Turning Homes into Virtual Batteries: A New Business Model for Utilities

Across Europe, more homes are installing EV chargers, heat pumps, solar panels and batteries. That is creating new challenges for electricity networks, which need to balance growing demand with the generation volatility of renewables. But, what if those same household devices could also help balance the grid? That's the idea behind Home Energy Management Systems, or HEMS. HEMS are platforms that coordinate connected devices to shift electricity consumption to different times, helping households save money while giving utilities access to flexibility for improved grid demand management. We saw a diversification amongst our customers where there's a lot of demand for managing what goes on beyond the meter at the customer site. So with all of the smart home technologies coming in, that enables our customer, the utility company, to create more dynamic tariffs, more value, more flexibility, supporting the grid in a better way. One company working to bring this technology to utilities is Emulate Energy. The startup has developed software that helps energy companies coordinate EV chargers, heat pumps and batteries across thousands of households. So how do HEMS work? For example, a homeowner might need their EV charged by seven in the morning. Rather than charging immediately, the HEMS can schedule charging for a cheaper period overnight while respecting the drivers requirements and adjusting to grid conditions. Utilities can use energy consumption patterns to identify customers who may have EVs, home batteries, or solar panels and invite them to join a HEMS program. Customers who opt in can then set their preferences through the utilities app, for example, when they need their EV charged, allowing the system to automatically manage their connected devices while respecting those needs. Emulate has partnered with utility software provider Hansen Technologies to connect residential energy management with the systems utilities already use to manage customers and energy operations. What we do is that we help utilities connect to these devices, and then we map the flexibility into what we call a virtual battery, which is essentially we map the flexibility in these thousands of connected devices that are difficult to understand. And we present them to the utility in the form of something that they understand, which is a battery specification. By cordinating thousands of connected devices, utilities can effectively manage a large pool of flexible electricity demand. Bringing a new business model to the game. Utilities can use that flexibility to shift electricity consumption to cheaper hours, reduce energy purchasing costs, and where market rules allow, earn revenue by providing services to grid operators. According to Emulate, this represents a new generation of HEMS moving beyond household energy savings towards flexibility based business models. The second generation that we're seeing expand quite heavily now in Scandinavia is that to launch business models that are based on flexibility. So essentially use the flexibility of your consumers to procure energy cheaper and to increase your own margins and your bottom line. For utilities, that means the value of a customer is no longer tied only to the electricity they consume. You will then create a new revenue stream that is not based on sold kilowatt hours. It's actually based on how much supply demand you can move in your total customer landscape, and then you just basically choose out of those how much you want to give back to the customer, and how much you want to keep for yourself based on how attractive you want your offering to be for your customers. But turning residential flexibility into a viable business requires scale. A single EV charger offers limited flexibility. Thousands of connected devices, though, can become a meaningful resource, provided utilities can coordinate them reliably and respect customer preferences. HEMS may have started as a way for households to manage their electricity bills, but now it's about turning them into a scalable business model for utilities and a reliable source of flexibility for the wider energy system.