Energy prices in the European Union have only increased in 2021, mainly due to the Covid-19 crisis. But the war between Russia and Ukraine has also severely affected the distribution of gas from Russia, exacerbating the looming crisis. In fact, the European Parliament has called on citizens to use less energy to balance electricity markets. But is it enough to be part of a renewable and better distributed energy network?
In 2021, energy prices in EU countries increased by an average of 25% due to the COVID-19 crisis and CO₂ trading. The Russian invasion of Ukraine in 2022 has further affected energy markets, leading to further increases in energy prices and strong concerns about the European Union’s ability to secure its energy supply.
Gas, in the spotlight
Gas distribution could be considered the main problem, because it is increasing the price of electricity to a figure never recorded in the European Union. In fact, it has reached (surprisingly) increases of up to 54% in just four months. The marginalist electricity market claims that the global price of energy is determined by the increase in the price of technology. A fact that causes, during peak consumption times, gas to be included in this package of technologies. Added to all this is that, right now, gas is not cheap, because it does not come from Russia, it comes from far away, and uses polluting techniques (such as fracking ) to be extracted. To put it simply, it could be said that if the European Union imports expensive gas, it produces even more expensive electricity.
So how can this problem be solved? Currently, tax relief packages have been put in place, which is a temporary measure. But, apart from that, what is being proposed is a classic economic approach: reduce consumption and increase supply . In other words, ask citizens to be more efficient and increase local energy production .
The energy of the future is clean, local and distributed
Energy production is linked to the energy transition, so it would not make sense today to think about building large gas, coal or nuclear power plants again. The renewable energy of the future is clean, local and distributed . Therefore, the electricity grid must be fed by other unmanageable energy plants, such as wind or solar. It seems complicated to control, and in fact it is. But the important question is: Will we be able to act quickly enough to produce so much energy? Unfortunately, the odds are stacked against the EU, since the deployment of renewables is affected by two other crises: the one related to the shortage of raw materials, and the one referring to the lack of trained installers. It is therefore important to plan and use these resources appropriately.
In this context, the most logical solution is energy efficiency, because it is the most affordable way to save money and energy. It is always important to remember that the least polluting energy is the energy that is not used . Here are some tips in this direction so that users can save at home:
- If you have a dynamic rate, change your energy usage to the off-peak rate.
- Place a programmer on the electric boiler to take advantage of solar energy or the off-peak rate.
- Increase the water temperature when prices are low or when the home’s photovoltaic system produces more energy than is used in the home.
- Consider the thermal inertia of the building you live in. You can heat/cool during low-rate hours to avoid higher costs.
- Consider the weather forecast for the area to find out about local energy production.
- Store energy in the electric vehicle for later use.
- Insulate the house or replace the old boiler with a heat pump.
Did you know these tips? Are they difficult to follow due to the characteristics of your home? And, most importantly: Would this approach be enough to improve the prices we pay for electricity?
The answer is no. These tips are not enough. If they were, we probably wouldn’t be writing this article. As we noted earlier, the electricity market does not depend on the amount of energy used. In fact, and more importantly, it depends on the moment in which the energy is used. So why should we save energy when we have excess wind production at night that we could be storing? Or, what’s the point of producing a lot of solar energy if we’re not at home to use it?
The paradigm is changing and we are moving from centrally managed fossil fuel-based technologies to unmanageable distributed energy resources (DER). The first scheme was designed to meet all consumer needs regardless of their environmental impact. The second, on the other hand, is designed to maximize the use of renewable energies that are also produced locally. It may seem complicated, but it’s time to adapt, for the good of the planet!
Demand Response (DR) and Flexibility
And this is where two new concepts appear: Demand Response (DR) and Flexibility . Two concepts that go beyond energy efficiency or production. Two concepts to which the element “time” is added, which is introduced as a new dimension to take into account.
Could we imagine applying all the advice described above, but in an automatic and planned way ? Or, better yet, getting paid or getting some benefit when we carry them out at home? Believe it or not, this is the future .
Demand Response allows users to automate and optimize the amount and time of use (TOU) of their energy. For example, the use of heating or appliances can be optimized using a simple and inexpensive controller, such as a Raspberry Pi . This would achieve the best price, as well as the use of the maximum amount of renewable energy possible and the decarbonization of the electricity grid. In addition, a new advantage is created for residential users. An advantage that, until now, was only available to industrial customers: flexibility . This means that a residential user could use or produce energy taking into account the needs of the electricity market or the grid. A new concept, good for the environment and very profitable.
So, why build more high-voltage power lines if we can sell our solar energy directly to our neighbor? Why not automatically charge our electric car when the network is overloaded? Why not help improve the forecasting of energy consumption? All this would save a lot of money for stakeholders , agents who, moreover, are willing to pay for this change. With flexibility, users would save and earn money without losing control of their consumption or comfort. And that is big business.
And who controls the Demand Response system?
Here one of the most important questions arises: Who controls this Demand Response ? Not only would private companies have control, but also the users. How? Through energy communities or cooperatives, thus becoming new agents of the “aggregator” market (remember this concept, as you will hear about it in the future). In this way, the system would be user-centered and we could talk about an inclusive model.
In conclusion, it is safe to say that users will hear about Demand Response and Flexibility . In fact, they should become familiar with these concepts and see them as a great opportunity to ensure better electricity prices, as well as a better way to produce local and clean energy . But all this will only be achieved through innovative solutions focused on something more than the traditional approaches of using and producing. Time, as always, is gold.
