The energy prices in the European Union increased quickly in 2021, due to post covid activities. Also, the Russian-Ucranian war affected severely the gas distribution from Russia, aggravating the upcoming crisis. In fact, the EU parliament stated that citizens needed to use less energy to bring balance to electricity markets. But in a more distributed and renewable energy grid, is that enough?
In 2021 the energy price of the EU countries raised an average of 25% because of post COVID19 activities and CO2 trading. The Russian invasion of Ukraine in 2022 has further affected the energy markets, causing new increases of energy prices and concerns over the EU’s ability to secure its energy supply. Gas distribution could be considered the major problem because it is increasing the electricity price to numbers never seen before in the EU. It has shockingly reached increases of 54% in just 4 months. The marginalist electricity market states that the most expensive technology determines the overall price of the energy. In peak hours of consumption, gas is included in this package of technologies. And now gas is not cheap, because it does not come from Russia, it comes from far away and uses polluting techniques such as fracking to be extracted. Simplifying, if EU imports expensive gas, it produces an even more expensive electricity.
So, how can we solve this problem? Currently a patch of tax reductions is put in place, but a classic economical approach is now considered: Reduce consumption and increase offer. In other words, to ask citizens to be more efficient and increase local energy production.
The future energy is clean, local and better distributed
Energy production is obviously related to energy transition, it makes no sense to build again big gas, coal, or nuclear plants. The future renewable energy is clean, local, and distributed. Therefore, the electricity grid will be fed by numerous plants of non-manageable energy such as wind and solar. Does it seem complicated to control? Indeed, it is. Will we be able to act quickly enough to produce so much energy? Unfortunately, the odds are against the EU because two other crises are impacting on its development. First, the shortage of raw materials, and second, the lack of trained installers. Therefore, it is mandatory to plan and use these resources adequately.
Energy efficiency is a very logic solution because it is the most affordable way to save money and energy. Remember that the less polluting energy is the one that you do not use. In fact, the following tips are useful to save your euros so take note of them!
- If you have a dynamic tariff, shift the use of the energy to off-peak tariff.
- Put a programmer in your electric boiler to take advantage of your soler energy, or off-peak tariff.
- You can increase the water temperature when the prices are low, or when your photovoltaic system is producing more energy than the amount used in the house.
- Consider the thermal inertia of your building. You can heat/cool it during off-peak tariff to avoid higher costs.
- Consider weather forecast to know your local energy production.
- Store energy in your electric vehicle and use it later.
- Insulate your house or change your old boiler for a heat pump.
Are some of them a bit difficult to follow, or are you already familiar with them? Keep reading, because here comes the big question: Is this approach enough to improve our electricity prices?
The answer is no, otherwise you wouldn’t be reading this article. As said before, the electricity market does not only depend on the amount of energy used. Also, and more importantly, it depends on when it is used. Why should we save energy if we have an excess of wind production during the night that we can store? Or why would we produce a lot of solar energy if we are not at home to use it?
The paradigm is shifting from manageable centralized fossil fuel-based technologies to non-manageable distributed energy resources (DER). The first scheme was designed to satisfy all consumer needs independently from its environmental impact. The second is designed to maximize the use of renewables and local energy. It may seem complicated, but it is our time to adapt for the planet.
Demand Response (DR) and Flexibility
And here is where two new concepts appear, Demand Response (DR) and Flexibility. These are beyond energy efficiency or production. Time is introduced as a new dimension.
Can you imagine the previous tips being automatically planned and activated? Or even more, can you imagine someone paying you to carry them out? Believe or not, this is the future.
Demand Response allows users to automatize and optimize the amount and time of use (TOU) of their energy. For example, the use of heating or appliances can be optimized through a simple and cheap controller, such as a Raspberry Pi. Therefore, ensuring the best price, the maximum amount of renewable energy used, and the decarbonization of the grid. Furthermore, it creates a new advantage for residential users that up to now was only available for industrial customers: flexibility. This means that a residential user can now use, or produce, the energy considering the needs of the electricity market or grid. This is new, good for the environment, and very profitable.
The stakeholders interested in flexibility are all the companies in the electricity value chain. Why building more high voltage electric cables if we can directly sell our solar energy to our neighbor? Why not automatically charging our electric car when the grid is overloaded? Why not helping to improve the energy use forecast? All of these would save the stakeholders a lot of money, and they are willing to pay for it. Therefore, users both save and earn money from this flexibility without losing control of their consumption or comfort. That is truly a great deal.
But who is controlling this demand response system? It would not only be the private companies, but also the own users. They could do this through energy communities or cooperatives, becoming a new agent of the market called aggregator (keep this name in mind, as you will hear it a lot in the future). This way, the system would be user centered and inclusive.
In conclusion, users will hear about Demand Response and Flexibility. They should be familiar with these terms and see them as a great opportunity to ensure better prices, as well as local and clean energy production. This would be accomplished through innovative solutions beyond “use and produce” approaches. Time, as always, is gold.