Can innovation in the energy sector compensate for rising prices?

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.”