To save costs and reduce environmental impact, utilities are paying consumers to reduce their usage during peak times. The UK’s National Grid is already paying their commercial and industrial users to do this, however small businesses and households are not yet involved.
But, start-up Upside Energy plans to change that.
Opening demand response market to small business and households
The firm intends to open this market to everyone including households and small businesses. They are doing this by coordinating energy stored in batteries they already own.
Upside Energy was one of the five finalists (out of 70 entries) of the Nesta Dynamic Demand Challenge. The challenge was supported by National Grid, National Physical Laboratory, Department for Business Innovation and Skills, Climate-KIC (the EU’s main climate innovation initiative) and Imperial College London. The idea behind the challenge was how to engage domestic and small business customers in demand response. The firm won €25,000 and an entry to the EU’s Climate-KIC acceleration programme.
Founder of Upside Energy, Graham Oakes, saw that a great deal of opportunity is being lost in the demand response market as far as small businesses are concerned since many have back-up power supplies in the form of uninterruptable power supplies (UPS) which already have batteries installed. UPS are the systems that provide backup power to machine rooms, traffic lights, cellphone towers, etc.
Mr Oakes points out that there is a great deal of unused existing battery resource in the UK, estimated at about 6GWh. He says, “We decided to tap into that existing battery resource, coordinate all these small batteries that businesses already have and use that to shift their load from peak to off peak times.”
“We decided that if we can manage tens of thousands of batteries from small businesses, we can also manage the same for solar PV arrays, EVs and other heat storage systems such as heat pumps and domestic hot water systems - anything that has the ability to store energy.”
The company is building a cloud service that coordinates this and creates a virtual energy store that can be used to sell balancing services to the grid operators like National Grid. Because they have a geographically dispersed portfolio of storage, the company plans to sell services to the distribution network operators. There are also plans to help energy suppliers manage their imbalance positions.
Piloting the service
Upside Energy is currently building the service and has £800,000 of funding from Innovate UK and the DECC to build a pilot. The company is working closely with Sharp as far as solar PV goes and Siemens is being looked at for their battery systems.
“We are half-way into the development of a national pilot. The cloud will enable communication between devices which will result in the control of a battery system on a domestic solar PV array manufactured by Sharp for example. This will be ready to go into a small scale pilot by the end of the year.” Oakes says the company is in discussions with National Grid to take this into a larger scale pilot next year.
Upside Energy communicates with consumers' batteries via their broadband connections. Most UPS, for example, have remote monitoring ports built in, so these are used to communicate with them. Firms like Sharp are building communications facilities into their battery systems for PV arrays.
In terms of agreements, Mr Oakes says the company will set up terms of service where there is an agreement not to put too much load on the battery (e.g. restricting how deeply the battery is discharged.) This ensures that there's battery capacity remaining when the consumer wants it, and ensures that the battery's life is not damaged by over-cycling it.
Creating a battery market without the need for government subsidy
Upside Energy is helping manufacturers create value for small UPSs from solar PV arrays.
Oakes explains, “On PV, the payments that we can tap into are around about the same value as subsidies that the German government gives towards domestic batteries. We are helping create a market for batteries without the need for government subsidy.”
This is highly attractive for a battery manufacturer because the best you can hope for on a battery such as a Tesla powerwall right now is about a 12-year payback although it depends on installation costs and the price of invertors, explains Mr Oakes. With a 10-year warranty on a battery, this payback doesn’t look very attractive.
Upside Energy aims to create an eight to nine year payback. He explains, “People have a strong emotional desire to self generate and consume and hence to install batteries for their solar PV but economically it doesn’t stack up. We bring it back to the point where payback is less than the warranty so economics doesn’t get in the way anymore. Currently not many people are buying batteries for their PV installations because the economics don’t stack up.”
Catering to different market needs
Upside Energy is building its platform by running many algorithms in the cloud, making it possible to ‘plug in’ into different markets across the world.
“We are creating different algorithms to accommodate different markets and regulatory contexts. The distribution networks structure is different from country to country and we are building for that flexibility from the outset. We intend to build a basic service and then simply tweak it for each national market.”
The company plans to prove that the service works in the UK before it moves onto other markets like Japan and the US.
Unexpected flexibility from demand response
Grid operators have yet to see the benefits in demand response on a domestic level. Oakes explains that many small sites can be more flexible than a single industrial plant. He says that grid operators don’t expect that level of flexibility from demand response. “If we can prove this level of flexibility, it will be a highly attractive service and we can roll it out quite quickly.”
He highlights the renewables challenge: “The issue with renewables is that you are reducing flexibility of generation and the grid is being built around the fact that generation is flexible. So you have to build that flexibility somewhere else. We therefore suggest putting this flexibility on the demand side. Domestic and small businesses can be particularly flexible because it entails many small entities of demand-this makes it easier to include smaller renewable generation sources onto the grid.”
Opportunities for all
While there are challenges in establishing the right sales challenges, recruiting the appropriate loads, building a cloud service, and getting grid operators to accommodate smaller loads, there are a number of opportunities for a many roleplayers in the energy industry.
For instance, on a grid and distribution level, the flexible demand resource will solve a number of problems surrounding peak shedding and frequency response. There is also an opportunity to solve some power quality issues. Oakes explains, “We can look at things like voltage and reactive power by managing portfolio of devices and managing that appropriately.”
Equipment manufacturers stand to benefit too. The company intends to help create a market for batteries and for UPS manufacturers. “We are helping them put differentiation on to their equipment and basically add another revenue stream for UPSs which makes UPS more valuable so they can sell more of them.”
The re-sale value will also be improved by increasing the revenue stream onto the battery. “This will incentivize battery owners to use their battery properly.”
Creating risk by being risk averse
The energy systems in general have been built in a very risk averse way, explains Mr Oakes. He goes on to explain risk have been created as a result of this risk aversion which is why there are capacity problems.
“This is why it becomes too expensive to invest in new generation for instance. People can’t see the business case. By having high standards of risk management, a different type of risk has been created. We need to look at a different balance of risk and prove that demand side is actually not that risky. By doing something new on the demand side which may be perceived as risky, the systemic risks could be reduced.”