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For decades, all energy was generated and distributed centrally over the national grid. However, clean energy may well completely upset that – with energy generated by solar panels on people’ roofs, for instance, or more efficient generators designed for just one business. In Nottingham, a new city development is largely self-powered thanks to its own mega battery, showing how people may begin to live ‘off grid’. The article would explore if this is something that might actually happen on a large scale, what it would mean for the big energy suppliers, explore how things like Blockchain ledgers can manage it, and also look at which firms are offering the tech that would support this.
The entrenched, centralised nature of our electricity supply is being disrupted, largely by community energy projects. But what does this mean for the sector?
“Since we got the solar panels, we try to only use electrical appliances like the washing machine during daylight hours,” say the Wilsons, homeowners in north London. The couple invested in 12 solar panels that were attached to their south-facing roof in March this year following a drive by their local council. Now, they get free electricity from dawn until dusk and, thanks to a government scheme called the Feed in Tariff (which has now closed), will be paid some £200 each year for excess electricity they generate and sell to Bulb, their green energy supplier.
For over a century, the UK’s energy grid has been an almost entirely centralised system. Electricity is still mainly generated in large coal and nuclear plants, while a lot of heating comes from natural gas that is piped into homes and offices. But this is a system which is undergoing rapid change.
As with the example above, solar panels have allowed consumers to begin generating their own electricity to become both producer and consumer, or ‘prosumer’ (indeed, using solar panels this way has long been the norm in some Mediterranean countries). And there are a handful of larger ‘community energy’ projects, which have seen entire neighbourhoods taking energy creation into their own hands.
Take the Trent Basin housing development in Nottingham. Comprising 500 homes, the project generates electricity for all dwellings with rooftop panels and small-scale solar farms. This generates electricity in the day and stores any excess in a Tesla battery to be used by the community after the sun sets. A handful of large businesses are also beginning to use this model – the retailer M&S proudly claims that it has one of the largest rooftop solar plants in the UK to power one of its distribution centres.
And it’s not just electricity. Sainsbury’s supermarket says it powers its Cannock store entirely with unsold food, which is sent to a plant where it is turned into ‘biogas’. This is then fed back to provide heat and electricity to power the store.
“We’re going from a one-way system to a two-way system.” – Dr Tim Rotheray, ADE
“Our energy system was built on a model of passive consumers and active suppliers. But we’re now seeing that model being flipped on its head” says Dr Tim Rotheray, Director of The Association for Decentralised Energy (ADE), a group that advocates for the sector. Dr Rotheray explains that “we’re going from a one-way system to a two-way system”.
So, what’s behind this trend? By and large there are three big drivers: decarbonisation, decentralisation and digitisation.
With governments focused on reducing carbon emissions, they have actively encouraged such community energy projects with subsidies like the Feed in Tariff mentioned above. What’s more, renewable technologies have improved dramatically in recent years, and are now competing seriously with fossil fuels and nuclear.
Decentralisation is also being pushed forward by new technology and a drive towards regional and national self-reliance: governments are wary of depending on energy sources from international suppliers and finding local ways of producing energy can often result in lower prices. Finally, clever digital tools such as blockchain, smart meters and load-balancing algorithms make it possible for consumers to ‘export’ into the wider grid.
However, as exciting as this new trend is, Rotheray notes that there is a lot of work to be done to ensure the system’s stability. Unlike other markets, where disruption is usually welcomed, the energy system is rather different – critical infrastructure like hospitals need supply that is 100% guaranteed. At present, there is an enormous amount of exciting innovation, yet many interesting ideas may be tempered by future regulation that tries to balance the benefits of decentralisation with the need for energy that can be controlled.
Investors should focus on understanding how this new energy system will work.
Rotheray believes that investors should focus on understanding how this new energy system will work and identify trends that have potential. He notes that some start-ups are now offering prosumers ‘energy as a service’ models, whereby they pay a fixed monthly fee for the company to manage every aspect of their energy – from load balancing to repairs to negotiating prices for the electricity they generate.
Having finished a cup of tea boiled in their solar-powered kettle, the Wilsons talk of their plans: “We’re thinking of getting a battery next year so we can go completely off grid.”
These are exciting times for families like the Wilsons, and for battery and solar panel makers – but for coal plant managers, the prospect may be nothing short of terrifying thought.