About the guest: Jon Ferris is Head of Flexibility at LCP Delta, a leading consultancy and research firm focused on accelerating the global energy transition. Jon has worked in flexibility for over 20 years in roles across risk, trading and energy strategy.

In this conversation, Tania Barr (Head of Marketing at Podero) and Jon Ferris explore how residential and grid-scale batteries use similar technology but create value in different parts of the grid. While grid-scale storage competes in increasingly crowded national markets, residential batteries and EVs can deliver unique local benefits. The discussion also highlights that mass adoption will depend on flexibility being automated, customer-first, and packaged as simple savings, not exposure to volatile prices.

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Podero: Thank you so much for coming to see us on the third day of E-World. It would be great if you could start by just talking a little bit about LCP Delta and your role in flexibility.

Jon: Thank you. I’ve been working in flexibility for about 20 years now, and it’s evolved enormously over that time. From really being the interest of only the very largest industrial businesses providing demand response, to what we see today, where flexibility is everywhere from the residential customer up to the largest traders. It’s really become a core part of the energy system.

LCP Delta provide research and consulting in the energy transition, focused a lot on what’s happening on the consumer side of the market, looking at the uptake of EVs and heat pumps, and also how they can be monetized in the markets, looking at the evolution of flexibility markets, the development of big batteries and the huge investments that we’re seeing in batteries across all of Europe now.

Podero: It’s obviously music to our ears, because we’re trying to fly the flag for flexibility, and obviously device flexibility specifically. What do you see as the place for the residential battery flex opportunity versus these massive grid investments? Could you talk a little bit about the role for those two very different levels of battery capacity?

Jon: So from a technology perspective, a battery, whether it’s large scale or small scale, in someone’s home or in an EV,  it’s generally the same asset, but where it is on the grid makes a huge difference. And I think the markets, the industries, are starting to come round to the idea that flexibility is becoming a lot more nuanced.

Historically, flexibility was provided by the largest generators, whether it’s gas or coal-fired generators that could turn up and down, in response to shifting demand. Now, with a more renewable dominated system, we’re seeing a lot more need for flexibility because it’s weather-driven rather than responding to demand. But that also means there’s less flexibility from the generation side. And that flexibility is where most of the value has been up to now. 

So whether it’s in the wholesale market, being able to ramp from one hour to the next, and increasingly with a 15-minute market, shorter intervals and being able to adjust your schedule… to the ancillary services where we’ve seen not just the harmonization of markets across Europe (with AFRR, MFRR and FCR), but also new markets that provide faster-acting response, particularly in the Nordics, and GB, with the dynamic suite. That flexibility provided by the big generation is where historically value has been. And where the batteries have all moved into – as we’ve seen in countries like GB and Germany, where we’ve had a huge battery capacity. But even countries like Sweden, which have smaller FCR markets, a lot of grid-scale batteries have gone in. And that’s swamped the market.

So the markets that had higher value and higher prices, all of a sudden are no longer where the value is. And the big batteries are really looking at what’s become known as multi-market optimization. It used to be 5/10 years ago, if you had an FCR contract, you might get an annual contract and that would justify your business case. Now that’s traded on a daily basis, you’re competing with other assets, other entities. You’re having to think across frequency response, reserve response, wholesale markets, whether it’s day-ahead, even intraday, and balancing markets.  And that’s pushing value down; you’re seeing saturation of markets, or prices. So you have to become a lot more creative. And I think the question for the smaller assets… is can they compete in those markets? 

Podero: Is trying to create effectively one massive battery from a lot of distributed household ones the right game to be playing, or actually do they solve a different need or problem?

Jon: That’s where we’re starting to see the nuances come in, in the market. Obviously they can compete in those markets, they can in theory provide those services, but when you add in the cost of connecting to thousands of small devices and the metering and monitoring that’s required – the orchestration – can they compete on a cost basis? Can they compete for the TSO or dispatch, when instructing one large asset is a lot simpler than orchestrating lots of small ones?

But the fact that they’re on a lower voltage part of the grid does mean that they can offer  different services. So, even within the home, you can optimize for self-consumption and consume PV rather than spilling it out onto the grid when you’ve got negative prices. You can reduce your maximum import from the grid, reduce your demand charges. You can then think at the next level up of: can you coordinate at the distribution or local level? We’re starting to see more congestion at the local level and it’s harder to dig up the roads and increase the capacity.  But when everyone in the street wants an EV, can you accommodate more assets without increasing the size of the grid, and reduce costs by influencing how people behave?

Podero: Turn it into much more of a regional / zonal distribution.

Jon: Or even a very local market. We’re not quite at the super local market, but we’re seeing the emergence of distribution level markets. And there are lots of platform providers, pilots and projects that are appearing around Europe to try and manage that congestion at the more local level. The big batteries that are higher up the grid can’t play in those markets. So it’s a different game. Smaller batteries, domestic batteries, EVs, even flexibility from other assets can provide that local service in a way that the big batteries can’t. 

So we need to stop thinking about flexibility as this one big thing that happens at the top of the grid, and think about how you can optimize at different levels of the grid. What are the best assets, where the value is, and how you can layer value to create  the business cases.

Podero: Do you feel utilities that you speak to, or energy retailers with a B2C base, are thinking in this way? Are they geared up or even structured to think about that sort of distributed level of intelligence in servicing and delivery?

Jon: A lot of the companies are thinking about it. Whether they have sufficient scale among their customer base with assets is one of the key drivers. And some of them are supporting their customers in electrifying. The utilities providing electricity have seen declining demand for the last 20 years. Now there’s an opportunity to move away from thermal gas products and even for the electricity suppliers to eat into the oil industry’s markets by electrifying transport; increasing demand from their customers. So there’s a benefit to doing that, but that can create a challenge for them if they’re not encouraging their customers to charge smartly. 

It creates opportunities both for themselves and third parties to really help them optimize smart charging, particularly encouraging electrification of heat through heat pumps. And then you think about the flexibility that this brings into the system we’ve got used to, particularly in countries with gas fired heating, that will burn gas at a thousand degrees and heat the home up very quickly. That makes sense. So when we get up in the morning, or get in at night, we’ll turn it on.  But heat pumps are much more efficient at a lower temperature. Which gives more opportunity to pre-heat – but also means you have to think about how you manage that, over the course of the day. And that’s the optimization, the forecasting; building that buffer. Can you overheat an hour or two ahead of where you need to? Can you let the temperature drop when prices are high? The opportunity is there, the cost optimization is there – but it’s not something that the average household wants to be doing; they just want to be warm.

Podero: Absolutely. Podero’s perspective is to make it autonomous, hands-off for the household. The user’s preferences come first, but beyond that, the simpler the better in terms of: don’t worry, this is all just going to run in the background.

Jon: But it’s also hierarchical. What does the customer want first?

Podero: Yes, it has to be every time.

Jon: The old saying, they want cold beers and warm showers. A comfortable home. Lower bills. And if you’re cycling the assets, you can put a strain on the asset. You don’t want to have to replace your EV quicker because you’re providing services to the energy sector. You may be coming up against the warranty requirements. Then, where the retailer comes in, can they influence behavior through the tariff? And it’s only after that that you really should be thinking about the market signals and what’s left in order to optimize.

You talked about that local market. A lot of people don’t live in an area where you have that local congestion yet – where the markets don’t exist. But that’s starting to come. So you have the local market, then the national markets, the TSO markets. That optimization across multiple levels  becomes even more complex, increasing the need for the consumer to just hand it over to someone that they trust. Just do it for me, make sure my home is warm, and minimize my costs. 

Podero: How much do you explain any of it to the householder? Or do you just say, trust us, we’ll generate some value, you’ll see it on your bill.

Jon: There’s certainly a move towards that simplicity. Five years ago, the view was ‘markets are volatile, so we need to expose consumers to those volatile crises. Everyone should be on a dynamic tariff. They’ll change their behavior and respond to the market’.  And we’ve seen nearly every country with a high uptake of dynamic tariffs, as soon as you see high volatility, customers have run a mile. They don’t generally want that exposure.

Podero: Norway is a great example of this.

Jon: Yes, Norway is the most recent example. We’ve seen it in Spain, we’ve seen it in Texas four or five years ago. Customers are comfortable with volatile prices unless they’re too volatile.  

So if you were running your own energy retailer in Spain, lots of sunshine, increasing amounts of PV and battery penetration. What would that product look like for you if you could have a blank sheet? What would you be offering? Norway, there’s a lot of electric heating. A lot of EVs.  Spain is very sunny. You have a very different dynamic. So a summer and winter split.  And I think that sort of customer segmentation, even within a country, let alone across countries, is becoming more and more important.

You’ve got the early adopters with EVs, heat pumps, solar. But you also have people that maybe still have a lot of old appliances  and where just managing the cost of energy is so important to them, but they don’t necessarily have the ability to buy into devices that can provide flexibility. 

We’re seeing a move more towards broadband-type services where you can offer a fixed price. Now you know what it’s going to cost you for the month. For a lot of consumers, that certainty is really important. Whereas at the other extreme, you have customers that are monitoring their prices, watching the output of their solar panels, playing with their battery and heat pump. The mass market is somewhere in between. And there’s so much less homogeneity, even in one street, where a decade ago, a utility could assume that every house in that street had a fairly similar profile. Now, a house may have PV, a heat pump, an EV, people may be working from home. And forecasting demand has become even more important. So for the retailer, again, having some influence over those assets is a way to offset the increased risk that they’re facing as well. 

Jon: Even from customers that are not necessarily wanting to get involved on a day-to-day basis there’s much more awareness from over the last 3-4 years of the importance of when you consume energy. And being able to get free electricity when there’s excess solar is a lot more attractive a message than what we hear about demand flexibility in the papers of rationing power. Offering people something for free, particularly if they reduce their peak consumption.

So we need to get the messaging right. We need to get that automation.  And then we can get some flexibility even from disengaged households.  

Podero: 100%. There we go – you make it sound easy. Thank you very much, Jon. We will get on with solving that. 

Jon: Thank you.

To learn more about residential batteries, check out our related article here.