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Can the sharing economy work in the energy sector?

Profile of By Hylton Millar
By Hylton Millar
Director, Corporate Finance Infrastructure, KPMGHylton is responsible for infrastructure corporate finance at KPMG, with a focus on Smart City and IoT projects.

The energy industry faces the ‘trilemma’ of creating cleaner energy, at a lower cost, while maintaining the security of supply and ensuring enough generating capacity to seamlessly sync supply up and down in line with surges in demand.

The key is location. If network operators know what is causing demand and where they can predict the time and place of ‘peak’ demand and continually adapt supply and nearby infrastructure accordingly.

Part of the solution is to decentralise energy management to consumers, through batteries that can store energy for use when needed. Electric vehicles, more than a cleaner way of getting from A to B, are also essentially ‘batteries on wheels’ which could empower consumers to store and redistribute surplus energy back into the network through Vehicle 2 Grid systems. This advance could see the sharing economy model at work in the national grid.

The same idea of storing and sharing surplus energy could be extended to household energy use, turning communities into smart, power-sharing networks. Automated systems that autonomously adjust energy use in line with demand, such as turning down the heating when the house is empty, will also help manage energy supply by managing demand.

Yet the ultimate solution is the convergence of energy so all energy use and consumption is monitored and managed as a ‘whole system’ rather than a series of separate systems. The National Infrastructure Commission recently proposed greater interconnection, the trading of electricity across borders and markets to raise and reduce capacity in response to real-time demand. We could also soon see combined heat and power plants. The vision is to create an adaptive energy grid that is continually capturing and redistributing power in response to local needs.

The electric car epitomises the coming convergence of the power grid with transport, heat and light all feeding on the same electricity network. The electrification of everything from transport to cooking and heating means traffic management and household energy use will all be intimately interdependent. This creates a need to move from a distribution network operator to a ‘distribution system operator’ with a whole-system approach to energy management.

The convergence of energy sources needed to produce an adaptive energy ecosystem will require a parallel convergence of energy data. Just as energy will need to be shared across borders and sectors to transform the grid into a single ‘system of systems’, data on everything from energy use to energy capacity will also need to be shared among different companies and countries.

Close up of a hand holding a mobile phone

This is necessary to give energy providers the full-spectrum oversight needed to balance supply with real-time fluctuations in local demand on a national scale. Energy companies could create digital twins, detailed virtual real-time representations of power grids, which enable events in the physical world to be monitored and managed in the virtual world. They could integrate data from smart meters, car chargers and solar panels to identify ‘pinch points’ and peak demand times and create predictive grids that balance national supply and local demand on a minute-by-minute basis.

Cross-sector integration of network maps with nearby ecological, geological and meteorological data could enable ‘joined-up’ planning of new power sources such as tidal and wind that reflect local variations in conditions. It would also enable national grids to predict the impact of a storm or flood on power demand in each region.

The electrification of transport will mean that household, business and transport energy use will be intertwined and so the data on all these forms of electricity usage must also be shared. Digital twins combining live location-based traffic monitoring with data on household energy use can help identify the causal factors behind demand in each area.

Combining such location data with that on-demand and supply will help us identify the optimal way to manage distribution in every region. It could help balance energy cost, consumption and provision across the country.

Profile of By Hylton Millar
By Hylton Millar
Director, Corporate Finance Infrastructure, KPMGHylton is responsible for infrastructure corporate finance at KPMG, with a focus on Smart City and IoT projects.