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The Smart Energy Glossary
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Introduction
Nobody has the time to navigate all the complicated terms swirling around the ‘smart energy transition’. And when we found ourselves pulling together a handy glossary for our new joiners, we decided others new to this space might appreciate it too. It’s hard enough to explain to your mum what you do, without needing to call a heat pump a ‘distributed energy resource’, right? So here are some key phrases we keep tripping over, and what they mean in plainer English.
What are Distributed Energy Resources (DERs)?
Think solar panels, batteries, electric vehicles or heat pumps. Distributed Energy Resources are the key devices that generate, store or use electricity within a household or similar location. They’re connected to the grid, but sit what’s called ‘behind the meter’, i.e. they’re involved predominantly in energy use on the premises. These days, they’re typically also connected to the internet, meaning they can be controlled - and optimized - remotely. Effectively managing your DERs allows a household to save money by using energy more intelligently (the ‘prosumer’ approach - see below), and often more responsibly.
What is a DER Management System (DERMS)?
At scale, smart DER management allows utilities to help balance the grid, keep things stable, reduce their costs (and typically customer bills too) and purchase electricity more efficiently. A DERMS is a software platform that utilities can use to monitor, control, forecast, and optimize a broad range of connected DERs. Podero’s platform is this kind of system.
By aggregating household DERs via these systems as if they were one big power plant, their combined energy demand, storage or supply can also be used as part of a grid network, and traded on the energy markets (see below). Clever stuff! Enhancing grid stability, improving power quality, and helping to integrate renewables much more effectively.
What Does Home Energy Management System (HEMS) Mean?
This is one of those phrases that can mean slightly different things to different people. As a basic concept, a Home Energy Management System (HEMS) does what it promises - it’s any technology platform that ‘manages’ - monitors, controls, and optimizes - the energy within a household. A HEMS typically connects to and manages various Distributed Energy Resources (DERs) such as solar panel (or solar PV / photovoltaic) systems, batteries and EVs / EV chargers - but alongside controlling smart thermostats and other “smart appliances”. However, some people define a HEMS as always incorporating a solar PV system.
A HEMS’ primary goal is to reduce energy costs and maximize ‘self sufficiency’ for the household. They’re a way of getting the absolute best out of your home energy consumption, without compromising on comfort and need. They work best when they’re also connected as a gateway into utilities’ own grid flexibility programs, automation and smart tariffs. Leading to overall better management of distributed resources - and a truly smart energy ecosystem from the home to the grid.
PV self-consumption optimization, a bit of a mouthful, is a form of HEMS that brings in solar energy considerations to how the household is optimised - maximising the use of all that lovely free energy. So your heat pump may automatically shift its schedule when the sun is shining.
If the HEMS also optimizes to pricing signals, things get even smarter. When the grid is paying well for your solar energy (export or ‘feed-in’ tariffs), the system may decide to prioritise exporting ‘now’ and wait to charge the car during lower overnight pricing periods - leaving you in profit overall.
What are Dynamic Tariffs?
Dynamic Tariffs are electricity pricing plans where the cost per unit of electricity varies. They can sometimes be called Flexible Tariffs, and they’re the opposite of a fixed tariff. Prices can flex based on the time of day, day of the week, or even real-time market conditions (i.e. “spot prices” - see the earlier Energy Trading explainer). An increasingly common example in many countries is a Time-of-Use (ToU) tariff. This features different price tiers for on-peak, mid-peak, and off-peak periods (or sometimes a simpler day vs overnight rate).
The goal of dynamic tariffs is to incentivize consumers to shift their electricity consumption from high-demand (typically higher-cost and higher-emission) to low-demand periods. Thereby reducing strain on the grid, facilitating better integration of renewable energy, and typically lowering bills. Smart energy platforms such as Podero can automate device responses to these tariffs, maximizing savings for consumers - with benefits for utilities and the grid.
The downside of a dynamic tariff? They can feel risky for consumers if they are too tied to market movements, penalise unavoidable energy use during peak periods - after all, dinner needs cooking - and can make it more challenging to predict and prepare for the monthly bill. (We have some ideas on tackling this here if you’re interested.)
Who is a Prosumer?
A prosumer in the energy market is an individual, household, or entity that both consumes electricity from the grid and produces its own electricity, typically from renewable sources like rooftop solar panels. Literally - producer/consumer. Prosumers may also have energy storage systems (e.g., home batteries) and can potentially sell surplus electricity back to the grid or participate in energy sharing or demand response programs. They can also be considered as ‘professional consumers’ - both definitions apply.
The rise of the prosumer signifies a shift from the traditional, centralized energy system of legacy energy suppliers and passive consumers… to a much more decentralized, interactive and flexible model, where consumers play an active role in - and gain meaningful benefit from - a collective approach to efficient energy generation and management. And it doesn’t even have to be hard work; with the rise of smart energy management tech, more households can ‘turn prosumer’ while letting the smart systems take the strain.
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What is a Virtual Power Plant (VPP)?
A VPP is effectively a big, distributed, cloud-based power plant of aggregated DERs. These typically combine the capacity of connected household devices (rooftop solar, battery storage, heat pumps and electric vehicles) with flexible industrial or commercial loads, to operate as a single, “dispatchable entity” in energy markets. VPPs enable smaller, geographically-dispersed assets to participate in wholesale energy markets, plus ancillary service markets, and local flexibility schemes, run by the Transmission System Operators (TSOs) and Distribution System Operators (DSOs). VPPs provide increasingly critical services like grid balancing and congestion management - particularly as more renewables come on line, with their greater unpredictability.
In simpler terms? You can charge up a whole bunch of household batteries to absorb excess midday solar from the grid, then discharge them back into the grid when demand peaks at tea time, and the sun isn’t shining. Voila - a veritable zen-level of balance! For utilities, creating VPPs also lets them monetize their consumer and industrial DER flexibility.
What is a Demand Response (DR)?
Demand Response is a rather unhelpfully broad term that refers to programs or actions designed to encourage or force a response (you could say, demand a response?) from an electricity user, to alter electricity consumption from normal patterns.
Typically utilities implement DR programs that incentivise lower electricity use at times of peak pricing, or when system reliability is jeopardized. DR at scale helps dampen down peak demand and improve grid stability. Over time, it also means utilities can reduce their investments in new generation and network capacity - typically only needed to cope with the peaks. DR can be enabled through three key means:
Behaviourally by incentivising changes in habits (e.g. Octopus UK’s Saving Sessions)
Directly via load control by the utility
Automatically through connecting smart devices to energy management systems, based on price/environmental signals alongside pre-set customer preferences (this is where Podero comes in)
DR can also refer to the balancing/ancillary services implemented at a whole (grid) system level to keep demand in balance, i.e. the services that utilities then step up to provide, by launching the programs outlined above.
What is Energy Flexibility / Demand-Side Flexibility (DSF)?
Energy Flexibility, often referred to as Demand-Side Flexibility (DSF), is all about how electricity consumers can increasingly adjust (i.e. flex) their energy use or generation in response to external signals such as price, grid conditions or even direct incentives from their energy company such as a ‘time of use’ tariff. This includes shifting household electricity use to off-peak hours, reducing what’s used during demand/price peaks, or doing more with on-site solar generation and battery storage.
As such, DSF is essential to the Demand Response activity described in the previous section. It’s the enabler for energy users to respond to the DR signals they receive.
It’s all very well having smart, connected DERs, but they don’t benefit anyone unless their energy use can actually be flexed. For utilities, harnessing DSF from residential, commercial, and industrial customers through smart technologies (like Podero) and the right kind of behavioural incentives is crucial for DERMS and VPPs to be able to do their thing - and for Demand Response to succeed.
What is Energy Trading (Spot, Day-Ahead, Intraday, Balancing Markets)?
This is a whole thesis in itself, and we won’t attempt to cover all the details here. Trading also varies enormously by geography, even within one country. But at a high level, Energy Trading involves buying and selling electricity in various organized markets to balance supply and demand, manage price risks, and optimize energy procurement or generation portfolios.
Key electricity markets include:
Day-Ahead Market: Participants submit bids and offers for electricity delivery for each hour of the following day. When all bids are in, the day-ahead’s price/load curve is agreed and set for everyone in that market.
Intraday Market: Allows for further trading closer to real-time, enabling adjustments for unexpected changes in generation (e.g., from renewables) or demand.
Spot price: The current market price for energy, usually accurate to the hour or quarter hour depending on the market. There is a unique spot price for each day-ahead and intra-day market.
Then there is the Balancing Energy Market (also termed Ancillary Services). The Transmission System Operator defines what energy shifts are needed to balance a grid over a certain period, then participants are chosen via a ‘merit order’ process. It’s used by grid operators to buy - or sell - what they need to maintain grid stability and frequency in real-time and avoid blackouts. Examples include the Frequency Containment Reserve (FCR) and automatic Frequency Restoration Reserve (aFRR). Utilities and aggregators can leverage their DERMS to participate - essentially step in and save the day - optimizing short notice dispatch of DERs to provide grid support. It’s so heavily regulated and structured, it’s hard to call this a true market and isn’t really open to trading in the classic sense. So many acronyms!
What Does Smart EV Charging Mean?
Here’s a simpler one. Smart EV Charging refers to the intelligent management of electric vehicle (EV) charging processes, allowing charging times and rates to be adjusted and optimized based on factors such as electricity prices, grid load, availability of renewable energy - and of course, user preferences.
Unlike basic charging, smart charging enables communication between the EV and/or the charging station and a central management system (or the grid operator). This lets EV owners benefit from smart stuff such as automatically charging only during cheaper hours - they set their charging requirements, plug in and walk away. EVs today have pretty huge batteries, so being able to control their charging patterns significantly minimizes strain on the grid. Increasingly and excitingly, they can also act as a ‘capacity reserve’ for the grid (called Vehicle-to-Grid services) - participating in DR programs and earning money for the household in the process.
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Subscribe now!What is an Energy Aggregation / Energy Communities?
Energy Aggregation, sometimes known as Community Choice Aggregation (CCA), is the process of pooling multiple electricity consumers (residential, commercial, or industrial) or distributed energy resources (DERs) to purchase or sell electricity or provide grid services collectively. It’s not too common yet, but the trend for Renewable Energy Communities and similar collectives is definitely growing, and increasingly incentivised by government grants as a way for more people to participate in the cleaner, smarter energy transition.
By combining their demand or generation capacity, participants can achieve greater bargaining power, access more competitive energy rates, or participate in wholesale energy markets and flexibility programs that might otherwise be inaccessible to individual or small-scale resources. New "aggregators" are emerging who facilitate this pooling and market interaction, often leveraging sophisticated software platforms to manage and optimize the aggregated assets.
What is an Energy API (Application Programming Interface)?
APIs are pretty common terms if you work in the software world, however many in energy are less familiar with the concept. An Application Programming Interface (API) is a set of rules and protocols that allows different software applications, devices, and platforms to communicate and exchange data seamlessly. In energy, they are crucial for enabling interoperability - basically, mutual connection, communication and control - between different DERs, utility systems (e.g. billing, customer servicing and trading), and third-party service providers (e.g. the app that controls your electric vehicle). Podero’s API plays this role in enabling utilities to steer (control) and trade.
By facilitating secure and standardized data exchange, APIs help utilities integrate and manage DERs effectively, offer more innovative and informed customer services, automate energy trading, and ultimately build a more responsive and intelligent grid.
What Does Grid Balancing mean?
Grid Balancing refers to the tricky art of matching electricity generation with electricity demand in real-time to maintain the stability and operational integrity of the power grid, primarily by keeping the grid frequency within a narrow, predefined range (e.g., 50 Hz or 60 Hz). Any significant deviation between supply and demand can lead to frequency fluctuations, power outages - or even widespread blackouts. Grid operators achieve balance by flexibly dispatching various resources including curtailing renewables, activating grid-level energy storage and, increasingly, leaning on aggregated Distributed Energy Resources (DERs) that can provide new options for ancillary services. Traditional power plants are the hardest to adjust in real time, as they tend to have significant lead time and cost to ‘fire up or down’.
What is a Peak Shaving?
Nothing to do with teenage boys, peak shaving is an energy management strategy aimed at reducing electricity consumption during periods of peak demand on the power grid. This is typically done to avoid the high charges imposed by utilities on commercial and industrial customers, or to alleviate stress on the grid infrastructure. Peak shaving can be achieved by temporarily turning off non-essential equipment, shifting energy-intensive processes to off-peak hours, or utilizing on-site energy resources such as battery energy storage systems (BESS) to supply power during these peak intervals. Effective peak shaving can lead to significant cost savings for consumers and improved grid stability for utilities.
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