Can innovation in the energy sector compensate for rising prices?
Inventive players in all quarters of the industry are busy developing new business models and technologies with the potential to reduce fuel bills across the UK
The unwelcome return of high inflation to the UK this year has hit everyone in the pocket, but it’s presented a stark choice between heating and eating for many thousands of vulnerable consumers, as increases in the price of essentials such as energy and food show little sign of abating.
To counter the energy industry’s significant contribution to the cost-of-living crisis, a growing number of challengers and startups are working hard to bring prices down over the long term through innovative means.
For many, that has meant focusing on green solutions, particularly wind power. For instance, Glasgow-based company Katrick Technologies is trialling a flexible modular system that works with a wider range of wind speeds than conventional turbines can use. Each hexagonal unit features an array of vibrating mini-aerofoils that, the firm says, could generate 22MWh of carbon-free power annually. The system is far smaller than a typical wind farm turbine, which means that units could be mounted in built-up areas and operate effectively and relatively unobtrusively.
This is just one example of an innovation that could provide cheaper renewable energy by tapping into a trend for local microgeneration, with whole communities owning and running some larger installations.
Another option for collective ownership is demonstrated by green power challenger Ripple Energy. Each of its customers buys a tiny share in a large-scale wind farm. Ripple’s supply partners buy the electricity that this generates at its relatively low and stable operating cost, rather than at the high and fluctuating market rate. The saving is passed on to customers in the form of monthly bills that are discounted according to how much electricity their share of the farm generated the previous month.
“Five years ago, onshore wind became the UK’s cheapest source of electricity, but people couldn’t access it directly. Wind farms were owned by pension funds and utilities,” says Ripple’s founder and CEO, Sarah Merrick. “Now that people can see the direct link between owning a wind farm and getting cheaper electricity, they’re spreading the word. Ownership really helps to protect against price spikes.”
Ripple’s first wind farm has 900 owners, whose average saving this year is expected to be £350. A much larger farm will start generating from late next year, owned by 5,600 individuals and 19 businesses.
Chantel Scheepers, CEO of OakTree Power, points out that it’s not only domestic customers who’ve been suffering because of the energy crisis.
“SMEs have often been ignored in a polarised national conversation about its impact, which has involved energy-intensive industries and households,” she argues. “Smaller firms absolutely need to shield themselves from a worsening situation, as the government’s handouts simply aren’t sustainable and will fall short soon.”
Scheepers’ company applies what it calls a demand-side response to the price problem, modulating energy usage in commercial buildings. Its AI-based systems identify when and where consumption can be reduced for short periods without affecting performance, potentially saving users tens of thousands of pounds a year. Commercial partnerships with grid operators are also in place, rewarding firms financially for making up energy shortfalls when supply and demand across the grid are at odds.
“This enables SMEs to tap into the most precious kilowatt there is: the one you learn to use at a time that’s cheaper – or don’t use at all,” Scheepers says.
New ways to improve energy efficiency are gaining traction on the supply side too. Peter Bance is CEO of Origami Energy, which provides machine learning tech to the owners of energy assets – batteries, solar panels and turbines, for instance – to help them understand changing market and physical conditions. The information it generates enables them to act swiftly to maximise their savings.
Bance believes that energy firms will depend on such systems for their survival, adding that digital optimisation can reduce prices. “A ‘dumb’ green transition – one that isn’t digitally smart – will just keep them increasing. For costs to go down for consumers and businesses, costs first need to go down for suppliers,” he says.
For its part, Westminster is pumping public money into the R&D effort. In April it allocated a “wide-ranging £375m package of support for innovative energy technologies”, promising that this would “power British homes and businesses for decades to come”.
Bance is also a non-executive director of the Energy Systems Catapult, a not-for-profit enterprise focused on bringing government, academia and industry together to accelerate innovation in the field. The group believes that policy-makers should mandate that any new green energy product must have digital systems built into it from the outset to maximise its efficiency.
As part of his role at the Energy Systems Catapult, Bance advises on how digital technologies can best be applied. He argues that a priority for the government should be to engage with the host of innovative startups and SMEs working in the sector, rather than focusing on big companies.
Another policy idea might come from the US, where President Biden has announced that he will use the Defense Production Act 1950 – normally invoked whenever the country is at war – to mobilise the production of goods ranging from insulation to energy-efficient heat pumps. The chief aim is to push down their prices to encourage greater uptake among businesses and consumers.
In the shorter term, an investment in public education could make a difference in reducing energy consumption and, therefore, costs.
Merrick says that there’s an important role for “low-tech and not very innovative” solutions, citing a desperate need among vulnerable customers for help to use less energy next winter. Relatively cheap, simple and effective measures include plugging up draughts, insulating lofts and adjusting the flow settings on condensing combi boilers to improve their efficiency.
In the longer term, it’s hoped that machine learning systems will assess market prices in real time and create dynamic tariffs, which could benefit all energy consumers.
Adam Ault, technical consultant at IT services company Aiimi, says that such systems could “identify those most at risk of entering fuel poverty and move them to an affordability tariff” before those customers even realise themselves.
Ault, who points out that the technology is already being used in the water industry, believes that utility providers could quickly identify struggling customers and alert each other to potential problems through the greater use of open data.
More collaboration of this type is vital if the UK is to get through the energy crisis. That’s the view of Dhara Vyas, director of advocacy at industry trade body Energy UK, who stresses the importance of leaving no one behind.
“Government, industry, financial organisations and the regulator all need to work together,” she stresses. “We must all ensure that the energy market will work for everyone, not only those most able and willing to adopt new technologies.”