07 November 2017

Demand response and energy storage – coming to a home near you?

Something unusual happened last week – friends of mine from outside the energy industry started to talk to me with great enthusiasm about exciting ways they will soon be able to save on their utility bills, thanks to the wonders of technology. Intelligent washing machines and fridge-freezers came into conversation on more than one occasion.

Why this sudden surge of awareness for smart grids, battery storage and demand management? It was thanks to Ofgem’s report “Upgrading our Energy System – Smart Systems and Flexibility Plan”, which picked up a lot of press coverage thanks to its eye-catching headline; that people could save up to £40 billion on their energy bills.

There are huge benefits to be unlocked by addressing the demand side, but the question is, will this actually happen in the domestic market?

It seems like a big shift – the behavioural change will be significant, with demand management becoming part of everyday life. This may appear farfetched, until you think about the changes that have come about in just the past ten years; a range of technologies including social media and smart phones have very quickly been woven into the day to day. We’re now banking on our phones, making purchases with a single click, gathering and analysing data on our morning workouts – why not manage our energy costs too?

Market acceptance is a big question, particularly with the potential cyber security connotations of web connected utilities and appliances. It’s only a matter of time before news outlets regale readers with stories of possessed washing machines and haywire home security systems.

On the other hand, cyber security is a growing field, and it may be that technology is able to outpace those with malicious intent.

And even if not – will the public care? After all, online banking and shopping are flourishing, with millions of people perfectly happy to publish their personal information, family photos and social connections online for everybody to see.

Customer service is a big consideration that could make or break this next phase of the energy industry’s evolution. If domestic users are working with connected appliances, automation, dynamic tariffs, storage and generation all at the same time, a “domestic customer” is going to be a very different beast from a supplier’s perspective. It’s likely that contractual arrangements will be much more complex, and there will be a lot of new support requirements whether it is software failure, automation issues or disputes over tariff levels, time periods and payout values.

Let’s not beat around the bush - customer service in the domestic energy industry is faceless and robotic, generally providing a negative experience. This will have to dramatically improve for customers to be successfully engaged in the management of their energy demand.

Regulatory dissonance is another issue that will need to be brought under control if this industry transformation is going to be successful. The past few years have been confusing and challenging for business customers who have tried to engage in demand management, generation and storage.

Whether it was the shock withdrawal of FiTs from a government professing support for embedded generation, or the slashing of peak demand reduction incentives resulting from DCP 228, businesses have had to deal with a set of goalposts that are perpetually on the move thanks to the uncoordinated actions of disparate industry parties. A similar situation in the domestic market would be disastrous for building trust and market engagement.

In sum, I believe that, with enough push from the industry, and the right financial incentives, it will be possible to engage the domestic market in managing their energy demand. The big question is – will the industry make this easy for consumers, or difficult and painful?

By looking deeper below the surface, PCMG has recovered well over £300m for its clients to date.

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