The energy the world uses to keep things turning ten years from now is still somewhat of a wild card. With so many divisions still existing over what the model should become, it brings wild speculation about what the next few years will bring. It’s still worth exploring what innovators continue bringing to energy transformation. Many significant initiatives are already developed that could end up being mainstream at some point in our future.
Many of these new paradigms relate to energy communities that exist in Europe. A number of business models are emerging. However, local energy markets are far from dominating future energy prospects. Other energy transformation projects relate to everything from how we distribute heat to smarter energy devices.
Are Local Energy Communities (LECs) Really Our Future?
A local energy community is one that utilizes local participation in energy use to the point that it takes local areas off main energy grids. This is not something wholly American yet by any means, despite some regional experiments. It all originates in Europe, where successful energy communities currently operate.
One of the big questions beginning in Europe is whether local energy communities can replace conventional energy suppliers. No one really knows for certain. But some interesting developments are occurring in various European countries.
LECs are really the product of Northern Europe, primarily in the U.K., France, and Germany. All three countries have two current energy transformation directives that more and more citizens are beginning to find useful:
- Citizen Energy Communities
- Renewable Energy Communities
Within the context of CECs, Europe has a more specific name for its directive: Electricity Market Directive. RECs have a Renewable Energy Directive. Both of these have different ways of persuading citizens to share in local energy projects.
In the case of CECs, shareholders or members act as local authorities to manage the community. Those who live in those communities are encouraged to participate in the program.
The goal is to lean toward environmental and social benefits rather than focus on profit. It works much the same way with RECs, despite those who participate not needing to live within the local area.
Renewable generation and any additional energy services under this directive often benefit shareholders and members by removing them from the main electrical grids.
What Are the Main Business Models of Energy Communities?
While the above directives continue to evolve, four business models are now emerging as the template to make energy communities more viable:
- Generation/import plans
- Using a co-operative energy supplier
- Collective self-consumption
- Virtual allocation (or peer-to-peer)
In the realm of the import plan, there are more limitations. It works primarily through member acquisition and asset development. Co-operative energy suppliers work much the same way.
Collective self-consumption plans are far more popular since they work in local neighborhoods, including in single apartment buildings. If this sounds familiar, it is similar to a microgrid experiment done in Brooklyn since 2017.
Neighbors were able to trade energy among themselves through the above microgrid program. Collective self-consumption works very much like this, but is not just experimental in Europe. Various communities, primarily in Germany, continue to make this energy transformation work in small communities and apartment blocks.
The sharing of energy output through pooled generation assets helps optimize energy use for consumers living within these communities. Thanks to Germany’s Mieterstrom Model, many can get a good idea of how this works and what it might portend for the future of local energy usage.
A Closer Look at the Mieterstrom Model and Other Energy Transformation Plans in Europe
It seems like Germany is trying to a lot of things right to make the country a great place to live, including taking new approaches to energy. Their shared energy Mieterstrom Model works in tandem with similar models in France, Belgium, and Spain.
How does it work? A distribution system operator owns the network. Energy is then produced within specific apartments. Very similar patterns emerged in France, where they have more stakeholders involved.
In the France CSC model, an electricity consumption index is used to determine who can join the network. They determine this based on detailed profiles with details on what these people normally consume. Through the use of smart meters, the distribution operators keep tabs on how much energy is being used. This gives you some hints about the use of smart technology in providing and measuring energy consumption in the future.
Net-metering is a similar system currently being used in Greece. Solar technology is at the heart of this, where a utility calculates all net-metering credits to local areas. The process involves an annual billing cycle while utilizing wind power and solar technologies in everything from local universities to farms.
Then you have the above Brooklyn experiment, which uses blockchain to make local collective self-consumption plans a viable future energy technology.
The Use of P2P Models for Energy Consumption
Undoubtedly, you have heard a lot about blockchain and how it provides a private and secure peer-to-peer network. The use of it in energy consumption is now at the forefront of the field, thanks to the Brooklyn microgrid experiment.
It opened a lot of eyes to the possibility of how a P2P system works to create local energy communities here in the U.S. We are certainly overdue to make such a thing work when millions still rely on mainstream energy suppliers.
When the Brooklyn experiment occurred, they only tried it in five households, though it was not a one-time tryout. Brooklyn Microgrid still goes on in Brooklyn with continual encouragement to spread the practice elsewhere. So far, it is not a mainstream activity; instead, it’s seen in select parts of the U.S., namely Texas.
P2P energy trading is only one small piece of what the next ten years will look like. What other significant energy tech predictions could come true over the next few years?
The Use of Heat Networks
To expand on energy sharing, engineer John Armstrong recently gave his predictions for what he sees happening over the next ten years. He saw heat networks as one realistic possibility.
Those who use heat off mainstream grids know how expensive it can become when left on for long periods during the winter. Armstrong said this about heat networks:
“Heat networks are predicted to supply 18% of the U.K.’s heat. My prediction is that they could actually do more. High-density areas such as city centers have the potential to share energy much more than they do now, taking ‘low grade’ heat from sewers, trains tunnels, data centers, and cooling systems to use in heating.”
He also predicts more fifth-generation heat networks being invented soon, to the point where every community can use them for heat sharing. Imagine how much this would change things in the realm of heating in the United States. During harsh winters, especially, taking low-grade heat from local utilities would finally prevent big heat bills for those who can least afford them.
More Use of Hydrogen to Fuel Transit
Armstrong also predicts hydrogen becoming more prevalent in specific pockets, including being used more often in transport. Soon, many vehicles and even trains may start using hydrogen as fuel.
Making it affordable and safe is going to become one of the biggest technological challenges for innovators. Hydrogen-fueled vehicles are still a little pricey for most Americans — not that the E.V. market is stalling by any means. Reports state that the global market bought 1.2 million passenger plug-in cars this year alone, up 5% from last year.
One major challenge facing the use of hydrogen is how to produce it inexpensively and how to use green electricity to make more of it. Many of those issues are still up in the air, with hydrogen likely playing a big part in energy usage by 2030.
What Is the Impact of Energy Transformation Projects on Retail Energy Suppliers?
Reports on energy retailers show they face a lot of stiff competition from these new energy models. Much of this occurs in Europe, where energy sharing continues to lead.
These energy retailers also face four key questions, posed by Arthur D. Little:
- What is their purpose?
- What offerings can they bring to improve?
- How fast and efficient can they become?
- How do they transition to digital technology?
Energy retailers consolidating with the above energy consumption models are answering these questions. In a poll from Delta-EE, they asked experts what they saw as the real future for energy suppliers five years from now. Poll results showed most respondents thought suppliers would contract with the energy community to purchase excess generation. In other words, a symbiotic process is likely the new reality of what energy will look like in a decade.
More energy retailers are beginning to team up with energy sharing programs and provide their assets to help make the process work more efficiently. Overall, energy transformation initiatives may not be a battle so much as a joining of forces to create less political friction behind the shift. If you think this is the future of energy (or if you see other trends), let me know about it.