This is the third in a series of posts (Part 1, Part 2, Part 4) exploring how automated devices that produce energy conservation outcomes can integrate with local energy trading, reducing network costs and driving financial value for energy users.
As noted in our previous post, the reduction in consumption of a “negawatt” immediately saves the customer money, either through energy not consumed (and thus not charged for), or due to cheaper electricity rates in the case of load shifting. But given the broader benefit in reducing the capital and running costs of the network, it can also be worthwhile for utilities to pay a premium, over and above the initial cost saving, to mobilise consumers’ devices to better manage events like network constraints and demand peaks.
This is where programs like Nest’s Rush Hour Rewards come in. However, a system like Rush Hour Rewards is proprietary to Nest. It relies on a critical mass of people having a Nest device installed in the area where a demand reduction is most valued at a point in time (i.e. the place in the network where the negawatt reduction needs to be applied). A similar dynamic applies to competing services to Nest, like the Zen Within program.
The risk of this approach is twofold. Firstly, it means we end up with a fragmented set of systems that we need to integrate with in order to achieve the outcomes we need. We not only have offerings from different vendors to contend with, we also have different models to consider—such as Virtual Power Plants using batteries vs. demand response vs. load shifting.
The second is the challenge of the “walled garden”—a term originally used to describe software platforms that “lock in” and reduce consumer choice. This term is often invoked in discussion contrasting the “open web” and large scale, closed social networks like Facebook (see From Inside Walled Gardens, Social Networks Are Suffocating The Internet As We Know It, for example). We’re sensing this dynamic emerging in the battery space, for example, as vendors take a leaf out of the Apple playbook to create closed ecosystems that lock consumers into their specific offerings.
What if we created a more open, technology agnostic, marketplace to achieve this effect?
While local energy trading is most often considered in relation to distributed energy generation (e.g. rooftop solar), when well-designed it can also provide a means of orchestrating other responses like demand response and load shifting to better manage the network.
By providing a unified way to mobilise disparate distributed energy resources—storage, energy reduction, load shifting, etc.—in a vendor-agnostic way, local energy trading can provide significant benefits, to individuals, utilities, and the wider community.
Let’s say a utility has identified that a peak demand event is imminent — like we experienced here in the Australian state of New South Wales recently. The utility could provide an incentive price into a local energy market. In some households, this may result in a home-scale battery exporting to the grid (providing generation). But this signal could also be responded to by a bunch of air conditioners briefly reducing their cooling load. Or pool pumps turning off or deferring their activity. (Theoretically, precinct-scale resources could also be mobilised under such a model.)
The benefit of a marketplace that is vendor agnostic is that it doesn’t rely on everyone having the same device, or even devices from the same manufacturer, installed. A Wink Hub, a Nest or Zen thermostat, an Apple HomeKit enabled device like the Eve, can all respond independently. It also means that the customer retains control of their device, and determines how much they need to be paid in return for responding at any particular time.
This increases consumer choice and control, and significantly reduces the barriers to consumers — those that presently only use energy, as opposed to those with solar and/or batteries—to participating in local energy trading. In this way, they can become “prosumers” by using negawatts to replace the megawatt as an equivalence of production. This is a very promising way that consumers who can’t afford solar or batteries could contribute to, and benefit from, a more transactive grid. The cost and other contextual barriers of participation are far lower, in principle, than having to install solar or batteries, but they can still receive comparatively significant benefits (in the form of reduced energy costs, for example). We see this as being very important for achieving energy equity in the distributed energy future.
It also provides benefits to utilities as they don’t have to deal with and account for multiple proprietary systems and models of doing things. A future system like this, that is technology-agnostic, will provide lower energy costs for all because utilities’ systems will cost less to run. And that’s good for everyone!
The risk of walled gardens is one challenge that confronts us when trying to harness the full value of the negawatt. In the next installment we’ll take a look at some other challenges that we need to consider…
Posted by Grant Young, Chief Experience Officer (CXO) of Nexergy.
Want to get a better return for the energy generated by your solar and/or batteries? Or just want to pay less to get your energy from clean local sources? Sign up for the preview release of the Nexergy local energy trading platform.
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