Connected homes will unlock smart energy markets

The Energy Sector’s objectives are challenging and crucial in ensuring lower consumer bills and decarbonisation. Flexibility and smart energy can significantly help to transition into a low carbon energy system while also bringing benefits to the wider economy. Demand Side Response (DSR) is a key engagement piece which is only one way to put the consumer at the heart of the system by providing them the tools to engage with the market and use new services such as flexible tariffs. Currently not a lot of us know what our energy tariffs are exactly or/and how should we prioritise our lives to reduce our energy consumption and actively engage with the market. Smart appliances are key enablers of DSR for consumers.

Smart appliances can provide services in day-ahead and real-time for system operators and commercial parties by shifting operation (i.e. shifting energy consumption for better alignment between production and consumption). This will allow limiting the use of polluting and expensive peak generation to cover excess demand and it will also result in a decrease of Renewable Energy Sources (RES) curtailment in case of insufficient demand. In addition, a shift in energy consumption can also support solving congestion issues in the distribution grid. This leads to both monetary savings because of lower consumption of fuel, as well as reduced CO2 emissions.

According to the International Energy Agency, one billion households and 11 billion smart appliances could participate in interconnected electricity systems by 2040 thanks to smart meters and connected devices. The network still needs to undergo a process of transformation in order to accommodate and create these services. Most importantly to integrate and interact with the consumer so to be able to take part in demand-side response (DSR) schemes through the provision of time-of-use tariffs.

The energy system though is designed for the traditional business models of yesteryear, and because its function was to do so to keep the lights on and provide safety of supply, it worked, until now. Commonly operating as a heavy institution of a very small group of actors with well-defined roles, in an age of decarbonisation, renewable energy evolution, and flexibility, new entities and disruptors are marking their territories however they are finding barriers to testing new products.

Significant barriers for consumer adoption of smart appliances remain however. It prevents wider adoption especially in the connected/future home. By far the greatest of these is the value that consumers attribute to the connected home products and services. Clearly, industry needs to do a far better job of conveying the benefits of the connected home. In addition to finding ways to demonstrate value we must also take steps to address other concerns which tend to revolve around privacy and security. The Government is committed to ensure the right regulation is in place to encourage an adequate adoption and intends to base any regulatory requirements on the principles of interoperability, data privacy, grid-stability and cyber-security, and consumer protection.

Our job is to collaborate and navigate together with Government and industry to ensure that the connected home market in the UK is both an attractive one in which to test, develop and launch products as well as ensuring that it delivers value and benefits to consumers, as well as the energy network as a whole.

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