Extreme weather events such as wildfires and heatwaves are heightening the risk of blackouts
Extreme weather events such as wildfires and heatwaves are heightening the risk of blackouts © Mike Eliason/Santa Barbara County Fire Department via AP

Extreme weather events, from heatwaves in the Pacific Northwest to bushfires in Australia, are expected to become more frequent as climate change accelerates — piling greater pressure on electricity grids and increasing the risks of blackouts.

And these challenges have fuelled the use of digital technologies to link up privately owned energy assets — such as solar panels, thermostats and batteries — aggregating energy to relieve the pressure on the grid.

Such decentralised “virtual power plants” have the potential both to lower power costs for consumers and to reduce the need for expensive upgrades to electricity grids, according to companies in the sector.

Global electricity demand is set to rise 2.5 times by 2050, according to the International Energy Agency, driven by a shift to electric vehicles. That will require $14tn-worth of upgrades to electricity grids globally, based on estimates from Bloomberg New Energy Finance.

At the same time, however, greater use of renewable energy — such as solar and wind power — increases the intermittency of electricity generation.

“Variability on the grid is becoming more of a problem and climate change is the gasoline on the fire,” says Thomas Folker, co-founder of Leap, a creator of virtual power plants. “You get weather that is unexpected in places where you would normally not think about.”

Sunnova, a Houston-based solar provider, says it has seen increased demand for home solar and battery systems due to a jump in extreme weather events.

In addition, the pandemic-induced shift to homeworking has heightened the importance of preventing power interruptions, says John Berger, Sunnova chief executive.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here

In the first quarter of 2021, Sunnova installed more than twice the number of battery systems that it handled in the same quarter of last year, it says.

The US should utilise these home-owner assets rather than spend on upgrading the electricity grid, Berger argues.

“Let the market work, let consumers have a choice of what they want,” he says. “The market will find a more efficient change to the energy system than a top down, almost communistic-style approach.”

San Francisco-based Leap helps electricity grids manage periods of peak demand by telling participants in its virtual power plants to reduce consumption. Such “demand response” services are paid for by electricity grids, and Leap passes the financial upside on to its customers.

The company’s network can connect up energy assets including batteries, electric vehicles, smart thermostats, agricultural and municipal water pumps, cold storage, and commercial heating and cooling systems.

These services can reduce the need for grids to rely on gas-fired “peaking plants” that provide fill-in electricity during periods of high demand, Folker says. Gas power plants, he adds, have had problems operating during periods of extreme weather.

Moixa’s AI-powered software is used to lower energy use during peak periods
Moixa’s AI-powered software is used to lower energy use during peak periods © Katarzyna Bialasiewicz

“We’ve seen a whole bunch of gas power plants come offline because it’s too hot for them to operate,” he says. “We can alleviate the pressure during those crucial intervals. We compete in the wholesale market as other power plants [do].”

Combining home-installed electricity storage systems with rooftop solar panels can reduce the need for extra grid spending, since software algorithms can determine the best time to charge and discharge the batteries, reducing strain on the grid, according to UK start-up Moixa.

“We can substitute intelligence for grid spending,” says Chris Wright, Moixa co-founder. “You can enable the flexibility that’s needed by rolling on more renewables on to the grid. The best way to do that is to leverage assets that are going on to the grid anyway and add intelligence.”

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Moixa is now recruiting households with solar panels in the UK seaside towns of Worthing and Littlehampton for battery installation. This will help build a VPP in the area to support the local grid. The battery systems costs about £4,000, and joining the VPP allows the households to both buy energy from the grid at the lowest cost and to sell energy back to the grid when demand is high.

The company has also worked with trading company Itochu on optimising the use of 28,000 of its battery systems in Japan, with almost 300 MWh worth of storage. It found its software provided a 14 per cent reduction in energy use for some customers.

Integrating electric cars into VPPs offers even more flexibility, Wright adds, as they can be programmed to charge in the middle of the night, reducing stress on the grid. Electric car batteries will be able to deliver energy to the grid in the future, points out Folker.

However, creating VPPs will require households to have good broadband access and ensure their personal energy data is secure, says Barbara Hammond, chief executive of the Low Carbon Hub, which is developing a community-owned solar project in Oxfordshire, England.

“There’s a discussion about who owns the data coming out of the smart meters,” she says. “If we’re not careful about how we develop this smart energy system, we will erode trust further. We have to be working carefully about how the metering is done — and who owns it.”

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article