Can a sharing economy approach to energy deliver a more sustainable future?
As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?
Technology is shaping our lives like never before, making our world smarter, more efficient and more connected. In the last decade, it has fuelled an explosion of sharing economy business models — adopted by the likes of Uber, Airbnb and Zipcar — who in just a few short years have revolutionised established industries. But can a sharing economy approach help to tackle one of man-kind’s greatest challenges and deliver clean, affordable and secure energy to all?
Sharing economies are a consumer-led phenomenon which work by exploiting excess capacity or inefficiencies in existing systems for mutual benefit. Take Airbnb for example. The wasted asset is your property and the excess capacity is the space you are not using. By creating a user-friendly platform and giving homeowners the security they need Airbnb have built the biggest hotel chain in the world, surpassing the Intercontinental Group in less than four years. They have achieved this because they haven’t needed to construct a single thing.
So how could this apply to the energy industry? As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?
Since the world’s first power station was built in 1882 the global energy system has worked on the basis that supply must follow demand. Consumers — businesses and households — have been passive users of power, paying to use what they want when they want, whilst electricity supply has adapted to ensure the lights stay on. This has created inefficient systems built for periods of peak demand — in the UK this is typically between 4–7pm on a cold winter evening — which most of the time are massively underused.
But this is no longer the case. Today, our ability to connect and control anything from anywhere means we can manage our demand for electricity in previously unimaginable ways, and consumers are emerging as a driving force for change.
By connecting everyday equipment to a smart platform (just as you might upload your property to Airbnb), it’s now possible for consumers to take advantage of small amounts of “flexible demand” in their existing assets and processes — be it a fridge, a water pump, or an office air con unit — and sell it to organisations tasked with keeping the lights on — like National Grid.
Applying artificial intelligence and machine learning to govern when and for how long assets may respond gives consumers confidence their equipment’s performance will not be affected, and in return for sharing their “flexible demand”, they benefit from cost savings or direct payments.
This sharing economy approach relies on the power of tech and our ability to orchestrate many thousands of consumer devices at scale. Any one piece of equipment can only make small changes to the timing of its electricity consumption — e.g. delaying when a fridge motor comes on for a few minutes during a spike in electricity demand at the end of a football match — but collectively, the impact is transformational.
It means that when electricity demand is greater than supply, we don’t need to fire up fossil-fuelled power stations. Instead, we can reduce demand by asking non-time critical assets to power down for a short while.
If the wind is blowing and too much electricity is being supplied, we don’t need to let this clean, abundant power go to waste, but can ask equipment to shift its demand and make use of this power as it is available.
And we don’t need to keep building more power stations to meet occasional peaks in demand. Instead, we can distribute demand more intelligently throughout the day, reducing the size of these peaks and making better use of existing capacity.
In the UK, Open Energi’s analysis suggests there is 6 gigawatts of peak demand which can be shifted for up to an hour without impacting end users. Put into context, this is equivalent to roughly 10% of peak winter demand and larger than the expected output of the planned Hinkley Point C — the UK’s first new nuclear power station in generations.
This doesn’t make it easy. Unlike other sharing economy success stories, energy is a public good. The need for incredibly robust solutions means the barriers to entry are high. But, if we can get it right, the prize is enormous; a cleaner, cheaper, more secure energy system which gives consumers control of how, when, and from where they consume their energy.
Businesses have already recognised the power they hold and the benefits it can bring, with the likes of Sainsbury’s, Tarmac, United Utilities and Aggregate Industries adopting the tech and demonstrating what’s possible. Households look set to follow, but wherever the flexibility comes from, it’s clear that consumers and the environment will benefit from a sharing economy approach to energy.
David Hill is strategy director of Open Energi. He is an expert on electricity markets and demand-side flexibility, including demand-side response and energy storage. He joined Open Energi in 2010 after completing an MSc Energy, Trade & Finance at Cass Business School.