Across Great Britain, smart energy meters are being installed in every home to start the digital transformation of the way we consume energy. As with other sectors before, such as music, films and more recently financial services, the digitisation of a market significantly changes it, introducing opportunities for new services, players and transformed customer experiences.
Britain’s energy market today is in excess of £30 billion for domestic supply, an average of over £1,000 per year for a typical property. Small houses and flats aren’t much better off, paying more than £700 per year and, as we’ve seen over recent years, these costs will continue to rise. Furthermore, people on lower incomes often find themselves using prepaid meters that can restrict their choice of energy tariffs, cost substantially more for the same energy consumed and have the inconvenience of having to frequently top up their credit at local shops.
This situation is changing and the introduction of smart meters will allow consumers, in real time, to understand their energy usage and spending. They will also introduce greater parity between prepaid and post-pay costs (in the same way as pay-as-you-go mobile phones did in the 1990s), making it far easier to identify better deals, change energy supplier and provide greater convenience. Probably most importantly, the meters will also enable the basic infrastructure for consumers and communities to generate and trade energy with each other and the electricity grid. This creates the opportunity to not only consume energy at ‘cost’ prices but also to generate revenue from energy that isn’t consumed locally.
Over the past few years, there have been a number of examples to deploy energy generation and storage capabilities into communities. As centralised energy prices continue to rise and sustainable generation and storage equipment costs fall, there is a growing opportunity for consumers and communities to purchase the equipment needed to generate their own energy at a fraction of the current cost. Also the energy market regulator and the national grid have created and are creating further mechanisms for communities to sell their excess energy back to the grid and to more efficiently buy energy when local generation is not sufficient.
This market is at the beginning of a significant growth cycle. In 2017, the government announced the transition away from fossil fuel- to electricity-based transport by 2040 and it is expected that transitioning away from natural gas-based domestic heating is likely to be the next major policy move. These things together will more than triple a typical home’s consumption of electricity, creating even more demand for community-based generation to sustainably benefit both landlords and tenants.
With this growing market in mind, energy management should become a business priority for your organisation. Below are some basic priorities you should start to consider.
Minimising and optimising consumption
The easiest way to reduce energy costs is to consume less, therefore appropriate levels of insulation and energy-efficiency technologies should be considered as part of your on-going maintenance regime. Consider the government schemes around energy efficiency and look to include other improvements (wall and roof insulation, LED lighting, automatic timers & PIR sensors and high-efficiency white goods).
Energy communities to avoid building margin on margin
There are a number of white-label businesses that can help you create an energy community that can sell energy to your tenants and generate revenue by selling back to the grid. Many of these are in their infancy but the business model has been proven to be both viable and sustainable. Through these models, you and your tenants start to avoid the ‘margin on margin’ problem that is pervasive within the complex supply chains of the national energy suppliers.
Generation and storage facilities within your estate
Time-of-use tariffs will become the norm and therefore your ability to generate and store energy can significantly offset your and your tenants’ energy costs at peak times. Asset costs have dramatically fallen and continue to do so, creating in some areas an RoI within 2-3 years on an asset with an operational life of 10-15 years.
Matthew Roderick is founder of n3rgy.