Utility Week

Utility of the Future: Consumers 26 | 13TH - 19TH MARCH 2020 | UTILITY WEEK The relatively high capital cost of low-carbon technol- ogies, such as air source heat pumps or vehicle charging systems, coupled with consumer wariness of their ben- e ts, could hold back decarbonisation. One potential solution to this is EaaS, which mimics popular subscription-based services for things like video streaming or mobile contracts, by charging customers a xed fee for a guaranteed level of electricity or heat- ing. The supplier manages the entire service, including investment associated with technology upgrades. Steve Jennings, head of UK Power and Utilities Sector Practice at Pricewaterhouse Coopers, tells Utility Week: "When you think about the concept, it makes sense; through all of the devices in the home you transfer the investment decision to energy suppliers who should be better positioned to make decisions to deliver a return on investment that meets the speci c service requirements. "If a boiler is ine… cient, they can invest in a new low- carbon boiler that provides the same level of service at a lower cost. Or in the case of electricity, if a homeowner has solar panels on their roof and doesn't need all the energy, the supplier can invest in a battery and export the surplus back to the grid." In February, Bristol Energy completed the rst ever trial of heat-as-a-service by a UK energy company as part of a government-backed project that could pave the way for extensive low-carbon retro ts. The year-long testbed saw a subset of homeowners in the Energy Systems Catapult's Living Lab (a collection of 100 homes nationwide tted with smart heating systems including room-by-room temperature controls and ther- mal sensors) sign up for either xed price or pay-as-you- go style "heat plans" for heat and hot water. Hours of warmth, instead of kilowatt-hours, were purchased based on a xed schedule of room-by-room heating tailored to customers' needs, with variations on levels of service and payment terms. Samantha Nicol, head of innovation at Bristol Energy, tells Utility Week: "The purpose of the trial was to assess customer behaviour and understand what it would take to switch them to low-carbon heating in a more e• ective way. The onus is on us as an energy supplier to provide the right advice and recommendations for installation and when it is time for homes to move from a gas boiler to a heat pump if the suitability is right." Analysis "Subsidies could enable a new 'box' to cost roughly the same as a regular gas boiler installation over the duration of its lifetime." Ed Hunt, Energy Systems Catapult "The trial found that 1 in 50 customers breach fair use policies. If that equates to 2 per cent of the energy market, that is quite a large portion." Phil Steele, future technology evangelist at Octopus Energy continued from previous page A survey of the test cohort revealed some positive reactions. According to Nicol, 77 per cent of customers said they prefer the idea of a heat plan to buying a heat pump up front, and 85 per cent said they are more open to alternative methods of heating aš er being on the heat plan for a year. Subsidies available through the government's Renew- able Heat Incentive to fund low-carbon heating technolo- gies could help the business model stack up, says Ed Hunt, service design lead consultant at Energy Systems Catapult: "Subsidies could enable a new 'box' to cost roughly the same as a regular gas boiler installation over the duration of its lifetime and could be used to support some of these contracts going forward." But the energy-as-a-service approach poses chal- lenges. The huge variation in thermal performance between di• erent properties would require extensive survey work to capture the speci c heating requirement for each home. If similar properties are charged di• erent rates, for example if one has double glazing and another doesn't, it could lead to customer complaints and accu- sations of a lack of pricing transparency compared with standard charges based on energy consumption. "You also get into the argument of fair use policies needed to address those customers who turn the heat- ing up and leave all windows open," says Phil Steele, future technology evangelist at Octopus Energy. "The Energy Systems Catapult found that 1 in 50 customers breach fair use policies. If that equates to 2 per cent of the energy market, that is quite a large portion, if not all of the margin an energy supplier makes." Clock watching The ongoing smart meter rollout, and greater penetra- tion of decentralised energy and storage on the grid, are building momentum behind time-of-use, or di• erential, pricing structures, which can cut consumer energy bills and reduce strain on the energy network. The principle is to encourage customers to switch to consuming electricity at times of lower demand when unit costs are cheaper. Prices can be xed, for example 10p per kWh in the morning and 5p per kWh in the mid- dle of the night, or dynamic and changing based on avail- ability of energy in the system. Customers on these tari• s can operate appliances manually to use energy at the desired times, or devices can be automatically triggered. Octopus Energy has been particularly innovative in this space, its Agile time-of-use tari• gives customers access to half-hourly energy prices tied to wholesale prices, updated daily. Prices closely mirror levels of car- bon intensity on the grid, so at times of peak demand, when gas takes up a lot of the load, the unit cost is higher, and when there is little demand, such as over- night, the UK's extensive base of wind turbines takes up the strain, resulting in low prices. The tari• also takes advantage of "plunge pricing", a phenomenon whereby networks have too much wind energy, so they must price it far cheaper, even negatively, to o¢ oad it. Agile passes these negative prices on to customers; during one windy period in December, homeowners were paid up to 5p for every unit of electricity¤used.

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