The energy industry has already been looking at how households will be supported in their participation in demand-side services. This area has traditionally been the domain of large commercial customers, but the current situation of low energy demand and high renewable generation has brought the need for flexible household consumption to the fore. Oliver Archer, senior analyst at Cornwall Insight, looks at the potential benefits and flexibility models available to domestic customers.
Unlike large industrial consumers, households are unaccustomed to rigorously managing consumption. Domestic energy expenditure is considered relatively infrequently, creating significant barriers of complexity and effort. This is one of the key challenges to building a domestic flexibility market — how best to communicate and sell demand-side response to households so enough sign up.
To combat this challenge, providers of connected home technology are now focusing on automation and artificial intelligence. This will enable assets and appliances to automatically respond to price signals while accounting for learned patterns and preferences of users. Such advances will reduce the effort required from householders to participate in flexibility and could make load shifting attractive even at lower saving levels.
Simplicity and ease of use will need to sit at the heart of any household offer. Some providers are packaging the management of flexibility into an ongoing contract when an asset or energy plan is bought. The supplier will manage pre-agreed increases or decreases in consumption remotely on behalf of the customer. Cost savings and revenue generated through flexibility would then be shared between the supplier and customer.
For the customer, this could look like an upfront discount on the product or an ongoing subscription-style ‘energy as a service’ arrangement, with a flat monthly fee for power supply and demand management.
This kind of contract would bring energy in line with contract structures in telecoms, as well as other developing areas of consumer technology which are increasingly shifting to service models.
However, it comes with the substantial challenge of consumer caution around ceding control of key elements of daily life as well as access to data. For mass uptake and benefits to be reaped, these services will need to provide simplicity of use, adequate financial incentives and preserve control through established flexibility parameters and a simple consumer override.
