Throughout history technological advancement and change that has lasting impacts on humanity has largely come about through critical mass. As a child, I distinctly remember visiting a friends house and seeing their newly installed solar PV system on the roof. 25 years ago, this seemed like the future as I had only seen photos of such things in books about NASA and science fiction.
While some technologies are adopted quickly into day to day life, it seems to be taking an age for solar systems to become common place. Obviously cost is major driver of this but then so too is how seamlessly technology can be integrated into how we live.
Micro grids have been spoken about in energy circles for some time, but it is only now that the step change in the supply and purchase of energy appears to be gathering momentum as more and more end users are installing solar systems and battery storage.
Contact, Trustpower and Vector have all been trialing various strategies relating to this in Wellington, Tauranga and Waiheke Island respectively. Some third party companies are taking a slightly less traditional approach allowing end users to buy and sell energy directly between each other underpinned by blockchain technology removing the need for a “middle-man” so to speak.
The following post from Centrica has direct parallels with the New Zealand energy market.
Suzanne Schutte is a supermarket worker – and an energy pioneer.
The mother of two from Wadebridge, Cornwall is the first householder to have solar panels and cutting-edge battery technology installed as part of a £19 million trial that aims to help unlock further renewable energy use across her part of south west England.
What makes this scheme different to thousands of other rooftop solar schemes across the world – and what makes Suzanne a pioneer – is that the electricity generated by the solar panels and stored in her battery won’t just be used by her home or sold back into the grid.
Under the Cornwall Local Energy Market, homes and businesses will eventually be able to trade electricity with each other directly. This gives them greater control over their energy use and greater access to cleaner and cheaper electricity.
By taking part in the scheme, Suzanne joins a select band of people in communities across the globe trialling new ways of using and trading energy that are underpinned by the latest digital technology.
Rerouting Renewables
The need for schemes like the Cornwall Local Energy Market has been created by the rise of renewable energy and the inability of existing power grids to move this energy around efficiently.
In most western countries, power transmission networks were developed nearly a century ago to transfer electricity from large coal-fired plants over long distances across the country. However, the map of electricity generation in these countries has changed dramatically over the past decade. For example, renewable energy sources, dominated by wind power, now account for nearly a third of all the electricity generated in the UK.
And microgeneration – where energy is generated by homes or businesses and distributed locally – accounts for 17% of electricity generation.
Government incentives and the falling cost of technology has encouraged many to generate their own power with more than a million homes in the UK using solar panels for their electric and heating needs.
Old-style grids – such as that found in the UK – are not designed to move electricity from thousands of small power plants over short distances. Instead, electricity continues to be fed over long distances to central points in the grid, then fed out again.
This can create curious anomalies. Around the country, many wind farms have had to reduce their power output because of an excess of energy on the grid – due to strong winds and low demand – while major energy consumers including nearby factories have no way of accessing that extra electricity.
Being able to store and move electricity at a far more local level can help smooth out supply and demand, and address many of the problems caused by the intermittent nature of renewable electricity generation.
Going Local
The UK’s National Grid predicts that by 2050 up to 65% of the country’s electricity generation capacity could come from local sources. That means that something needs to change in the way electricity is moved between those producing it and those consuming it.
And this is where schemes like the Cornwall Local Energy Market come in.
The scheme is being funded by Centrica and the European Regional Development Fund, with support from partners including the local distribution network operator and academia. All of the organisations involved regard it as a critical test case for how energy markets around the world could operate in the future.
“The Cornwall Local Energy Market is an important test of how we can better integrate renewable technologies into local areas,” says Ed Reid, Head of Strategy for Centrica Business Solutions.
Reid adds that the opportunity today isn’t only to make the energy system more efficient, but also to give both producers and consumers greater involvement and control.
“The existing energy system is based on 1950s technology and treats the consumer as a passive recipient,” he says.
“It’s far less dynamic than other markets, and I think going forward what we’re seeing with new technologies is that it is allowing customers to be more involved in energy and take better control.”
The Airbnb of Energy
When energy industry experts like Reid talk about making energy more dynamic the way it is in “other markets”, they are referring to the kind of transformation that is currently taking place in sectors such as finance, travel and hospitality.
Specifically, it is the ability for digital technology platforms to enable so-called “peer-to-peer” transactions. In finance it can be seen when, for example, those seeking foreign currency for their holidays can trade their own currency via an app with other travellers.
Arguably the most famous example comes from the hospitality sector, where Airbnb has enabled millions of homeowners to make extra income from renting out their spare rooms.
“Companies like Uber, Airbnb, have really changed the way that we think about business,” says Lawrence Orsini, Founder and CEO of energy blockchain pioneer, LO3 Energy.
“The very same things are happening now at very early stages in energy. We’re seeing more generation on rooftops in our communities, in businesses and that’s going to change the way that business works in the energy industry. It’s really distributing a lot of the power and control to members of communities, and putting more control in the hands of consumers at the edge of the grid.”
Orsini’s company will supply the blockchain technology through which participants in the Cornwall Local Energy Market will be able to trade with each other directly.
LO3’s blockchain for energy empowers consumers to set preferences for energy consumption including local energy produced by neighbours, commercial businesses and farms.
In Brooklyn, residents of the Park Slope and Gowanus neighbourhoods are connected with each other via a virtual microgrid using rooftop solar panels. LO3 has found that consumers want a choice in their energy and believe in creating a stronger, more resilient community focused on local values.
Trading with Blockchain
A blockchain is a database that is shared across a network of computers. It acts as a record of transactions. And because records of those transactions are stored on multiple computers and updated simultaneously, it’s much more secure and harder to hack than a centralised system.
Each transaction is a block, and when the transaction is complete the block gets added to a chain of previous transactions, providing a clear public history of those transactions.
In local energy markets and microgrids, tokens equal to the market value of electricity are traded and logged as transactions or “blocks”. This use of digital tokens means the trade between energy user and producer can happen instantly, without the need for bank approval of the transaction.
For Orsini, this kind of digital communication of data is the key to how grids will function in the future.
A lack of data is one of the main barriers that is stopping people from trading on microgrids, he explains.
“Our devices need to be able to speak to each other about what’s happening on the grid, in order for them to make choices about when they charge, when they discharge, when they produce electricity, how they move electricity. In order to manage the grid of the future, we have to have a significant amount of data. In fact, the grid of the future doesn’t run on coal or natural gas, or wind or solar; it runs on data.”
The Power Plant Next Door
The data vital for energy users and producers to trade locally won’t just come from the supply side. Local energy markets will also be able to understand electricity demand at a far more accurate level than ever before.
UK energy start-up Verv has developed an AI-powered smart hub that sits in people’s homes and learns how much electricity is used by individual devices in the home.
In a trial on a housing estate in Hackney, east London, Verv installed its smart hubs in 40 flats. The information from these boxes is being combined with a blockchain-enabled microgrid that trades the electricity generated by the housing estate’s rooftop solar panels and stored in a communal battery system.
This trial delivered the UK’s first peer-to-peer energy trade using blockchain in April 2018. Verv chief operating officer Maria McKavanagh says having highly detailed knowledge of electricity demand will enable local energy markets to behave like the current wholesale energy market. And that will increase the accuracy of future energy deals.
“We know which appliances are on in real time, how much they’re costing, what’s been used in the past and, therefore, we can predict your future energy requirements much better than we would be able to with smart meters alone,” she says.
That allows customers to buy the amount of energy needed based on a really accurate forecast. Similarly, for the person selling their solar energy, they will be able to ensure they’ve stored enough energy for that day’s needs, and only sell on the excess.
Whether you produce energy or not, schemes like those in Hackney, Brooklyn and Cornwall show how one day we could all become the power plant next door.
Until now, articles on the Total Utilities website have always been of direct relevance to the utility markets where we have operated since 1999.
In this case, we have included Jonathan Eriksen’s latest quarterly investment commentary below because it puts in wider New Zealand and global context the macroeconomic trading conditions that impact directly and indirectly on the utility providers in New Zealand.
I have an economics background and have known Jonathan since I emigrated to New Zealand 25 years ago. He is one of the leading actuaries in the country and his independent investment advice track record is second to none in my opinion.
The relevance of this advice to future trading conditions in the local ‘energy’ sector is very clear cut. Global energy market trading conditions are becoming more difficult due to well-publicised political factors including but not limited to the ebbs and flows of the Donald Trump Presidency. The New Zealand dollar exchange is weakening versus the major currencies overseas. We have a small, remote niche economy which has nonetheless been consistently successful over the past 20 years.
Focusing on the Liquid Petroleum Gas (LPG) side of ‘energy’, we have an energy source which is non-renewable but which is far ‘cleaner’ than other non-renewables like coal and diesel. Global demand for LPG is growing. There is a great opportunity for LPG to replace coal and diesel locally during the coming 30 year period. However the Government’s recent ill-advised (in my view) prohibition on all new offshore oil and gas exploration will inevitably constrain future local LPG supplies and hence force us to import more. This in turn will increase the proportion of imported LPG (particularly in winter) and hence increase our exposure to LPG price hikes driven by global political and economic forces in general and the Saudi Aramco Index in particular.
Investment Returns
The NZ Consumer Price Index rose to 1.5% for the one year to 30 June 2018. This was mainly driven by housing, construction, and food price increases. Inflation over the past ten years fell slightly to 1.6% p.a.
A number of funds within the Aon Master Trust were added over the quarter, raising FUM by $45 million. Total Master Trust FUM increased by $280 million over the quarter. Funds with a higher proportion of growth style assets (eg shares and property) had the best investment returns for the year to 30 June 2018.
The one year weighted average return for all Master Trust Growth funds was 10.6%; Balanced funds 8.1%; and Conservative funds 5.0%. Single Sector Aggressive funds returned 12.0% over the past year on a weighted average basis, while Defensive funds returned 1.8%.
The Trump administration demands to end all imports of Iranian oil have put pressure on prices as some key buyers, namely India, South Korea and Turkey look to source oil from elsewhere. The effects of the restricted supply pool are evident with oil prices still rising. However, it is unlikely that major importers will be able to switch suppliers entirely – at least by the proposed deadline of November.
Here in New Zealand, we are seeing our dollar depreciate. International trade uncertainty is one catalyst of this. During times of uncertainty, demand for riskier assets diminishes and the Kiwi dollar is viewed as a relatively ‘risky’ currency compared to many larger economies with more liquidity in their currency market from more transactions. This month, Reserve Bank Governor Adrian Orr released a statement that the OCR would remain unchanged at 1.75%. Also given acceptable inflation and employment levels, we can expect growth-supportive monetary policy for some time.
The effects of oil prices, petrol taxes and a weaker currency will flow through to domestic prices. CPI inflation is expected to rise to meet the target midpoint of 2%. However, escalating trade tensions between the US and China are beginning to give investors cause for concern as they could lead to even higher inflation disrupting the global economy. Energy market players are looking at rate hikes by the US Federal Reserve to quell this inflationary pressure. The ripple effect will eventually hit us, resulting in the RBNZ raising the OCR.
The expectation of higher short-term interest rates is supported by the US 10-2 yield spread curve which is at its lowest point since the 2008 recession. Bond investors are becoming increasingly more comfortable accepting lower yields for longer-term bonds. Historically, significant troughs in the yield spread have been followed by an economic slowdown. This was the case in both 2001 and 2007 (although it is not always the case).
The past does not always offer accurate predictions of the future, but there is some evidence in support of less optimistic economic forecasts going forward. The changes in investor sentiment and outlook over this calendar year are particularly relevant.
Last year the world enjoyed synchronised growth, low inflation and stable low interest rates which supported economic expansion. Oil prices below $60 a barrel was considered sustainable and reasonable.
This year the price of Brent Crude has reached $75 a barrel, interest rates in the US are projected to continue to rise steadily and inflation is starting to rise. This is worsened by the beginning of trade wars which can only increase consumers costs. They also raise geopolitical tensions and may derail global trade.
In this current climate of low interest rates and weaker currency in Australia and New Zealand, overseas buyers have pushed up share prices. Our equity market offers attractive dividend yields at relatively lower price to earnings ratios. In other words, you get more bang for your buck. The inflow of foreign capital will help companies grow while people are buying. Conversely, it would be potentially harmful to equity markets should they sell their positions. However domestic inflows from the SGC (compulsory Super in Australia) and KiwiSaver are also supporting local markets.
KiwiSaver
Over the past few years funds with a higher proportion of shares and property have seen some stellar returns. This has led to a number of investors who are invested in the more conservatively invested funds to ask: why their returns are so much poorer in comparison; and whether they should switch to a more aggressive style fund to begin reaping these same rewards. Our response is this: hindsight is a wonderful thing! We suggest to investors who have invested more prudently over the past few years to avoid a switch to growth options now. There would be nothing worse than jumping into a fund with a riskier asset allocation profile, after years of investing cautiously, to find that the markets take a dive just as they make the switch. After 30 years of falling interest rates and almost a decade of rising stock markets a correction will certainly happen. The only question is whether it’s this year or next?
Many businesses begin collecting energy data as a means of saving energy – and energy costs. While this remains one of the greatest benefits of energy data analysis, its appeal does not start nor end with direct financial considerations.
In fact, focusing only on energy savings has led to an underestimation of the full value of data-backed energy management in global economies.
Across all sectors – from manufacturing to retail to healthcare – organisations are harnessing the operational efficiency benefits that result from energy data like never before by:
Assembling and integrating energy data to share across the enterprise
Combining data and advanced analytics
Benchmarking against historical data, similar devices, comparable locations, and industry standards
Acting on alerts and insights to ensure the reliability and performance of critical assets
Using energy data for operations and maintenance results in a wide range of benefits across the enterprise. Organisations are harnessing the operational efficiency benefits that result from energy data like never before.
Transparent collaboration
Businesses, today, generate more data than ever before, yet often, very little is actually used to make real-time decisions. Different departments gather their own data and do not always share it across the organisation.
Collecting data from critical devices formulates a single source of truth that can be easily shared across teams, departments, and entire enterprises. This breaks down information silos and enables managers to set KPIs and predict and avoid waste.
Increased production yields
Both discreet and processed manufacturers rely on the optimal performance of their production machinery energy as a lifeblood. Manufacturers think profit per hour and total profit should be driving factors in making decisions.
By monitoring the energy data of their machinery, manufacturers can now link their operational goals with energy performance. Ensuring equipment optimisation and effectiveness with live equipment status monitoring helps create greater outputs and enables users to calculate the cost of production per equipment/production line.
Improved maintenance schedules and expedited decision making
Initiating a systematic approach to energy data gathering at the device level, manufacturers can be alerted to anomalies in their critical devices. By diagnosing, troubleshooting, and servicing the machinery that is showing irregular consumption patterns, they prevent imminent disruptions or even breakdowns.
From kitchen equipment to HVAC, lighting and industrial machinery – maintenance schedules are improved and become more cost-effective.
When time is money, a quicker decision is a more profitable decision. Enterprise-level decisions that are based on data are reliable and undeniable.
Energy data enables the transformation of facility and maintenance groups from a cost centre to a value centre. No longer do these groups weigh on the company’s bottom line. Instead, they become the suppliers of data that adds value by informing decision-makers of opportunities for savings and optimisations.
Energy forms a sizable shareof operating costs
Operational efficiencies from energy data
The starting point for most operational-improvement efforts is incremental change: taking an existing process as a baseline and seeing what improvements are possible from that point.
Saving energy, funnelling the savings to the bottom line, and reducing carbon emissions are all worthy benefits of energy data. Adding the multiple benefits to operations, albeit sometimes difficult to measure or quantify, increases ROI. Operational efficiencies maintain the value of the business while reducing the required resources.
A client of ours recently installed energy sensors across two areas of their facility. One area is significantly old using good practice equipment for the time, the other brand new and utilising advancements in equipment technology. Both areas are similarly sized and perform the same operation, however, measuring energy performance between the old and new will provide our client with real insights when making future strategic decisions.
While our client operates a large portfolio of facilities around the North Island, they are using this specific site as a sandbox environment, a testbed to trial new initiatives as they look to upgrade and replace existing equipment at their other facilities.
Utilising real-time energy data to measure performance against a range of benchmarks will allow them to verify performance gains and deliver insights into which areas should be prioritised in their long-term business plan.
Non-intrusive wireless energy sensors that can be easily moved to measure other areas, combined with powerful cloud-based software reporting tools provide a cost-effective and flexible way to build business cases.
The following article, written by Jon Rabinowitz at Panoramic Power, highlights the fact that, with Internet of Things (IoT), businesses can now test ideas in a quick and cost-effective manner while collecting valuable data for future decision making.
The Internet of Things has exploded onto the scene and with it a slew of potential business applications. In navigating this terra nova, most decision makers take their cues from the competition, afraid of wading too far into the unknown. This is reasonable, of course, but it’s also a big mistake.
Smart business owners and managers should know that they don’t need to resign themselves to the role of a follower in order to hedge their bets and mitigate their exposure to risk. You can lead and be cautious at the same time!
A False Dichotomy in Applied Internet of Things Investment
Consider, for example, the business value of smart, self-reporting assets. These assets hold the promise of constantly refined operational processes, reduced maintenance costs (as issues are caught and corrected in the earliest stages before degradation occurs), extended lifecycles and the elimination of unplanned downtime.
Still, few things ever go exactly according to plan and deliver quite as advertised. So it’s understandable that prudent decision makers might set expectations below the promised value. Add to that the fact that overhauling and replacing the entirety of your asset infrastructure is incredibly expensive and a terrible disruption to operations.
It’s easy to see why some business owners and managers might prefer to sit back and let “the other guys” take the lead in implementing Internet of Things into their business operations. But easy to see and right are two very different things.
The right approach is significantly more nuanced, as the rationale presented above is built on a false dichotomy. Your choice isn’t between sitting back and doing only what the other guy already succeeded at or totally replacing all your critical assets. There’s a world of options spanning the divide between those two.
The Golden IoT Mean: New Operational Intelligence, Old Equipment
Science and technology are both predicated on the principle of testing and your business should be the same. It always makes sense to “pilot” new technologies or techniques before deploying them at large. Beyond that though, using advanced Internet of Things technologies and tools, you can infuse new operational intelligence into old equipment without replacing anything.
Until your industry has reached a “mature” state in its development and integration of IoT technologies, this is the best way to mitigate risk without forfeiting access to value while it’s still a comparative advantage.
Using smart, non-intrusive energy sensors – each about the size of a 9-volt battery – you could retrofit past-gen assets to enable next-gen operational intelligence. Simply snap a sensor onto the circuit feeding the intended asset. No need to suspend operations; no need for complicated installation.
After your sensors are in place, enter the corresponding ID numbers into the mapping console. Immediately, these sensors will begin reporting granular energy data, pumped through an advanced, machine-learning analytics platform, and turning out new operational intelligence to be acted upon.
Investment in energy monitoring has traditionally been dominated by lengthy CAPEX discussions and the technical specifications of proposed monitoring infrastructure which means spending more cash to find out where cost savings might be made. Little thought was ever given to the data output and associated software –most competing products delivered similar back end services and data displays which required users to export data to CSV format before being able to really interrogate it.
That’s changing with Panoramic Power smart sensors available now in New Zealand, through Total Utilities.
My colleague David, has previously written a series of articles regarding the rise of artificial intelligence algorithms and how major corporations are using these to exploit customer data and drive behavior. Data obtained from raw internet traffic, page clicks, key search words and online transactions is now being structured by algorithms in order to deliver insights and show trends. Further to this, the data is normalised by user defined groups and then compared.
Smart recommendations for energy flows
If Amazon or Apple can recommend a book or record that I might like, why can’t my energy monitoring software make recommendations? And if the data is all I really need, why should I have to purchase a very expensive metering asset that may only be required for 12 months? Of if my usage pattern changes why can’t I quickly adjust my monitoring setup?
Total Utilities encounter clients every day who operate energy intensive equipment, while the type of equipment varies greatly from production and manufacturing applications, cold storage, and commercial buildings, the issues remain the same. Clients need real time visibility of where energy is being used so that they can make strategic decisions and act quickly to save money.
Further to this, they need to know when energy intensive systems are under stress and may require attention outside of their normal maintenance cycle. They want the ability to see their energy flow within their site in various graphical formats and to be able to benchmark their HVAC or compressors across multiple facilities.
Total Utilities use Panoramic Power’s IoT (Internet of Things) sensor technology and cloud based analytics to help customers understand energy consumption.
Fast to install, fast to get benefits
Worldwide there are eight billion data points per month across 800 sites in 30 countries. With more being added in New Zealand every week.
Forty smart meters were installed in 1.5hrs at an Auckland CBD site the week before last and fifty were installed in 2hrs at a site in West Auckland on Friday. Each sensor is clamped onto the outgoing electrical wires of a customer’s distribution board. This eliminates expensive wiring, investment in new panels, lengthy shutdowns, IT connections and reduces health and safety risks. Once installed, it monitors the flow of electricity, sending information wirelessly to the cloud-based analytics platform every ten seconds.
With such an ease of install combined with effective data presentation and representation, potential energy savings can be identified quickly by pinpointing specific areas for further investigation. It took less than two days for Total Utilities to identify that the lighting of a commercial building was switching on at 2am and running for two hours every morning despite the BMS (Building Management System) showing all lights were off. Simple measures were implemented quickly which means the energy monitoring system has already paid for itself.
While the above is a relatively rudimentary and common example, Total Utilities can just as easily correlate key variables such as chiller temperature against outdoor temperature on a monthly, daily and hourly basis across multiple sites located throughout NZ without the need for pain staking manual calculations. We then deliver clients meaningful information and advice quickly so they can act and make significant energy savings.
Total Utilities believes that traditional energy meters are merely becoming a means to an ends as clients engage us for the value we create with intelligent data and analytics.
Suzanne Schutte is a supermarket worker – and an energy pioneer.
The need for schemes like the Cornwall Local Energy Market has been created by the rise of renewable energy and the inability of existing power grids to move this energy around efficiently.
The UK’s National Grid predicts that by 2050 up to 65% of the country’s electricity generation capacity could come from local sources. That means that something needs to change in the way electricity is moved between those producing it and those consuming it.
When energy industry experts like Reid talk about making energy more dynamic the way it is in “other markets”, they are referring to the kind of transformation that is currently taking place in sectors such as finance, travel and hospitality.
A blockchain is a database that is shared across a network of computers. It acts as a record of transactions. And because records of those transactions are stored on multiple computers and updated simultaneously, it’s much more secure and harder to hack than a centralised system.
The data vital for energy users and producers to trade locally won’t just come from the supply side. Local energy markets will also be able to understand electricity demand at a far more accurate level than ever before.
