To recap from my previous blog post on the Dynamic Demand Challenge Prize, the 5 finalists chosen by the judges were:

• Upside
• Powervault
• thEnergy
• Demand Shaper
• Community Substation Challenges

My favourite idea – Upside

Of the 5 chosen ideas, the most exciting from my perspective is Upside. Their idea is to allow the owners of UPS systems to trigger them to turn on during times of peak electrical demand, saving the customer money and reducing the burden on the electricity grid.

This demand curtailment could be coordinated through a demand response aggregator such as EnerNOC or KiWi Power, meaning that not only could the UPS owner profit on the arbitrage of cheaper energy and enjoy the carbon savings associated with avoiding high-carbon peak rate power, but they could also benefit from participation payments from the providers. Not only that, but it is inherently beneficial for customers to regularly test their UPS to ensure that it will actually work effectively in the case of an actual emergency, so why not get paid for it?

For me this idea is exciting due to the size of the UPS market in the UK. My finger-in-the-air estimate is that there is around 0.5-2.5 GW of connected UPS capacity in the UK currently that is protecting sensitive servers and equipment (a better estimate is probably available via this market study or similar). Even at the conservative end of my range, if this “dumb” capacity could be made “smart” and then mobilised during times of peak grid demand, that would be the equivalent of a virtual gas power plant turning on. Now that is exciting!

It sounds like Upside are currently very busy developing their product and customer base. If it were up to me, they would win the challenge hands down.

My second favourite idea – Powervault

However, a special mention should go to Powervault. Their technology is a battery system that can be simply installed in a UK home via a normal LV socket to allow the household to store any surplus electricity produced in the day by their solar panels to be used later on during times of high-carbon peak electricity demand.

Through the Powervault system, the user would reduce their carbon footprint in a fairly measurable way by reducing their demand at peak times, plus they would presumably save money due to the arbitrage effect of saving electricity generated at a time of low cost for use at a time of high prices (as long as the cost of the electricity lost due to the inefficiency of the storage doesn’t cost more than the marginal arbitrage benefit received).

I like the idea that the technology is easy to install for a household. It is also undeniable that energy storage will be a huge market theme in the coming years, as the UK seeks to increase its resilience to grid volatility as it integrates more renewable power into the generation mix.

The main issue with the Powervault concept for me is the target market. It is great that the team have a very focused target customer, households who own solar panels, and a defined value proposition of “be greener”. This group is clearly so concerned with “being green” that they have already shelled out thousands of pounds for solar panels, so potentially it is a strong strategy.

However, I worry that if the financial benefits don’t add up then the prospect of being greener will not be strong enough to justify the cost of the Powervault system, which I guess would have to retail at somewhere between £250-£500 to be attractive. The system would need to yield an arbitrage income of £25-£50 per year to stand even a modest chance of appealing to customers. Even then, customers will not directly see these savings in their bill, so how will they be convinced of the financial case for the product?

I also wonder if a target market of residential solar panel owners in the UK (or owners of any distributed generation technology) is too small a market to focus on. Presumably there are only around 50,000-100,000 households in the UK that currently own solar panels (my guess), which would yield a maximum serviceable market of £12.5m. Assuming that you can only grab 5% of that market (due to factors like competition and customer apathy), that would give a potential market size of around £625,000, which would yield a very unattractive proposition.

One of the first things I learned in marketing is that fear sells. If Powervault wants to increase its potential market size, and add another really compelling motivation to buy their product, I suggest that the company also targets people who are scared about power cuts and outages that would damage their household equipment and interfere with their quality of life. As someone who has lived through a 3 day blackout in the UK, I can testify that this is something that I would be quite keen to avoid with a potential £250-£500 investment (although I’m not suggesting that they should have a battery that would supply a house for 3 whole days).

My least favourite idea: Community Substation Challenges

One of the ideas – Community Substation Challenges – centred on the use of smart fridge magnets to display information in the hope of motivating households to compete against their neighbours and save energy in their homes.

I am really not a fan of the theory that consumers will enjoy or prioritise the gamification of energy efficiency in their daily lives. Will you really care about how energy efficient your house is when the kids are fighting each other, the stove is boiling over and there’s just been a knock at the door? Will customers really look at their fridge magnet display 1-2 weeks after it has been delivered? When was the last time you really looked at the front of your fridge? Recently there was even a whole hackathon event in Paris, Energy Hack, entirely based along a similar line of thought.

Obviously I’d be delighted if this idea gets built and shown to successfully lead to consistent energy savings over time. However, if I was an investor, I would want to have seen extensive market research or some form of Minimum Viable Product as discussed in the Lean Startup methodology. Good luck to them, but the idea wouldn’t be a priority for my investment capital.

thEnergy

As I understand it, the idea of this team is to use a heat storage medium embedded in the fabric of a house to store heat generated by heat pumps during periods of low demand to be used in the winter when demand for heat is high.

The issues with this one are primarily technical but there are some commercial considerations. Is the heat storage mechanism cost effective to produce, safe to operate and easy to install? Will the market understand the offering and can the team create a product offering in a way that is desirable and easy to understand?

Quite frankly, this one didn’t especially grab me during the Hackathon and there’s not a great deal on the site to understand. However, when you consider how significant a proportion of UK energy demand is in heating (44% by their numbers), it will be a promising finding if they pull something together that is feasible.

Demand Shaper

The guys at Demand Shaper plan to create a service based on a smart home control device that will allow for residential energy use to be “influenced” by their company in order to reduce peak demand.

It’s a mammoth task and a complicated process, although the potential savings are enormous. Due to its complexity, it wouldn’t be my first choice of project to invest in, as it has various barriers to overcome. For example, they are in discussions with Ofgem and Elexon about making a change to the UK settlement system. Now I am all for the optimistic mindset, but that is one hell of a challenge for a new startup to pursue!

I also wonder whether they have undertaken enough market research to justify the effort they are making. Time will tell – it’s certainly an interesting concept!