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Unlocking the value of flexibility for the electrification of heat

Demand-side response and flexibility are becoming increasingly important – this is evident in the UK following BEIS’ announcement of its new plan to upgrade the UK’s energy system and give homes and businesses more control over their energy use. The opportunities for innovation and investment in the energy sector, therefore, are vast.

Smart electrically-driven heating is a potentially valuable field in which to invest, but to what extent will customers and the energy system benefit, and how can these benefits be unlocked?

There is already a substantial installed base of electrically-driven heating – 30M units across Europe – that can be utilised, but some barriers stand in the way. Technology is not the primary challenge, and there are players today with the knowledge and skills to facilitate a widescale rollout of smart controls in both retrofit and new installs. But competing communication protocols remain problematic, and the lack of standardisation on the market limits the applicability of wide-scale ancillary services.

Opportunities in this space require electricity market and regulatory barriers to be removed and this is happening at different rates in different markets.

electric heating blog 1#

© Delta Energy & Environment Ltd 2017. Figure taken from the Smart Electrically-driven heating report, published in August 2017 by the Electrification of Heat Service.

 

So how can we take advantage of further potential markets? We must consider the following enablers:

  • Attractiveness of self-consumption from PV systems – this ability to shape demand to maximise energy independence is already a valuable proposition in Germany, with Italy set to become an important secondary market.
  • Availability and variability of dynamic time of use tariffs (requiring smart metering and reformed electricity retail settlement practices) – these are available to customers in a small number of European markets and should emerge elsewhere as smart meters roll out.
  • Openness of electricity system ancillary services market (and the value in these) – again, some countries are further ahead than others in the willingness of Transmission System Operators (TSOs) to procure ancillary services from distributed residential assets. (link to the map again) Greater engagement – and regulatory change – will be needed to unlock the full benefits.
  • Customer engagement – leaders in this field are experimenting with a range of customer propositions. Many of these are focused on reducing energy bills - but green credentials and customer usage insights are among other models being employed.

With engagement from TSOs and a standardisation of communications protocol on the market, and if innovative business models are successful, we could then expect to see significant values from smart electrically-driven heating passing to both the end-user and energy market stakeholders. As you can see in the figure below, these benefits range from lower energy costs to the end-user through time-of-use tariffs, to ancillary services revenue for the electricity market player.

 

electric heating blog 2

© Delta Energy & Environment Ltd 2017. Figure taken from the Smart Electrically-driven heating report, published in August 2017 by the Electrification of Heat Service.

The recent Forum for the Future report, including insight from a range of energy experts, suggests European utilities have lost over 100 billion EUR in value since 2008. Energy stakeholders should take advantage of the new opportunities presented by digitalisation, and the implementation of technologies such as smart electrically-driven heating.

We are at a pivotal moment of change in the energy industry. Delta-ee’s research helps players in the energy market navigate this transition from an old, centralised, carbon intensive energy system to ‘new energy’: distributed, low carbon, service-orientated and customer centric. The time for change is now -  so if you’re interested in finding out more about how your business can succeed in this space, feel free to get in touch.

 

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