[99] Investment in demand response affects its own business case

This article pointed out that heat pump flexibility can be harnessed through demand side response. A challenge though is how to stimulate demand response in the home? Mobile games could be the answer!

Andrew Webster, Northern Powergrid (UK): ‘Household electricity use will grow significantly as electric vehicles and heat pumps become mainstream, increasing demand on the network. Mobile games offer a fun solution to help manage this demand, rewarding our customers for reducing their consumption at peak periods.’

Demand response is currently promising, but eventually there will be no more peaks to shave or valleys to fill. Beware of investments that rely on a long-term market for demand response.

[75] Energy services, not carriers

Or rather, a market that does not consider the energy carrier as an autonomous black box, but as a complex, integrated, digitally controlled system of input and output that serves to deliver energy services.

In the electricity grid 2.0, participants can both generate and consume electricity (prosumers) and monetize the flexibility in their energy demand. To make this possible in a direct and uncomplicated way,

  • an advanced standardized consumer interface should be developed;
  • regulation, tarification and taxation should be thought out according to business models that are advantageous to all parties.

[33] The early bird

This tweet referred to the apparent disincentive for utilities to support energy efficiency and the necessity to provide them with incentives to counter this. While this remains true to a certain extent, one argument is missing. In a truly competitive market it can be a utility company’s strategic decision to advise their clients on how to become more energy efficient in order to gain client loyalty.

Therefore, some utility actors in contact with customers (e.g. suppliers or aggregators) increasingly base their business models on value rather than volume.

Considering that network regulation is moving in this direction, early movers adopting new business models may harvest the biggest benefits.

[25] Entrepreneurial business models remain a distant target

The underlying assumptions of on-bill financing are that (1) home-owners and tenants have cost-effective energy-saving opportunities (the ‘energy efficiency gap’), (2) consumers do not have the necessary capital, knowledge or inclination to invest (the ‘finance gap’), and (3) a third party can step in with a standardised product and execute the project to a quality standard.

That’s a lot of ifs for developing a successful program in this field. It will require genuine entrepreneurs to come up with business models that work. Since these business models strongly depend on the entrepreneur’s personality, their replicability in other geographies represents a challenge.

[19] Energy services – promising and challenging

The problem with energy savings (so-called ‘negawatts’), is that they are difficult to measure. Metering technology has improved significantly since 2011, but the problem of the construction of a solid baseline remains. Another challenge is that some investments into energy efficiency, especially in buildings, have long payback times, and both ESCOs and building operators may be reluctant to enter into such long-term contracts.

As a result, a 2017 report from JRC finds that the European ESCO market is falling somewhat short of expectations. The total EU market was estimated at €2.4 billion ESCO revenue in 2015, with a forecasted growth to €2.8 billion in 2024 at a 1.7% compound annual growth rate.