Why the Internet of Things is Germany’s biggest chance for the energy revolution

by Nicolas Gülzow

Most people by now have heard of Germany’s Energiewende (the Energy Transition). By 2050, the country aims to double electricity efficiency and reduce greenhouse gas emissions by between 80 to 95%. [1] These are ambitious targets; and following the nuclear disaster of Fukushima in 2011, the country also decided to close eight out of its seventeen reactors immediately, accelerating the nuclear phase-out by 2022. That means that only renewable energy sources such as biomass, hydro, solar and wind power remain to meet these targets.

As a result, many young Germans (including myself) have gotten excited about our future of energy. For the first time, we feel the political will to focus on societal benefits rather than fast money. And in fact, the reforms are already beginning to take effect. Since 2010, Germany’s gross electricity consumption has dropped by 5.3% while the contribution of electricity produced from renewable energy sources has increased from 17.1% to 27.8%. [2] This sounds like the beginning of a success story.

After a closer inspection, however, I was surprised at how difficult the transition is turning out to be. Research reveals that the country is actually struggling with polluting less and encouraging electricity efficiency. From 2009 to 2013, greenhouse gas emissions increased by 4.2% despite the expansion of renewables. [3] And in the first half of 2013, coal consumption went up by enormous 8%. [4] Experts call this phenomenon the Energiewende-Paradox: a linkage between clean energy and climate-killing fossil fuel consumption. To remain economically competitive and shift from fossil and nuclear energy to renewables at the same time seems to be much harder than we thought.

So what will it take for Germany to emerge as a successful world prototype that can help get the global energy revolution off the ground? Well, like all electrical grids, Germany’s current grid must continually match power production to consumption. But how can you maintain a reliable power supply while incorporating electricity from erratic sources such as solar and wind? It becomes obvious that the unexpected rise in fossil fuel consumption was not primarily caused by the abrupt reactor shutdown, but by the fluctuation of renewables together with Germany’s storage problem. If wind parks generate too little power, energy suppliers have to start up coal or gas power plants on short notice, which is both inefficient and damaging to the environment. If there’s too much power, it forces energy farms to quickly shut down to not overload the system. What is too little or too much depends on the fluctuating demand from factories, offices and homes.

At the moment, Germany has to overcome two major hurdles. Its infrastructure has a limited ability to monitor and transmit power from one region to another and it has no energy-storage facilities beyond a handful of small pumped storage plants. The country’s newest plan to expand the grid and install smarter technologies is a first step to better balance electricity fluctuations. In the future, three high-capacity transmission lines will transport more power from north to south and connect the strongest economic regions with new energy parks. The installation of sensors and controls will help to monitor electricity use and detect problems instantly.

Due to extreme weather changes though, the expansion and modernisation of infrastructure will not be enough to fully balance supply and demand. But if Germany can’t smooth electricity fluctuations or massively increase storage capacity, clean energy supply will never adapt to consumer behaviour. And that’s exactly where the problem lies. Germany’s electrical grid and its fossil fuelled power plants were designed for peak consumption, but not solar and wind parks. It’s time to turn the tables and align demand with supply. We have to change the way we consume energy. And the best way to achieve this is to change the way we pay for energy.

Currently, most German households pay a standard price for their electricity. But instead of a standard rate, they have to be charged with real-time prices, depending on the respective production of renewable energies. By encouraging them to adapt their energy use, Germany could transform its centrally controlled grid into a decentralised self-adjusting system. For George Pappas, a professor of electrical and systems engineering at the University of Pennsylvania, applications of swarm intelligence would be a perfect fit. [5] Based on collected data from connected devices, a swarm algorithm could calculate the exact energy demand of a household or factory and automatically minimise costs by adjusting consumption.

But a swarm algorithm would not only mean that power-hungry devices turn on or off as the energy supply rises or falls. It also encourages people to store electricity on a small-scale when the price is low and purchase it at a surplus. Following the same principle as exchange rate arbitrage, it stabilises the price for electricity. Appropriate facilities are for example MIT’s improved liquid metal batteries, Tesla’s new Powerwall home batteries, electric cars, and other devices with plug-in batteries. Billions of self-organising devices would become a smart ecosystem and naturally align a country’s demand with its clean supply.

To facilitate the smart grid transformation, millions of devices have to have the ability to monitor real-time prices, communicate with each other and self-adjust to power production. To put it another way, the Internet of Things is the missing ingredient for the energy revolution. Scientists have already come up with a number of low-power communication protocols such as Bluetooth ACL, Zigbee and other IPv6 based standards to network devices to the Internet. And companies have just started to apply them to the grid. The Canadian start-up REGEN Energy for example uses ZigBee to reduce energy consumption by mimicking the swarm behaviour of bees. To maximise collective efficiency, wireless controllers study the power cycles of each appliance and negotiate the best times to turn equipment on and off. Many more start-ups and bigger players will follow. And Germany should leverage off that.