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By Dan Hopkinson, Acting CEO, ElectraLink
On June 28, 2021, the BJSS Energy Community hosted a talk by Dan Hopkinson, acting CEO of ElectraLink, former Head of Operations at Siemens, and a contributor to the UK government’s recently formed Energy Digitalisation Taskforce (EDiT). An advocate for disruption in the industry, Dan shared his views on how technology is driving the disruption and decentralisation of the energy market, as well as how the industry can tackle the challenges of the future. This article is based on the talk he gave and the subsequent Q&A session. ElectraLink is not a client of BJSS.
ElectraLink provides the data transfer infrastructure for the UK energy market, operating the data hub that allows over 270 market participants – energy retailers, metering companies, central settlement, distribution network operators (DNOs), among others – to interact and transmit data.
So, for example, when a consumer wants to switch energy supplier, the old provider will send the customer’s data – household energy consumption, billing information, etc. – to the new supplier over ElectraLink’s network. ElectraLink’s role is to ensure that the data can be transferred quickly, securely, and in a standardised format.
As a regulated body, one of ElectraLink’s main goals is to provide this data in a secure and low-cost way that improves market efficiency, facilitates innovators and disrupters to create new business models and enter the market, and ultimately reduce costs for consumers. Since 2012, we have built a data lake containing the majority of process transactions underpinning the running of the UK energy market. This data lake contains the nation’s entire switching history and consumption data at meter level.
As you can imagine, ElectraLink has played and is playing, a key role in the digitalisation of the UK energy industry. In this article, I will explore some of the ways we have seen the industry change through technological disruption, as well as what the digitalised, decentralised future of the market could look like.
Distruption and Decentralisation
The energy market has seen an enormous amount of change since ElectraLink was created in 1998. Firstly, there is the sheer size of the industry. Back in the late 90s, there were six energy suppliers, six distribution companies, and not many other players. Today, there are over 270 market participants, and the volume of interactions over the data network is enormous.
To use the switching example again, in 1998 you would have seen a few tens of thousands of customers switching energy supplier in a year. In April 2021 alone, over 1 million customers switched supplier – and that was a quiet month. It can take up to 48 different structured messages to facilitate a single switch, so you can imagine how much activity there is on our network overall. Especially when you consider that switching only constitutes about 2% of traffic across the network – the majority is actually settlement data.
At the same time as the energy market has expanded, it has been disrupted by new technologies, particularly Low Carbon Technology (LCT) like solar panels, wind turbines, electric vehicles (EVs), heat pumps, battery storage units and biomass heating, among others. Many of these technologies have become more widely available and affordable to consumers in recent years, and this is changing the entire nature of the national grid.
In the past, the UK’s energy needs were met solely by a centralised main grid of power stations delivering high levels of energy to the network. Through this setup, it is easy to predict, control and balance power over the grid because you can effectively turn the power on and off as needed, much like a tap.
With the proliferation of LCTs on both a commercial and consumer level, there is now a host of much smaller, decentralised generation points feeding into the grid. This makes the whole system less predictable than a coal-fired power plant that can be scheduled to turn on when power is needed. The amount of energy generated by wind farms and solar panels, for example, varies depending on how windy and sunny it is. It also means that a household can, at certain times, meet all its energy needs without the main grid, or even generate surplus energy and discharge it back onto the network for a price.
The big challenge here is that these smaller LCT generators are connected to the distribution grid, which was never designed for multi-direction power flows, unlike the transmission network that the centralised power stations flow energy into. The distribution network, originally conceived just to pump energy into homes, must now move energy around in a highly unpredictable way, and it creates a whole new challenge for the energy industry.
Greater digitalisation - greater visibility
Traditionally, DNOs would make assumptions about the energy requirement of an average household and provide power based on the number of properties at a substation. But now, individual households could have wildly different power profiles at different points in time. One home could be charging a Tesla EV at 350 kW, which is equivalent to 10 households of power consumption, whereas another could be outputting lots of energy through solar panels on a sunny day.
In this decentralised scenario, DNOs need to work out how to balance the grid at lower voltage levels. To do this, they need meter-level visibility of energy consumption and generation. Comprehensive smart metering has been a big step forward in this regard, helping to provide more granular, real-time data on what is happening on different parts of the network.
In this way, one of the ultimate aims of the digitalisation of the industry is to create the infrastructure that brings together decentralised power sources, gives visibility into them, and provides new ways for businesses and consumers to interact with the energy market. The impact of an individual piece of technology is minimal, but if you can aggregate multiple pieces of technology and create scale, that is where interesting applications arise.
For example, if we consider all of the UK’s 260,000 battery electric vehicles (BEVs) as a power grid in their own right, you can use each car battery to store or discharge power to balance the requirements on the grid. The Dutch city of Utrecht is running a pilot programme along these lines, asking BEV owners to effectively hand control of their car batteries to a local distribution company through an app. Users set a minimum battery level, and the distribution company then discharges energy from the car battery to meet increased demand or charges the battery if energy storage is needed.
As the digitalisation of the industry progresses, data will be the driving force behind these new use cases. ElectraLink’s role is to democratise this data and make it available in a way that businesses can use it to pioneer new products, services, and business models. Energy providers could provide dynamic tariffs customised to household energy consumption. Third parties could draw upon this data to provide better customer experiences, such as automatic switching services that move customers onto a new provider the second it becomes more cost-effective. Or we might see more services like the Utrecht BEV programme, where consumers could earn money for letting local DNOs manage their LCT energy stores.
Overcoming the barriers to change
Due to digitalisation and technology disruption, the pace of change in the energy industry is about to ramp up massively. As a result, market participants need to adopt more agile ways of working and move away from long-lead, “big bang” ways of designing and deploying solutions. A “fail fast” mentality – rapidly going to market with a Minimum Viable Product (MVP) and iterating as you go along – will drive quicker, more customer-centric innovation. But this will require a widespread change of mindset, and it will not happen overnight.
There is also the inherent challenge of working with so many datasets, which can vary hugely in quality and level of granularity across the market. One of the big hurdles to overcome will be finding ways to synthesise and analyse these disparate datasets in ways that are useful for businesses while protecting sensitive customer information according to the GDPR. For this reason, I believe the expertise of the financial services industry will be invaluable to us. With Open Banking, financial services organisations have found solutions to many of these challenges, and we should be learning from them. And while ElectraLink has governance arrangements in place to ensure household and business information is protected, other possibilities should be explored to streamline this process.
Ultimately, though, rather than considering these factors as barriers to progress, we should think of them as exciting opportunities. We are on the precipice of a complete transformation of our industry, one that will not just provide new commercial avenues for market participants but will ultimately deliver better outcomes for customers. This industry is full of brilliant minds capable of devising imaginative solutions that will make this promising future a reality. And I for one cannot wait to play a part in shaping what that future looks like.