The (Dis)Connection of HEMS and Flexibility
The energy sector is undergoing a transformation, driven by technological advances and changing consumer needs. Central to this change is the emergence of home energy management systems (HEMS) on the individual home level and at the same time the rise of flexibility. In recent discussions within the industry, a recurring question has emerged: How are HEMS and flexibility linked?
LCP Delta’s forecasts indicate a growing market: Around 5 million sales of asset optimization and HEMS systems per year are expected in Europe alone by 2030. In addition, there is the potential to monetize hundreds of gigawatts of flexibility worldwide.
Although HEMS and flexibility may seem like two separate fields at first glance, a closer look shows that they could function independently, but could also complement and enhance each other in a variety of ways.
A Deeper Insight into Flexibility
Flexibility, with elements like dynamic tariffs and Virtual Power Plants are solutions which are emerging out of the transition of our energy system. In a home mainly devices like storage, EV charging, and possibly heat pumps/ hot water heaters are considered first-hand valuable devices(depending on geography also pool pumps or sauna heaters can be included) for flexibility. The provision by these devices, depending on the regulation, can be tracked either individually or through the main smart meter.
The current main objectives of sourcing flexibility are:
Enabling balancing group optimization and hedging on energy markets
Provisioning of new/ dynamic tariffs through service applications
Stabilizing grids
Some players such as 1Komma5°, Lichtblick SE, sonnen, etc., leverage the flexibility of its customers to generate recurring revenue from the infrastructure layer of devices (like storage, chargers, etc.) located in consumers' homes. From this perspective, Home Energy Management doesn't offer any added value.
The Consumer and HEMS: A Closer Look
Consumers don't primarily care about flexibility. Their main concerns are a reliable energy supply, maximizing self-consumption, and finding ways to save energy. This is where Home Energy Management can offer immense value. Solutions such as Solarmanager, Eliq, Enode, Kiwigrid, etc., provide an integrated view of energy flows, give recommendations, and present control options. From this point of view there isn't an inherent need for flexibility.
Consumer Perspective on HEMS
From the viewpoint of the end-user, HEMS offers several key benefits.
A unified monitoring interface for all DER (Distributed Energy Resources) within a home.
Provision of control functionality, including self-consumption.
Making energy services more tangible and accessible.
So, is there a Link Between HEMS and Flexibility?
Trade-off: Flexibility's advantages can be intricate and challenging to explain to consumers. Business models that combine HEMS and flexibility can offer a simple trade: HEMS functionality in exchange for device flexibility.
Tangibility: As seen with products like the sonnen community box a few years ago, HEMS—often based on an app and sometimes even hardware—provides a visualization for a topic that's inherently complex to communicate and understand.
Cost Factor: Connecting multiple devices in a home can become costly, especially when considering different brands and models. Utilizing a HEMS as a single point of connection (with the necessary regulatory alignment) can streamline and optimize the process.
Recurring Revenue: Hardware providers, including those offering devices and/or HEMS, are constantly seeking consistent revenue streams. Flexibility offers such an opportunity.
In the end, HEMS and flexibility don't necessarily need to be linked. Offerings from companies like Tibber, True Energy, and Jedlix demonstrate that within their context. Currently, each of them mainly focuses on one or two specific devices in the home. This avoids the question of integration. Still, it will be interesting to see how this evolves as some are planning to introduce an offering for additional devices.
However, when HEMS and flexibility are combined, they can enhance and streamline certain business models. This combination can also facilitate cross-financing within a single offering to consumers, as seen with tiko Services, Voltalis, and 1komma5. It's crucial to understand what each part of the solution offers, how they can complement each other, and under which circumstances their combination is beneficial.
Conclusion
The evolving landscape of the energy sector underscores the importance of understanding the dynamics between HEMS and flexibility. While they can function independently, their combined potential can offer a myriad of benefits for businesses, consumers, and the broader energy ecosystem. There are also several challenges that remain to be addressed, especially in areas like standardization and cybersecurity.
As technology advances, regulations change, and consumer needs evolve, it's crucial to stay informed and adapt our solutions. We must always ensure our offerings are consumer-centric, empowering everyone to support our energy future.
As we explore this topic further in our upcoming articles, stay tuned to learn more about this transformative journey in the energy sector.
P.S. A thank you also to Lucinda Murley and Jon Ferris for the great discussion around this topic.
