TECHNOLOGY
MAY 13, 2024
Energy and Computing are the two things that propel human growth in the modern world. Throughout the centuries, humans have been generating energy in some form or the other. We can go back to our ancestors who discovered fire. We eventually learned how electricity can be generated from burning fossil fuels. While this approach led to the Industrial Revolution, it also meant climate change for the worse.
Let’s look at how electricity is generated and reaches our homes today.
Traditionally, our electricity journey begins at far-off coal power plants, hydroelectric dams, or sprawling solar farms. The energy generated there would traverse vast distances, navigating through complex grids before finally lighting up our homes. On the other hand, the journey of crude oil, sourced from distant lands, involves refining and then transportation via colossal trucks to localities worldwide.
The hidden truth behind these processes? Energy loss. A considerable chunk of energy dissipates during these journeys, silently impacting the costs we bear for powering our homes and fueling our vehicles.
The hidden truth behind these processes? Energy loss. A considerable chunk of energy dissipates during these journeys, silently impacting the costs we bear for powering our homes and fueling our vehicles.
While this approach is bad for the environment it does ensure seamless electricity to our homes, factories, offices, shops, malls etc. This then leads to more growth and development and the cycle continues. For centuries, people have now been used to ~24-hour electricity without any fluctuations. There is in fact an entire industry for energy backup in the form of either Diesel generators(again bad for the environment) and Lead Acid batteries. We transact with this energy to fuel our personal growth and live a prosperous life. So, despite environmental concerns, it’s unlikely that people will willingly abandon these conveniences.
Renewable energy is the obvious way to sustain future demand without impacting the climate. However, it still needs to cater towards the expectations from people and hence needs the following to be figured out.
Enter Demand Response, Dynamic Pricing, and Energy Arbitrage—the triple pillars of optimized energy consumption.
Demand response (DR) is a system used by utility companies to manage the energy consumption of consumers during peak demand times. In demand response programs, consumers are incentivized, usually through cost savings, to reduce their energy usage at critical times. This can involve simple actions like reducing HVAC use, turning off unnecessary lights, or delaying large appliance use during peak hours. The main goal of DR is to stabilise the grid during high-load periods without needing to resort to fossil fuel based plants, which are often expensive and less environmentally friendly.
Dynamic pricing, also known as time-of-use pricing, is a strategy where the cost of electricity varies depending on the time of day, the day of the week, and the season. Prices are typically higher during peak demand periods and lower during off-peak times. This pricing model encourages consumers to adjust their power usage habits to benefit from lower rates, thus flattening the demand curve and reducing the strain on the grid.
Energy arbitrage involves buying electricity when prices are low and selling it when prices are high. This is particularly relevant for those with energy storage systems, like batteries. For instance, a smart battery system at home can store energy during low-cost periods (often overnight or when renewable production is high) and then sell it back to the grid during high-cost peak hours. This not only offers economic benefits to the user but also aids in balancing supply and demand on the grid, making it an essential tool for integrating renewable energy sources.
Simply put, utility companies would want to incentivize consumers to use less electricity from the grid and sell back access electricity in peak hours.
Why you may ask? Well it is evident from the curve below that the usage patterns peak from 10 am(+- 1 hr) in the morning to 7 pm (+- 1 hr) in the evening
Electricity Demand curve
Source: https://energymag.net/daily-energy-demand-curve/
The equation is simple- “ Use less and sell more in peak hours”
Batteries are the key here. In non-peak hours(overnight- to early mornings), electricity demand is less which means price is also less. The consumers can use their on-premises batteries to store this energy at night at cheaper prices and then use the same to fulfil their high demand in peak hours. This will then eventually ensure, using less in peak hours(saving cost) and/or selling to utility companies in peak hours(if there is on-premises Solar installed).
Refer to the below image to understand how it is already working in practice for consumers. Even if a consumer doesn’t have Solar installed, they can still offset their E-bill significantly.
Electricity Demand curve
At The Energy Company, we are not only solving for Energy Storage in Mobility but also changing the way present and future consumers are going to utilise and transact electricity.