How energy retailers are increasing revenue with residential demand response
If we want to prevent the worst impacts of climate change by 2030, we need to electrify – well, pretty much everything. Switching from fossil fuels, especially in the highest-polluting sectors, like transport, will drastically reduce CO2 emissions and help us get to a more sustainable future, faster.
But there’s a problem. Energy supply is changing: the use of renewables for energy generation is expanding. Renewable energy is clean, but it’s more intermittent, and more distributed. At the same time, energy demand is growing. It’s predicted that by 2050 the world will need four times as much electricity generation as it has today, and three times as much transmission capacity. Our grid, built decades ago, just isn’t set up to handle that amount of load – or to power it with intermittent renewable energy. There are all sorts of issues with our physical grid infrastructure that mean balancing supply and demand is becoming increasingly perilous.
So, what can we do about that imbalance? Well, we could turn to the supply-side, by investing in physical infrastructure. That requires huge, complex, and often contentious projects, takes a lot of money and – critically – time we don’t have. Or, we could turn to the demand-side: use electricity more flexibly, and better match consumption patterns with the peaks and troughs of grid availability.
Unlocking this capability is a strategic shift for energy retailers. But enabling their customers to use electricity more flexibly also represents a massive opportunity. Leveraging the flexibility that’s currently lying dormant in distributed energy resources (DERs) like EVs, HVACs and home batteries means they’ll be able to participate in flexibility markets, creating new revenue streams and growing loyalty within a notoriously disengaged customer base. In an energy ecosystem that’s being rapidly re-shaped and re-defined, those are vital differentiators.
The residential demand response opportunity
The idea of using electricity more flexibly isn’t new. Even before the recent rise in demand for electricity, keeping the grid balanced was a tricky business. The grid is a huge, distributed network. It’s fed by multiple generators and power stations, and in turn feeds every power outlet in the country. Inevitably, supply and demand are sometimes mismatched – especially during extreme weather events, when usage of heating or air conditioning is at its peak.
In the past, when there was too much pressure on the grid, Transmission System Operators (TSOs) would seek to reduce demand by calling around to large commercial and industrial energy consumers – to turn down their consumption for a period of time. This was easier, quicker and cleaner than throttling up production. Large consumers that were able to reduce demand were paid to do so.
It is and was a helpful additional flexibility resource, but it wasn’t scalable. It was manual, and limited to high-consumption customers. Ordinary residential customers weren’t able to participate, as their individual loads weren’t significant enough to have a tangible impact.
Today, that’s changing. There are more small energy-producing or storage devices than ever inside households, like EVs, HVACs and home batteries. They’re inherently flexible. An EV, for instance, spends most of the day sitting on a driveway, and doesn’t need to be at 100% charge 100% of the time. They also all have small ‘computers’ inside of them, allowing energy retailers to connect and talk to them. That means they can be deployed to help balance and control demand on the grid, and aggregated to do so at scale.
Residential demand response gives energy retailers a competitive edge
Now, there’s a huge opportunity to leverage residential customers and their assets to participate in flexibility markets.
One way to do that is through EV smart charging. EVs are effectively a movable grid resource. The flexibility of EVs allows them to absorb excess generation from renewable energy resources, as well as act as real-time demand response assets. With smart charging, EVs can be programmed to charge only when there is excess supply in the grid, or when prices are inexpensive.
Another option is to turn EVs into Virtual Power Plants (VPPs). VPPs pool EVs together using cloud software so that they can be collectively activated to respond to fluctuations in the electricity grid. And it’s not just EVs: thermostats, solar inverters, batteries and hot water heaters can all be used in similar ways.
Obviously, integrating all these DERs and building the functionality to automatically manage them is complex. But software like Enode’s makes it easy for energy retailers to connect to the DERs in their network, monitor their potential flexible load, aggregate it, and automatically activate it as energy supply fluctuates.
Those that do so will win an important competitive advantage. For one, demand response opens up new revenue streams. Energy retailers are incentivised by TSOs to reduce or even increase demand in their network at times of frequency imbalance. And, those that create VPPs can sell their flexible loads back to TSOs through flexibility markets that were previously inaccessible for residential customers.
Demand response also adds value for customers, which in turn increases their engagement and loyalty. Customers care about two things: cutting their energy bills, and cutting their carbon emissions. Demand response enables both, as customers can avoid peak rates and shift their consumption of energy around supply of renewables. Offering those benefits improves brand reputation, helping to win new customers, and increasing satisfaction among existing ones.
Demand response cuts energy costs and helps balance the grid
As energy retailers re-strategize to remain relevant in an evolving market, demand response is critical. Forward-thinking energy retailers are already seizing the demand response opportunity – and seeing results
Greenely launched a smart energy app in 2017. Its goal was to help users reduce their energy bill and consume more renewable energy. Since then, more than 145,000 households have connected to the app.
Greenley used Enode’s API to enable smart EV charging in the app. Our out-of-the-box Smart Charging module handled all the complexity of getting energy market data and controlling EV charging, while Greenely focused on creating the optimal user experience.
In the first 6 months, Greenely customers saved an average of 25% on all EV charging. One also set an unofficial smart charging record, saving over $25 on a single overnight charge.
Electric vehicles are just the first step for Greenely. Their goal is giving consumers a complete overview of their energy consumption by eventually integrating thermostats, solar inverters, home batteries and more. This will help customers optimize all of their energy consumption, driving benefits for themselves, and the grid as a whole.
If you're an energy retailer looking to create new revenue streams and a more sustainable future, Enode can help. Get in touch to learn how.