By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.

Distributed resources, dynamic pricing — this is a job for software

Published on
September 4, 2023
5 min read
Sam Wevers

Our power grids, and the fundamental way that they’re managed, haven’t changed much for the last 100 years. Centralized power plants are turned up and down — firing more fossil fuels — to balance energy supply and demand. 

That has to change if we’re going to hit our climate goals. Solar and wind energy are ready and reliable today. But how much energy they make at a given moment is intermittent — it varies throughout the day. Add to that millions of homes with solar and battery systems feeding into the grid, electric vehicles charging from it, and the variability of electric heating, and it's clear the simple, centralized grid is an anachronism.  

The path forward isn’t to fight complexity, it’s to embrace it, and all the opportunities that come with distributed energy.

To keep this new system balanced and flowing smoothly, market models will need to adapt and become more dynamic. Instead of supply following demand, demand can now be shaped to match variable generation. And, for the devices in customer homes to do the right thing at the right time, advanced software will be needed to control them. 

Building a cheaper, more resilient system 

Distributed Energy Resources (DER)  enable connection of utility-scale renewables to the grid, soaking up excess wind energy overnight or cutting demand when supply is scarce. But they also have the potential to be “grid-harmful”: they could all draw power at times of peak demand when supply is already tight. 

The solution is simple: make rates available to customers that reflect the system benefits of DER at particular places and at particular times. This helps to steer grid-friendly device behavior; saving customers money, encouraging adoption, and helping with grid stability. A more resilient, efficient, and cheap energy system is the result. 

Markets that encourage DER participation allow us to get more with less. We’d see reduced average energy prices for everyone, as well as improved economics of owning and operating DERs—creating a virtuous circle of adoption and system efficiency. Of course, some network upgrades and utility-scale generation will still be required, but smart management of millions of DERs could enable us to only build (and pay for) what we truly need.

Market design provides the foundation for DER rollout

To build a great house, you need to have the right materials, the right foundations, the right scaffolding. When you have those things, you can create the house you want; windows here, kitchen there, climbing wall in the basement. The analogy may be a bit of a stretch, but it can be applied to DERs. To incentivise DER rollout, it is critical that we get the right market structures and price incentives in place. From that foundation customers and companies can then choose the kinds of models they want. Choice, competition, and innovation can flourish and provide the cutting-edge, climate-tackling energy solutions we need. 

We see a world where customers have access to electricity rates that reflect grid needs through dynamic prices. If the grid is under stress in a given area, or supply is very short, prices go up. If there is a glut of wind or solar energy and low demand, prices can go negative (i.e. people get paid to use electricity). While these signals may exist at the wholesale level, they often don’t make it into retail prices. Having such signals could drive automatic tweaking of supply and demand across millions of homes, without an omniscient central body telling each EV or battery exactly what to do and when. 

There are already some offers like this out there. For instance, in the UK, Octopus offers the Agile tariff, in Belgium, Engie and Eneco offer dynamic pricing, and in New Zealand the likes of Powershop and Flick Electric pioneered wholesale-linked pricing for end customers many years ago. The recent NEM 3.0 reforms in California are another example of how policymakers can choose to reflect the value of DERs to the system in a dynamic way. With the right market structures, some retailers can expose complex pricing to customers, while others can provide flat-rate “energy-as-a-service” offerings where DER are optimised behind-the-scenes. 

The tech is ready, we just need the pricing

A more dynamic energy market requires software solutions that can connect to various devices, ingest price signals, and optimally control those devices to deliver value. That is what the Gridshare platform has been doing at scale for the last four years across Europe, Japan, and the United States. Whether for behind-the-meter optimization in Japan, for grid services in the U.S., or for EV smart-charging in Europe, Gridshare automatically finds and optimizes value in a given market. 

With 77,000 residential batteries on the platform, and extensive international experience, clients can be sure that Gridshare can deliver value now and in the future, as DERs proliferate and markets become more dynamic. We just need the right policy settings in place to make sure that a customer-centric, low-carbon future becomes a reality, and soon.  

Post author
Sam Wevers
Sam Wevers
Head of Software Product
Sam leads the software product team at Lunar, focused on Lunar's Gridshare platform and apps.