Startups Are Leading the Energy Transition

Investors and commentators celebrated the news that renewable energy-related transactions surpassed $35 billion in the first half of 2018 (as highlighted in Power Transactions and Trends: Q2 2018, published by E&Y). However, the revolutionary changes occurring as the energy transition unfolds would not have advanced without the emergence of a new breed of energy-focused startup, whose arrival delivered new, game-changing business models. 

The newcomers have built businesses around optimizing operational generation assets, managing demand-side energy consumption, and connecting generators directly with consumers while skipping the middle man and beyond. Underlying all these innovations is one core ingredient: data.

Taking a leaf out of the Silicon Valley book, a new generation of founders have designed cloud-based systems that have enabled the complete digitization of the energy ecosystem. In doing so, they have created new ways for consumers, generators, and grid operators to engage with the market. In fact, they have enabled everyone to become a consumer, generator, and distributor of energy.

The following are three new energy models that are galvanizing the market and changing the value of energy assets in the process. 

1. Artificial Intelligence and Asset Optimization

The grid would fall over in minutes if the balance of generation and consumption were not properly managed. Traditionally, this role has been left to traders and large utilities who assess time of day demand, weather conditions, wholesale commodity markets (to assess the price of gas, coal, and carbon allowances). Generators sell their power into the wholesale market at a discount to pay for this balancing service. 
Accessing real-time generation data and employing predictive forecasting companies, such as Climate Connect, can now predict generation of renewable energy assets. Using this data means that power can be accurately sold into the next-day market, improving financial returns for asset owners by up to 20% (as independently reported by Climate Connect). 

Companies such as UK-based Limejump are using digital tools to build virtual power plants (VPPs) by contracting a portfolio of generation and storage capacity that can be traded internally and sent to the wholesale when the price signal is correct. By selling power into the best market at the optimum time the VPP model means asset owners can benefit from higher prices.     

2. Commercial Energy Efficiency

If a company can understand how its commercial facilities are being used in real-time, then they can begin to improve building efficiency and make significant savings. By blending new low cost monitoring technology with the latest in artificial intelligence and cloud computing, energy efficiency can now be automated as part of the general estate management. Companies such as US-based GridPoint and UK-based Shields Energy now help clients make real savings simply by being able to turn out the lights in a room that is not being used to adjust heating and cooling to converse energy without effecting temperatures.  

3. Blockchain

LO3 Energy is a blockchain-based energy company. Its first project in Brooklyn created a peer-to-peer smart grid system that linked local homes with solar panels to other homes that needed power. The project demonstrated that an open ledger could record transactions transparently, decentralize the accounting process, and manage energy with close to zero transaction costs. The company’s model is now being emulated around the world, with a focus on local smart grids.

Data Makes the Difference

Data is the true gamechanger that underpins the current energy transition. It has enabled the market and investors to rethink the value of generation, distribution, and storage. In doing so, it has created new business models and income streams that did not exist until very recently.