Energy Hackers are on their way

The power generation costs of photovoltaic systems have dropped in recent years and are still falling. Lazard, a consultancy, calculated that at the end of 2014 in the USA the Levelized Cost of Energy (LCOE) was 180-265$/MWh for domestic installations and 126-177$/MWh for installations in businesses and industry. According to these figures, photovoltaic energy has a lower LCOE than electricity generation using a diesel generator, and is at the same order of magnitude as gas turbine generators at peak times. The Rocky Mountain Institute, Colorado (USA) forecasts that this technology will be used in combination with batteries for storing photovoltaic energy, whose installation costs will also fall. Using a system of these characteristics, consumers will have the opportunity to decide freely between connecting to a traditional electrical grid or going off-grid.

Using a system of these characteristics, consumers will have the opportunity to decide freely between connecting to a traditional electrical grid or going off-grid.

Operating an off-grid system still has considerable technical problems that need to be resolved for users to enjoy the same kind of quality as that provided by connection to a grid. Although not at first evident, the impact that consumers going off-grid could have on the electrical grid is vast. If an increasing number of consumers chose this option, the grid will have fewer consumers connected to the same infrastructure. This means that a decreasing number of consumers will have to bear the cost of the infrastructure, which will lead to higher access charges. This will encourage consumers who are still connected to take the step of going off the grid, as others will already have done. This is a variant of the economy of scale, but with a reduction in production. In an economy of scale, the product gets cheaper because the costs are divided between an amount that increases constantly. If the amount that is produced is reduced, the product gets more expensive. If we apply this process to electricity grids, it is called “grid defection”: consumers deserting the traditional electrical grid.

Currently, a similar process is happening in Spain, caused by the recession and the resulting decrease in demand.

The Decree on Energy Self-Consumption was drawn up to regulate aspects of this trend. It introduces a backup toll for photovoltaic installations that enable self-consumption and are connected to the grid. The success of the measure still remains to be seen. It adds costs to energy self-consumption installations that will limit the expansion of these systems.

In any case, this measure will provide an additional incentive for consumers who are considering off-grid systems to take the next step. These consumers are known as Energy Hackers, as they seek a technological solution for a need that is not met by the current electricity system. They prefer renewable, locally generated energy. They already have part of the installations (their homes or businesses), energy resources and investment capacity. They are proactive, and want to be able to decide on energy issues. They differ from computer hackers: they are not young people, but people with homes, capital, and grey hairs on their heads. Energy hacking is not an illegal activity, as everyone is free to do what they want in their homes. However, it forces the system to react and respond. Energy hackers have strong allies: the Internet of Things (IoT) and home automation. The IoT is developed in the homes of consumers, it is user-centred, and can offer new services to consumers in exchange for their data. Energy hackers may explore its potential in energy-related applications, and try to create added value to make investment in automation worthwhile.

Electricity companies are beginning to realize that they must change their business strategy. Added value is no longer created by the distribution and sale of energy; with these new actors a very different economic ecosystem is emerging. Currently, energy is an undifferentiated asset; to create added value, services must be offered that differentiate the product from that of other companies. A system will numerous small producers, active consumers, management of demand, renewable energy and batteries would provide the perfect ecosystem for creating new services with a much greater added value than the sale of energy. We should not forget that, like the IoT, electricity distribution companies have direct access to the client and home installations. Energy hackers could be allies of electricity companies and create value with them. The coming years will be very interesting as we will see how the two giants of the IoT and electricity distribution fight to gain control of a market that is still hard to imagine.

Dr. Andreas Sumper, CITCEA UPC Researcher,
CIT UPC member
Article published in the journal “Automática e Instrumentación” on 27.10.2015

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