The three tech trends opening up the energy world

Back to the Future

The year is 1812...

Britain is at war with Napoleon and it will be another three years until the famous battle at Waterloo marks the final defeat of the French Emperor.

King George III is on the throne and has just granted a Royal Charter to a company promising to deliver a technology that will change streets across London, the rest of Britain, and eventually the world: gas lighting.

After receiving its Royal Charter, the Gas Light and Coke Company – the company we today know as British Gas – begins building a large number of small gas works across the capital, to meet the energy requirements of the various boroughs, locally. It also starts installing gas lamps across London to light up the city’s streets and drive down crime rates.

Image courtesy of Grace's Guide to British Industrial History

Cross section of The Exhauster House, Beckon Works, 1870. Image courtesy of Grace's Guide to British Industrial History

Cross section of The Exhauster House, Beckon Works, 1870. Image courtesy of Grace's Guide to British Industrial History

This vision of a past where energy sources were close to the point of use also hints at how energy companies will operate in the future.

There will be fewer of the large centralised power stations that dominated the twentieth century, and in their place a diverse network of homes, businesses and smaller power plants all generating electricity.

This transformation of energy networks is happening across the world, driven by three key trends: Decarbonisation, Decentralisation and Digitisation.

Decarbonisation and Decentralisation

By 2040 Bloomberg New Energy Finance predicts that more than half of global energy capacity will come from renewables and flexible sources, such as battery storage and demand side response.

At 7% of global capacity, flexible sources such as batteries and demand side response – where homes and businesses automatically cut energy usage a peak times – will account for the same level of global energy capacity as oil-fired power plants today.

And more than half of this energy storage capacity will come from small-scale batteries installed by households and businesses alongside rooftop solar panels.

This trend away from larger power plants and towards smaller, decentralised energy systems is happening in both developed and developing nations.

In developed economies it is driven by the search for energy efficiency and cleaner energy sources.

Global renewable energy investment has risen each year since the 2015 Paris Agreement, where countries agreed to limit global warming to less than 2 degrees Celsius above pre- industrial levels. According to the UN Environment Programme, 2017 was a record year, with global investment in renewable energy reaching $279.8 billion in 2017.

In developing nations, solar panels are providing cheap, local power in the absence of grid infrastructure. The UN puts the total global solar power capacity added in 2017 at more than the additions of coal, gas and nuclear power plants combined.

The decarbonisation trend is being accelerated by the falling price of renewable energy technology, and the availability of technology such as batteries that makes it easier to store electricity.

This in turn accelerates decentralisation, as renewables are by their nature smaller and more spread out than the equivalent capacity provided by a traditional power plant.

The rate of decarbonisation and decentralisation is being accelerated by digital technology, giving people the power to save, or even make, money by being more flexible with their energy use, while helping electricity grid operators to balance supply and demand.

The principle of supporting the grid as a consumer, rather than as a producer, is known as demand side response. At peak times where the grid is struggling to meet demand, users can automatically cut their energy use and sell this reduced consumption back to the grid.

What is Distributed Energy?

Sale of energy savings from users to the grid is typically delivered by an emerging class of companies called demand response aggregators.

Europe’s largest demand side response aggregator, REstore, was acquired by Centrica in 2017. Centrica CEO Iain Conn says he expects demand side response to become one of the fastest growing elements of the energy market over the next few years.

“Demand response aggregation and being able to sell less energy use into the grid operator is becoming a big business,” says Conn.

Demand side response exemplifies the decentralisation trend, with lots of small adjustments and contributions spread evenly across the grid accounting for something that would cost hundreds of millions, if not billions, of pounds to build.

It is estimated that the energy savings created by demand side response globally will increase seven-fold over the next five years, and it will have a market value of £6 billion by 2025.

Conn says connecting this diverse network of electricity generation, whether it is virtual or real in the form of onsite renewables, will become the chief role of energy companies in the coming decades.

“So many customers have built a solar panel on the roof of their factory, or have two or three wind turbines,” he says.

“But they don’t know how to optimise those into the energy market. They’re wanting the ability to access extra value through that. That’s called route to market services.”

In the same way as demand side response aggregators are emerging as a new type of energy company for the decentralised era, a new breed of companies is providing these route to market services for small generators.

Centrica acquired one of Europe’s leading route to market companies, the Denmark-based Neas Energy, in 2016.

Neas is able to take all of the Big Data coming from smart meters and Internet of Things (IoT) connected devices to build an accurate real-time picture of energy demand, as well as demand trends. Neas also uses software that combines this data with smart algorithms that judge weather patterns, so that it knows how much any given wind turbine or solar panel is likely to generate, and when.

This helps balance the grid by matching supply and demand more accurately. And for the smaller energy producer, it helps them sell their energy at the most accurate market price.

The growth in services supplied by companies like Neas is being driven by the rapid improvement and increasing availability of smart digital technology to both energy companies and their customers.


By 2025 it's estimated the world will have over 75 billion connected devices.

From smart home products such as Hive that allow home owners to control their energy use from their smartphone, through to companies like REstore employing artificial intelligence to calculate just how much energy capacity a factory can offer as a virtual power plant. Energy, like every other sector, is going digital.

Microsoft’s National Technology Officer Michael Wignall says the combination of increased computing power, cloud computing and all the data generated by IoT devices is driving a rapid transformation of how companies and entire sectors operate.

“Things we just weren’t able to do a few years ago are now possible,” says Wignall.

“AI and big data allow organisations to come up with different business models and different offerings that they weren’t able to before because they didn’t have the insight about what
their customers were doing with their service.”

And it is imperative that companies in the energy sector do this, because customers’ expectations of what it means to engage with a business are changing.

When a person engages with Google, it is invariably through one of its platforms, be that searching for something online, opening up their email, or finding something on a map.

This idea of businesses as a digital platform is something that energy companies must grab hold of, says Conn.

“Centrica has to become and is becoming a platform company,” he says.

“For example, Hive is a home internet of things set of propositions. But primarily it’s a platform that people are having a relationship with.”

As that relationship grows, Conn says he sees the platforms offered by companies such as Centrica extending well beyond energy-related services.

“A growing segment of the market is around peace of mind, which is customers asking “Is my home OK? Can I tell whether someone’s come in or not? Is my daughter home?” or being able to look at it through a camera,” he adds.

This shifting nature in the relationship between energy companies and their customers is one where, thanks to digital technology, the balance of power is tipping firmly towards the customer.

What these trends mean for customers

Energy customers today are already far more informed than they ever have been before.

Smart meters, IoT devices and smartphones enable both homes and businesses to understand their energy with ever-increasing levels of accuracy.

Nicola McCheyne, head of the Centrica Innovations Ideas Lab says this new level of insight is helping to put customers in control.

“Some of the technologies that we're seeing in the energy sector that will really have an impact on customers' lives are those that provide insight into what is happening, such as new metering technologies that allow you to understand what's happening in your home,” says McCheyne.

“That will give consumers much greater control and enable them to really engage in energy in a way that they haven't done in the past.”

However, greater insight through digital technology is just the start of the shift of power away from energy companies and towards the customer.

Centrica is currently piloting a project in the south west of England that will allow local residents and businesses to buy and sell energy between themselves without the intervention of their energy supplier.

The £19 million Local Energy Market in Cornwall is enabling 200 homes and businesses to do this using a digital record known as Blockchain. It is used to create a secure electronic ledger of transactions between participants.

McCheyne says Blockchain is critical for providing the trust among users in a local peer-to- peer energy system in the absence of a central energy company or grid operator controlling everything.

“Every piece of information that goes in the blockchain is essentially tamperproof,” she says.

“And that means that we can create these new networks at the edge of the energy system that enable that trading.”

While recognising this technology is only at an embryonic stage, Iain Conn says he believes such local networks will become the norm in a new decentralised energy market.

Energy Revolution

Home owners using Blockchain to become their own micro-energy companies may seem like something for the distant future, but Microsoft’s Michael Wignall says that digital technology is accelerating at such a pace that these kinds of radical changes will be delivered over a short period of time.

“In 10 years’ time a lot can happen from a technology perspective and, whether it’s the connected home or autonomous vehicles or something else, it’ll look radically different to where we are today,” he says.

“The impact we’ve just seen in the last 10 years I think will actually look quite small compared to the impact we’ll see in the next 10 years.”

Just as it may have been hard to fathom, in 1812, the Industrial Revolution that would unfold across Britain over the next century, the Fourth Industrial Revolution we are currently experiencing will make energy systems of the future completely unrecognisable from what they are today.

The companies that thrive in this changing landscape will be those who return to what energy companies have done best over the past 200 years. Successfully providing the services that bring energy and people together will position Centrica at the very heart of a new age of energy.