The winners of Nesta’s Dynamic Demand Challenge have been announced at the Finalists Awards Presentation last week.
The winners were Demand Shaper of Exergy Devices with Hestia, a “smart home controller specifically designed for electrically–heated homes, and could save these households over £200 per year. Using Demand Shaper technology, Hestia implements a time–shifting algorithm to subtly alter domestic heating schedules, modulating electricity demand according to the needs of electricity suppliers, or National Grid“.
Hestia (aka Exergy Devices) received their award: Winners of the Nesta Dynamic Demand Challenge
To be perfectly honest, at the Hackathon I didn’t fully grasp understand their offering, as you can see from my previous post on the topic. However, I should have guessed they would do well as the team have invested significant efforts in their academic research into this field, and already have a history of successful and profitable IP generation for the smart home market.
The focus on an initial target market (or “sandbox”) of electrically heated homes will lead to some impressive benefits:
“Hestia could reduce energy consumption by 25% thanks to subtle alterations in domestic heating schedules which match the homeowner’s needs with the supplier’s capacity. The technology offers a peak demand shifting capacity of 1.7 GW if deployed across the UK and has the potential to reduce individual homeowners’ CO2 emissions by around 3 tonnes per annum and save around £200 a year.”
Hestia have won £50,000 in funding on top of the significant benefits and funding they have received from the Challenge already. Congratulations to Dr Peter Boait and his team!
I was also delighted to see that my favourite finalist, Upside, won a place on the Climate-KIC Accelerator which will see them receive €25,000 in funding and “continued support to develop their business”. In addition to this, Upside has recently confirmed their successful bid for funding from the Technology Strategy Board’s Localised Energy Systems Competition, in consortium with Siemens, Sharp Labs, Tempus Energy and the University of Manchester. Graham and his team now have a great combination of validation, investment, and partner support to take the idea forward. Well done guys!
This brochure from Nesta contains information on all the finalists: their progress to date, their future plans and any investment opportunities for those that want to support their work. On a side note, it’s nice to see my PowerCube Tariff idea get a little shoutout in there:
“An ultra low–priced electricity tariff, with a capacity ceiling that is hard wired into consumers’ electricity supply. A smart meter would be installed in house, including a switch, which will feed from the capacity limit that is fed from the smart meter. The Powercube will notify the user via green, amber or red lights and also via text message when they are utilising a surge of electricity. If a large amount of electricity is used at one time, the house’s full electricity supply will cut out for 60 seconds as a warning/incentive for the user to be more wary of their activity.”
I should add that paragraph was not written by me… 🙂
It was exciting to see how far the ideas have come in the 12 months of the Challenge and I’m optimistic for the potential environmental benefits that will come out of this successful initiative. I recommend this as a model project for all those seeking to stimulate smart grid entrepreneurship.
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!
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.
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.
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.
Source: Demand Shaper’s Second Blog
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!
The Dynamic Demand Challenge Prize is an exciting competition set up to encourage innovation in the demand side management sector of the UK electricity industry. Specifically, the goal is “to create a new product, technology or service that would utilise data to help households or small businesses demonstrate measurable reduction in carbon emissions by shifting energy demand to off-peak times or towards excess renewable generation“.
There’s a great briefing document on the need for demand side management in the UK, written by Marieke Beckmann of the NPL, that is available for free download here.
Why a Hackathon?
10 teams of innovators were selected from the vast number of competition entries and invited to attend a 36 hour Hackathon at Imperial’s Faculty of Engineering to make demonstrable progress on their ideas and to allow the judges to get a better feel for the potential of the both the ideas and the teams.
Although my own idea was not shortlisted, I was invited to attend the event as a “Roving Hacker”, with the task of assisting the other teams in the development of their ideas and adding value based on my experience of the energy sector and demand side management.
However, one of the invited teams dropped out at the last minute and so I was invited to join up with a fellow “Roving Hacker” to form an improvised 10th team to take part in the event. More on that later.
The Hackathon was manned by a number of knowledgeable experts (called “Hack-xperts”), demonstrators, and mentors who circulated, adding value to the development process at every stage.
Reverse engineering an electric whisk
As well as plenty of free time to go off to the lab or meeting rooms and work on your product, there were several sessions designed to stimulate and inspire the teams.The first of these was a reverse engineering session: each team selected a household object and took it into the lab to de-construct it into its individual constituent parts in order to appreciate the complexity of event the most mundane pieces of household equipment (we counted more than 78 individual parts in a £20 electric whisk!) and get our mindsets into “design mode”.
There was a great “speed-dating” style elevator pitch and feedback session, where each team had 3-5 minutes to pitch their ideas to 2 Hack-xperts and receive feedback before the bell sounded and they had to move on to the next pair. This was phenomenal as it not only forced the teams to practice and refine their elevator pitches,
Marketing and business models lecture
We received expert coaching plus talks on the formulation of business models, on marketing, on the measurement of energy efficiency and power saving claims, and on seeking finance and pitching to investors.
What was your idea?
We developed a “restrictedcapacity tariff” specifically targeted at the 3.5m UK households living in fuel poverty. By fitting a device into the homes of participating customers that limits the total power that can be drawn by a household, our tariff can give the household a strong discount on their electricity as this predictable load pattern will bypass the need for expensive peak-rate electricity to be bought on the Grid’s capacity auctions. Our idea will be explored in more depth in a further post to come, so subscribe to my mailing list to watch this space!
Impromptu pitch and feedback session
At the end of the weekend, each of the 10 teams pitched their idea to a panel of expert judges and the event’s attendees. The panel then asked the presenting team a series of questions to probe the inherent assumptions and to explore the potential of each idea and team in greater detail. All the pitches were recorded on camera (check out the videos on the Dynamic Demand microsite): perfect for post-event pitch improvement!
From the 10 attendees, 5 finalists were selected by the judges to progress their ideas over a six month period before the Final. Each of the 5 teams won a prize £10,000 of funding from Nesta, technical and verfication support from National Physical Laboratory scientists as well as expert business advice courtesy of Climate-KIC and Imperial College.
Our idea for a capacity tariff was strongly commended by several of the Hack-xperts and judges but unfortunately didn’t make the final cut. However, there was no shame in this as our team was formed at 9am on the first day of the Hackathon, whereas the other teams were formed well in advance by people who had been working on their ideas for months, if not years, as part of their jobs and PhDs. In addition, our team had only just met each other, whereas many of the teams had known their colleagues for years. To be frank, it was incredible that with this competition we were even able to put something notable together within the 36 hours!