IoT will underpin development of new energy markets

Authors: Dr Andy Gilchrist and Dr Scot Wheeler, University of Oxford.

The world is transitioning to a decarbonised and decentralised energy system, requiring a total re-think in how we produce and use all forms of energy: this includes how and where electricity is generated, how we heat our homes and industrial processes, and how we transport ourselves and goods. Digitalisation is enabling the transition to a smart, flexible and low carbon energy system which will present opportunities to offer new products and services throughout the energy value chain.

These opportunities will go far beyond the historic model of simply supplying energy to consumers.

This historic model is shown in figure 1, where energy (shown in green) flows from a generator, through the national and local grids, to the consumer. The consumer pays a retailer for this energy (money flows in red), who in turn reimburses the network providers and generators in accordance with rules defined by the regulator. A command and control model, that has ensured the consumer has energy when they want it.

A centralised renewable-based energy system, as shown in figure 2, is more complex, as energy generation is intermittent. As we expect energy to be there when we want it, storage will become important. In times when energy generation is more than demand, energy can be storage: when generation drops below demand, energy will need to be released from storage if the lights are to stay on.

This is stimulating a market in network balancing services. This balancing is complex, requiring novel management of energy movements across both time and geography. Financial transactions also become more complex, as these balancing services must be paid for.

However, a renewable energy system will not be a centralised command and control model: renewable energy is being generated in local wind farms and photovoltaic parks, and many consumers will both produce and consume (the ‘prosumer’), perhaps though putting PV panels on their roof. This will stimulate the development of local energy systems, where energy and financial flows are locally contained.

Figure 3 shows how this will work. Each local energy system (within the brown dotted circle) requires generation and demand to be matched, with local markets delivering balancing and network services (as in figure 2 above). However, these local systems will operate within the wider external system, including both larger systems above and micro systems below. Balancing systems become even more complex, again requiring integration across both time and space.

One example of the importance of local control is in the uptake of electric vehicles. ‘My Electric Avenue’ has shown that effective management of energy flows for EV charging could reduce the cost of UK grid upgrades by around £2.2 billion up to 2050.

The Internet of Things (IoT) will play a major role in managing these new energy flows and in the development of new markets.

Figure 4 shows how the IoT will be fundamental in connecting real world assets to the cloud connected data and market platforms required; essential for managing both individual local energy systems and linking to connected energy systems – a new decentralised energy system management.

There are undoubtedly technical challenges for IoT deployment in the new energy systems which include the development of new sensors, data analytics techniques, control mechanisms and security. There are challenges around integrating old, new and evolving technologies and systems, which will require a higher degree of inter-operability (all devices need to effectively talk to each other) and trusted computing (all must be secure and behave as expected).

Equally, there are non-technical barriers for IoT deployment to tackle within the context of a new local energy system, including the highly sensitive issue of data ownership and sharing. Also new markets will only work if they meet human behavioural needs. And, there is a big issue of reforming existing energy market regulation to allow novel business models and markets to evolve!

We are moving from a command and control energy system to one of consumer-led energy production and control. The IoT will underpin this transition. Pitch-In can contribute vital learning that bridges academic excellence (across physical and social sciences) with successful commercial innovation and increasingly position the UK as world leader in these new evolving smart, interconnected and decarbonised energy system markets.