Tag Archives: demand side management

Upgrading Our Energy System: Smart Systems and Flexibility Plan from BEIS – my thoughts

Early in 2017, the UK Government called for evidence and views on how to move the UK to a smarter and more flexible energy system. They received over 200 responses and I am informed that the vast majority related to energy storage.

The UK Government took the views into account and have produced a plan of 29 actions that BEIS, Ofgem, and industry will take for the future of the UK energy system called: Upgrading Our Energy System: Smart Systems and Flexibility Plan. I’ve sketched out some of my main thoughts on the document below.

Introduction of an energy storage licence to UK grid code

Tantalisingly, the UK Government plans to recognise the overwhelming noise from industry and amend the Electricity Act 1989 to include a definition of storage, but frustratingly only as a subset of the generation asset class. It will be based on the Electricity Storage Network definition and Ofgem will begin consulting on this in the summer of 2017.

The licence changes will allow storage to be exempt from final consumption levies and will de-risk investments that co-locate alongside renewables. Ofgem will improve the connections process and will use financial incentives to make the DNOs do more to help their customers.

In some ways, it is great news that the Government is finally making this move. However, by merely adding it as a sub-set of generation instead of making it a separate asset class, I interpret this solution as a bit of a bodge-job.

Creating a separate asset class would have opened up a much deeper discussion about which organisations can own the asset (i.e. can DNOs? Can National Grid?). By not creating a separate class, it seems that this vital conversation is off the cards entirely. Indeed this is consistent with Ofgem’s view (plainly reiterated in the document) that “network companies should not own or operate storage”, as they think it will “impede the development of a competitive market for storage and flexibility services”.

In my mind, this is the wrong conclusion. For me, DNOs are the perfect customer for energy storage assets. They already own the wires on the network that do the spatial arbitrage of taking energy from places of low price (supply) to places of high price (demand). Surely it follows that DNOs should be trusted to do the same with the temporal arbitrage that storage provides?

If DNOs will be continuing to make decisions about investing in the capital equipment of wires, transformers, and the rest, then surely they should be allowed to own storage at the same time, as it is being lined up as a potential rival for these traditional assets ( one of the major touted benefits of storage being “Transmission and Distribution Upgrade Cost Deferral”)?

Removal of other barriers to energy storage and Demand Side Response (DSR)

Apparently, Ofgem has already consulted on a proposed Targeted Charging Review (TCR). The consultation stated Ofgem’s views that storage should only pay one set of balancing system charges (not two as currently) and that storage should not pay the “demand residual” element of network charges at transmission and distribution level. This is obviously a sensible move as it removes a major source of unfairness and will make the business case for storage projects a lot healthier.

Ofgem are looking at giving aggregators access to the Balancing Mechanism (BM) and clarifying the rules for DSR and energy storage to participate non-exclusively in the Capacity Market (CM). This is really great news for the UK energy market. Firstly, clarification of the CM rules will finally allow the much-talked-about revenue stacking that underpins almost all energy storage projects.

Secondly, allowing aggregators access to the BM will boost DSR and energy storage as it will allow them to compete with traditional generation in the provision of this vital service to the System Operator, National Grid. Professor Goran Strbac of my almer mater Imperial College has frequently spoken about the potentially huge benefits that energy storage assets could provide to the BM, so this development would pave the way for his predictions to become reality.

Removing barriers to smart meters and “time of use” tariffs

The document refers to the UK Government’s commitment to ensuring that every household and small business is offered a smart energy meter by the end of 2020.

To make the most of these hard assets, domestic half hourly settlement of electricity payment has been possible on an elective basis since June 2017 and Ofgem will consult on whether it will be made mandatory. If so, it would be dovetailed to coincide with the smart meter roll-out.

Intriguingly, these two developments would allow me to introduce my PowerCube product idea if I decided to move forward with it, as the smart meter and half hourly metering requirements were the two major limiting factors holding back the product’s successful launch.

The document talks about the need for consumer protection, standards, and cybersecurity protection as part of the smart energy revolution. In an increasingly interconnected and rapidly-changing world, these factors will be extremely important if the benefits are to be safely secured.

Recognition of smart energy entrepreneurship

On a final note, it was great to see the inset case studies of various innovative smart energy startups such as VCharge and Open Utility included in the paper.

It was particularly great to see Upside Energy mentioned, which is a company that formed as part of the Nesta Dynamic Demand Challenge competition that I supported as a mentor back in 2014. Graham and the team were one of the winners, so it’s encouraging to see them still going from strength to strength.

Winners of Nesta’s Dynamic Demand Challenge announced

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 Nesta dynamic demand Challenge winners

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.

PowerCube: a capacity tariff to fight UK fuel poverty

During last year’s Dynamic Demand Challenge Hackathon, the organisers asked me to form an impromptu team with another Roving Hacker. Together we designed a “capacity tariff” aimed at those living in fuel poverty (an estimated 3.5m UK households).

Our idea, PowerCube, is to limit the power that can be drawn by a household in exchange for a deep discount (50% or more) for the price per unit of electricity (kWh) paid by the consumer. This would be achieved by installing a device such as a relay switch on the main incoming power supply that is triggered by the smart meter when the power reaches a certain predefined level. Our pitch presentation at the end of the 36 hour Hackathon can be found here:

Benefits of the idea

The benefits of this tariff are many. Customers would benefit from reducing their outgoings on expensive energy, utilities would eliminate the need to buy electric at peak times when it is expensive by shifting large amounts of demand to off-peak times, and the environment would benefit as it would reduce the need for GHG-intensive peaking plants powered by fossil fuels like gas and oil.

Fuel poor customers often have poor credit history and therefore frequently receive their electricity via a pre-paid meter, notorious for their scandalously high prices. Because ‘Fuel poor’ householders are often in a situation where they are faced with the “heat or eat” scenario, our belief is that the 50% discount of the PowerCube tariff is something that would get real traction.

Weaknesses of the idea

Capacity tariffs are not a new concept and have been trialled on the continent before, to mixed levels of success. We believe that targeting them at the energy poor section of the market, for whom energy prices are a real and priority problem, will give the concept a new lease of life as this application will add real value to this particular market segment.

The PowerCube tariff idea relies on a physical device to give a visual/auditory signal to indicate when the household is close to its limit. Ensuring that this signal is simple to understand and able to inform action is vital.

It is also important to realise that the whole concept of a capacity tariff means that people will need to learn the relative power demands of their devices, which could prove difficult for consumers who are not very tech-savvy. However, a counter argument to this is the fact that non-commercial sailors intuitively learn how to ration their power use on a boat to stay within the fixed capacity limits of their vessel’s battery supply.

Finally, the level of the capacity ceiling will probably need to be fixed and chosen very carefully, as it will be too confusing/undesirable for customers to live in a situation where their allocated capacity ceiling is changing unpredictably. It also might need to be set on an individual basis, which could prove expensive if not an automated solution is not developed well.

Opportunities for the idea

The tariff would provide consumers with savings of around 50% from their electricity bills, which is a significant amount of money (around 5% of their annual income when using the old definition of fuel poverty).

It would also allow the UK to shave a significant amount of peak load if designed correctly. For example, if 5% of the UK’s energy poor households (3.5m*0.05=175,000) were to sign up and reduce their peak demand by 2kW it would be a 350MW saving, equivalent to an average UK natural gas power plant gas.

Threats to the idea

One big threat to this would be a change in the demand of a household, or a consumer switching tariffs after receiving the PowerCube device.

Another threat would be weaknesses in the UK smart meter roll-out, such as low up-take or hardware that is incompatible with the infrastructure of this tariff offering.

My thoughts on the Dynamic Demand Challenge Prize Finalists

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

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.


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.

Demand Shaper business model

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!

Hacking for a smarter grid: Nesta Dynamic Demand Challenge Hackathon

I recently attended a great Hackathon as part of the Dynamic Demand Challenge Prize.

Organised by the Nesta Centre for Challenge Prizes in partnership with the National Physical Laboratory – Centre for Carbon Measurement, the Challenge is co-funded by Nesta (the UK innovation charity) and the Department for Business, Innovation and Skills, with the National Grid as a lead sponsor.

Dynamic Demand Challenge Prize: What is it?

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.

Imperial College Engineering Department

Imperial College Engineering Department

The Hackathon itself was and hosted by Imperial College London and Climate-KIC, with Judges and demonstrators from OFGEM, DECC, Which?, and KiWi Power.

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.

Hackathon structure

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

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,

Smart grid innovation presentation

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 “restricted capacity 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!

What happened?

smart grid hackathon feedback and elevator pitch

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.

The winners

The 5 finalists chosen by the judges were:

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!

To view my detailed thoughts on the five finalists, read this blog post.

What happens next?

The winners of the Challenge will receive a prize award of £50,000 at the Celebration Event in June 2014. Fingers crossed for an invitation…