'Exciting' smart energy innovation has been spurred by cuts to renewables subsidies, says expert

Out-Law Analysis | 04 Oct 2017 | 11:00 am | 4 min. read

ANALYSIS: An exciting, new and innovative smart energy market has emerged due in part to governments withdrawing or reducing renewable energy subsidies.

Those policy decisions have spurred widespread diversification by renewables companies into new areas of smart energy technology. These are finding a market thanks to the increasing support of local authorities and changes in demand for energy.

This is part of our series analysing the challenges and opportunities ahead for companies embracing smart energy technologies. For more, sign up to receive an exclusive Pinsent Masons research paper on smart energy technology, supply, storage and investment.

The result is a market ripe with opportunity for utilities and the tech community, as well as for investors.

Despite well-publicised international efforts to cut greenhouse gas emissions and move towards a 'greener' supply of energy, many countries around the world have cut the support they had been offering for solar, wind and other renewable technologies.

The cut in subsidies has put pressure on the business models operated by renewables firms and spurred many to diversify their business and look at other ways to keep their company afloat.

In the UK, for example, we have seen solar developers branching out into providing battery storage solutions for both commercial and domestic customers. Some renewables companies have also moved into the home energy market by supplying products such as smart thermostats and smart meters, for example, while others are looking to become energy suppliers in their own right.

The developments show that policy is definitely having an indirect effect on the way the market is moving, but there are further factors converging to drive the smart energy revolution.

Digitisation of the energy market has become much more customer-interactive. Today, vast amounts of data can be pulled together and presented in a way that consumers can understand, empowering those consumers to engage much more flexibly and quickly with the energy market. On energy-pricing, the growth of comparison websites has helped consumers become much more informed about how they use their energy and how much they pay for it.

This has opened gaps in the market for new companies to emerge with innovative solutions on how to drive down the cost of energy.

New technology is at the heart of those solutions and is increasingly helping to balance the demands placed on the National Grid by providing for stand-alone decentralised energy networks and, in many cases, enabling excess energy generated to be supplied back to the Grid.

While one of the ongoing challenges of managing the electricity grid remains in ensuring, particularly in winter, that there is sufficient power available to prevent brown-outs, further issues stemming from the increase in local generation include how both the economics of the Grid are managed and how energy provided from local networks is captured and made available for use when it is needed.

Battery storage technology is one of the smart energy technologies to have emerged in recent times as a solution to this problem. The market has acted quickly to identify the potential of this technology and develop solutions that address the problems that arise from an increasingly diverse energy supply market. The technology has been developed much more affordably and much more speedily than most within the industry had anticipated.

The development of new technology for electric vehicles, together with recently stated policies banning the sale of new petrol and diesel cars in the UK and France from 2040, is a good example of where changes in demand for electricity is opening up opportunities for smart energy companies.

The National Grid has estimated that, at peak times, it could require an extra 18 GW from the system to support the charging of electric vehicles – levels of additional power that would be very challenging to deliver at the moment.

To address the issue, there would either need to be extra capacity built into the Grid to support the anticipated increase in demand, which would likely require drastic increases in energy pricing to pay for that, or a fresh solution to better manage the additional demand.

One solution being developed at the moment is smart electric vehicle charging. This would see drivers plug-in the vehicles to be charged, but where the Grid would decide when that charging would take place, subject to vehicle owners being able to use their vehicles when they need to. So, for example, vehicles could be plugged-in to charge in the evening and electricity pulled from the Grid overnight when demand is low. The solution would also allow excess energy in the battery to be discharged back to the Grid to respond to periods of high demand for energy.

It is those sorts of technologies and solutions which are really driving the market at the moment. In many respects they are common sense solutions, but there are gaps in the market for them which is helping to drive innovation. While this is exciting, unfortunately regulation and policy often lags behind, which can serve to stifle developments.

One area, though, where the smart energy industry has been given a leg-up is in local government policy. Many local authorities and municipalities around the world are pushing the smart cities agenda, of which smart energy is playing a major role.

For example, Bristol and Peterborough in the UK have been promoting smart technologies, including electric vehicles and renewable energy for a number of years. New York, Amsterdam and Seoul are other cities leading the way

The smart cities drive is helping to change the focus of the smart energy market as local authorities open up public sector assets, such as data, and enable the private sector to innovate using those assets.

In addition, some local authorities are also providing public sector money to support private sector investment in smart cities, and smart energy, technologies. This gives businesses comfort that they are not alone in taking on the risks involved in pushing forward with innovation and developing and commercialising new technologies.

We have seen many examples of successful partnerships to-date between companies in the smart energy market and local authorities, and there is no doubt that this has been a spur for the smart energy revolution.

Becca Aspinwall is an energy expert at Pinsent Masons, the law firm behind Out-Law.com.