSOs) already procure reserve services to manage the electricity system in the short term. Providers of reserve capacity are typically paid an availability fee to compensate them for holding capacity on standby, and a utilisation fee, to compensate the energy actually provided.
Some Distribution System Operators (DSOs) are also starting to pay for demand side flexibility to mitigate local network congestion. This could be used daily, or only in response to a fault on the network.
As part of its optimisation of energy flows in the home, HEM can monitor and control consumption of certain large appliances. While some companies focus purely on providing flexibility to TSOs and DSOs, some (e.g. Tiko, There Corporation) have seen the benefits of having a system in the home which can help them achieve more values. Flexibility providers see this as an opportunity to provide values for both the end-user and the electricity system. Equally, HEM providers (e.g. Sonnen) are starting to move from HEM only to add flexibility to their portfolio.
However, today barriers still exist for residential assets to entry, mainly because of the insufficient bid sizes, restrictions on aggregated portfolios and technical requirements. Nevertheless, with the DSO market mechanism getting mature, more opportunities to participate would be open to the residential HEM systems.
Optimising the electricity flows in the energy communities
Energy communities are being used in a lot of ways today in the energy industry. Most of the time companies talk about their community of customers. In some cases, companies talk about Peer to Peer trading between customers. Regardless of how companies talk about their offerings, some communities are:
- Actual self-contained communities with physical optimisation (such as a microgrid)
The concept of trading between peers, may be applied to the situation in which, for example, households with excess PV generation (prosumers) can trade with others who have a deficit (consumers). However, the term is also widely applied to the community owned generation being traded amongst a mix of end-users including households.
Peer to Peer Energy, in its purest form, involves a physical private wire network or microgrid. Microgrids and community owned private wire networks, can provide valuable financial benefits and enable the support for small-scale renewable and prosumer generation at community level. The total amount of energy supply revenue can be matched against local generation and shared amongst market participants.
- Based on ‘commercial’ (virtual) exchanges of electricity
The relative rarity of microgrids has left a vacuum that some entrepreneurs are, increasingly, aiming to fill with what may be characterised as ‘virtual P2P’ solutions. Unlike microgrids, none of these solutions require physical changes to be made to the network by engineers. Instead, they aim to deliver similar benefits via a virtual P2P business model overlaid on top of the public network. Therefore, most companies involved in P2P offer virtual solutions. Many of these virtual P2P players have a national focus and some who focus on collective self-consumption will rather have a local focus.
If the result on the potential exchange of electricity is different, both business models can be optimised with HEM. HEM could for example be used to turn on and off electric loads in order to maximise the use of self-generated electricity within the community and reduce the exported electricity. Equally, in period of high demand in the community, HEM equipped households could change the timing of consumption to allow others who have more urgent needs to use the locally generated electricity. This could be even more optimised if the non-residential buildings of the community would be equipped with some sort of energy manager (such as a BEM).
Home Energy Management might be on the rise – particularly around providing customers with financial benefits for self-consumption and dynamic tariffs optimisations – but it’s clear to us the real game might be in providing a solution which will help optimise the energy flows in the electricity system, in energy communities, as well as in the home. Some companies are already thinking about positioning themselves in the middle, e.g. GreenCom Networks is doing early stage pilots on their energy information platform and testing new business models.
Our recent Home Energy Management report is now available to subscribers of Delta-EE's Connected Home Service. If you are not a subscriber and would like to purchase the report individually or talk about this topic further, please get in touch.