Market view: Analytics are the key to future energy security

It is only the middle of the year but many are already predicting a looming crisis around the UK’s energy supply this coming winter.

The Financial Times recently reported on research suggesting that with some electricity generators raising their prices as supplies get squeezed, smaller suppliers may be unable to bear the higher cost and stop trading.

Meanwhile, the UK is committed to phasing out coal-fired power stations by 2025, but on-going discussions around the country’s nuclear future have brought some uncertainty to this timeline. In either case, the potential problems facing our energy supply this winter needs to be addressed urgently.

Smart technologies offer many opportunities

Smart metering and network management technologies are a real ray of hope in this respect. The energy sector and consumers have both started to reap rewards from these tools, but their full potential is far from being realised. In its Smart Power report, the National Infrastructure Commission points to a ‘smart power revolution’ that could see UK energy users save up to £8 billion.

Analytics are at the core of these smart technologies. Information collected by smart meters is both detailed and complex, and more importantly it provides utilities with a deeper understanding of where they can operate more efficiently. When it comes to energy supply, this insight can open up opportunities for more flexible energy distribution by allowing utilities to get more out of a wider range of sources, all while helping ensure they meet customer needs.

Smart grid data can also be used to help energy and cost-conscious customers see where they might cut down their consumption. A closer exchange of information between utilities and energy users can promote a more efficient approach to consumption on a large scale.

How analytics can benefit all types of energy users

It is worth examining the impact of smart metering on consumers more closely, an issue that has been the focus of discussions in the UK for some time. The deeper, up-to-the-minute view of consumption that smart meter analytics provide opens the door to a wide range of nudge-based approaches to help people better control their energy usage.

For example, in periods when energy stores get so tight that it is not possible to maintain a steady supply to every household, utilities can offer customers incentives (such as rewards or reduced bills) to minimise their consumption during peak periods or on a strategic ad hoc basis.

An even longer term and arguably more beneficial approach would be to embed rewards into customers’ everyday energy usage patterns. Utilities could incentivise households to commit to using appliances like washing machines or dishwashers overnight on a permanent basis to reduce demand at peak hours.

Looking beyond the domestic sector, some businesses are already changing the way they manage their energy use to consume more efficiently. For example, the Marriott Hotel chain uses demand based information to switch some of its systems off automatically. This translates to lower usage, a reduction in energy bills, and a curbing of Marriot’s carbon footprint.

Taking the longer view

In addition to short and medium term gains, a strategic approach to smart grid data will allow utilities to develop an increasingly efficient operating model over time. By examining how different mechanisms work with various customer groups, energy companies can tailor their services to different demographics to promote the best possible energy behaviour for all users. Incremental gains from fine-tuning energy management can add up to substantial improvements in the long term.

Renewables have a part to play as well. Solar and wind sources produce an increasingly large proportion of the UK’s energy, and accounted for 25 per cent of the country’s electricity in 2015. With local production from renewables feeding into micro grids, smart energy systems are ideally suited to help optimise the use of these intermittent energy sources driven by both the needs of the grid and consumer preferences, as appropriate.

Managing energy and balancing power is the key to accommodating this change. Modern network management tools allow for faster processing of smart meter data, which utilities can use to develop strategies that reflect the changing way people consume energy

The UK’s energy infrastructure is becoming increasingly diversified as it grows to encompass a complex network of providers, including some operating at the most local level. This development, along with threats to our future energy supply, demands a fresh look at how supply and demand are managed and how consumers can be empowered to consume more responsibly.

Network and customer analytics are the lens through which utilities should view these issues, so they can develop suitable responses and balance both sides of the country’s energy equation.