A new aggregator targeting small businesses and households has secured £545,000 to scale its operations. Rather than target the largest firms, Upside Energy is attempting to build demand-side response from the bottom up.
The firm believes small businesses are underserved by current market demand-side response (DSR) programmes and participants. While aggregators have made strides in educating larger businesses around getting paid not to use power or by switching to on-site generation when the power system is stretched, smaller firms make up the bulk of the market, according to CEO and founder Graham Oakes.
“The energy system is very complex. Most small businesses don’t really know much about demand response,” he told The Energyst.
“Even large businesses are aware of STOR (short-term operating reserve, the oldest of National Grid’s balancing services) but they don’t tend to be aware of frequency response (a newer service which is more technically challenging and requires much faster response time but which pays providers much more). So there is still quite a lot of education to be done.”
Alongside households with solar PV, Oakes thinks the UK’s hundreds of thousands of uninterruptible power supplies (UPS) are a good place to start scaling DSR.
“There are a lot of small businesses with UPS and a lot of large businesses with multiple small sites. We are talking to water companies, for example, that have pumping stations and sewerage infrastructure all over the place, often with instrumentation with a small UPS attached.”
The firm uses a cloud-based platform to connect those UPS and monitor them remotely. When the power system is tight, it can aggregate the systems to help balance the grid. National Grid pays aggregators for such services and Oakes says Upside gives 75% of the revenue back to participating businesses. When there is plenty of spare capacity, Upside can recharge the batteries when electricity is at its cheapest, so that businesses are effectively arbitraging power price differentials as well as getting paid a service fee.
Oakes says smaller businesses – and also larger firms – tend to be risk averse when it comes to using their UPS for anything other than emergency back-up. But he thinks that is the wrong mindset.
“From a small business perspective, one of the most important things is not just the revenue we create but actually in the monitoring of the UPS that we do,” says Oakes. “The fact that we are regularly testing the UPS and checking how it responds means that we can spot early on when the battery is degrading.”
He says that is a “very valuable service”.
“If you have a UPS, your concern is: ‘if someone is using the battery for something else, what happens when the power goes down and my battery is drained?’.
“But the real risk for a small businesses is that the UPS sits there in a corner doing nothing for three years because the grid is very reliable. It is only when you do have a power outage that you find out that the battery has degraded,” he says. “You thought you had an hours’ worth of battery – but it actually dies after 10 minutes. So we can help them manage that risk.”
That effectively allows businesses to monetise maintenance regimes as well as assets. But the challenge is convincing people that they are actually making their operations more robust rather than compromising them, says Oakes. Part of that fear of failure has been sown by the UPS manufacturers. Oakes believes they need to start pushing a “more nuanced” message.
“The risk aversion is there because UPS manufacturers have sold risk and said ‘it is really dangerous out there and you need our kit to address that’. There is a slightly more nuanced message and that is where we want to work with manufacturers and their reseller channels to put out there.”
He says the firm’s business model is to work with resellers because there is benefit for all parties.
“Through the battery monitoring service we are actually helping them identify where they should be selling battery testing and maintenance services. You should replace batteries every three or four years, but a lot of small businesses don’t do that,” says Oakes. “So we are helping the resellers open up some of that maintenance revenue and in return they are helping to explain our service and sell a slightly more complicated message.”
Upside, which was born out of a National Grid competition in 2013 and has received funding from both Decc and Innovate UK as well as the latest £545,000 from ClearlySo, is currently managing about 400kW of load via field pilots, mainly via sub-50kW sites. Next quarter it will launch larger scale pilots with the aim of entering National Grid’s Firm Frequency Response Bridging scheme (FFR Bridging) in the first quarter of 2017. That requires a 1 MW minimum clip. But Oakes is confident the company – with fresh funds under its belt and advisors that include former SSE boss Ian Marchant – can quickly scale.
“We have set ourselves aggressive targets. You have got to have 10MW to be a serious player with National Grid and so [our thrust now] is recruiting that capacity.”
He says once the challenges around “metering and demonstrating from a large number of sites that you are meeting National Grid’s requirements” have been met, the company may look upstream in terms of business customers.
But with the emergence of batteries and smart technologies, the domestic solar PV sector could actually dwarf the non-domestic market, Oakes believes.
“There is huge pent-up demand on solar PV. People hate the fact that they have to export it at x pence in the morning and import it at a higher rate in the evening. People want to self-consume. Up until now the economics have not been there. But we are on the cusp. So I think our initial capacity will be [mostly from] small business, but the domestic PV side is going to take off quite quickly.”
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