Proving the Business Case for the Internet of Things

Pilot show potential for smart grids to generate €3.5bn for Netherlands

Steve Rogerson
April 28, 2015
Implementing smart energy grids in the consumer market could generate between €1bn and €3.5bn for the Netherlands. This has been revealed by a study carried out in PowerMatching City, the first pilot project in the world to implement a smart energy grid in practice.
Smart energy systems enable the balancing of supply and demand of energy. This is important, because the electricity supply will become increasingly dynamic as the role of wind and solar energy becomes more important in the on-going energy transition. Wind and solar power are dependent on the weather, so they are an inherently fluctuating source of energy. Smart energy grids level out these fluctuations so supply and demand are continually in balance. This is known as flexibility.
To find practical solutions to the problems that the energy transition entails, in 2009 PowerMatching City was established in Hoogkerk, in the Dutch province of Groningen. In 2011, a community of 40 households entered into phase two of this pilot, a real-life experiment in living with sustainable energy. The residents used solar panels, micro CHP plants and heat pumps to provide their own electricity and heat their own water using the sun, gas and geothermal heat. Smart software was used to share electricity with neighbours and household appliances were activated at times that the supply of electricity from the local grid was optimal.
PowerMatching City demonstrated that smart energy systems are technically feasible and that energy flexibility makes economic sense. In fact, the net gains from the consumer market could well reach €3.5bn. These benefits are based in part on money saved by the grid operators by avoiding costs for investments in and maintenance of existing energy grids. On the other hand, energy providers will be able to manage their customers' energy consumption more effectively so they will be able to purchase energy for more competitive wholesale prices. Energy providers will also be able to use locally generated energy to match local supply and demand, which also saves costs.
During the pilot, the consortium partners and the residents jointly established two energy services to facilitate flexibility: Smart Cost Savings enabled the residents to keep the costs of energy consumption and generation as low as possible, while Sustainable Together focused on helping them to become a sustainable community.
PowerMatcher, the smart software used in the study, played a key role by matching the energy supply and demand based on the information provided by the energy providers and the consumers. A striking result of the pilot was that the system was much more flexible than anticipated on the basis of previous studies and that the demand and supply were easier to balance than expected.
If this smart and flexible energy system is to be implemented in the consumer market on a large scale then it will need to be standardised, both to reduce the costs of connecting the households in the smart grid and to lower the price of the smart energy services. The use of standardisation will reduce the cost per household enabling the flexible energy system to become quickly economically viable. However, another precondition will need to be met for this to happen: energy purchasing will need to take place on the basis of actually measured energy consumption or generation. Only then the energy providers will be able to profit from the added value provided by energy flexibility and share the benefits with their customers.
The partners in PowerMatching City recommend the development of a new market model for the optimal distribution of flexibility, whereby the value of flexibility is put to the best possible use. Fair distribution of the benefits among all the stakeholders – end users, consumers, energy providers and network operators – is essential for a successful business case. This market model requires a single market party that can collect and redistribute the flexibility: the aggregator. Furthermore, standardisation can ensure the economic feasibility of large-scale implementation.
The PowerMatching City consortium is DNV GL, Enexis, Essent, Gasunie, ICT Automatisering and TNO. Knowledge partners are TU Delft, Eindhoven University of Technology and Hanze University of Applied Sciences.