Four market developments that highlight the importance of an adaptable HEMS

In the orchestra of HEMS, the conductor directs the performance of different musicians, i.e. connected assets. A HEMS ensures that everything is synced and harmonized, creating the best “music” possible. In this case, that music can be anything from self-sufficiency optimization to time-of-use tariffs to imbalance markets. 

As the number of installed HEMSs in Europe is expected to grow to 4 million by 2026, now is the perfect time to establish a cohesive orchestra with a solid foundation: a modular platform. Read on to learn more about specific use cases where HEMS can orchestrate beautiful symphonies to match every taste.

Local gateway

A secure, offline-ready local gateway, such as the gridBox, is a crucial component of a HEMS. It allows fast responses and incorporates a rule-based energy management system (EMS) alongside cost-efficient cloud communication. Robust encryption and strong authentication processes between the local gateway and the edge connector ensures high security standards are constantly maintained. Additionally, the gateway provides offline functionality (which ensures robust operation even in the case of internet outages), fast response times (crucial for more complex use cases like explicit energy flexibility services), more widespread interoperability to different manufacturers and a local connection to the fuse to enable features like fuse protection, either in households or at charging sites. 

Cloud energy optimization

As a complementary addition to the local gateway, energy optimization in the cloud of a HEMS setup allows the implementation of complex algorithms. It acts as the “backbone” infrastructure that handles data storage and provides both back- and frontend functionalities.  

Adding modules to this HEMS foundation opens up additional functionalities. This can then be used to adapt your HEMS solution to the varying requirements of different markets.

1. The Netherlands: From net metering to imbalance markets

The Dutch energy market is primarily known for its unprecedented ramp-up of photovoltaic (PV) systems in private households. One out of three rooftops in the Netherlands is furnished with solar panels, which creates great potential for HEMS solutions. In 2023, the country added 4.5 GW of solar capacity, making its cumulative capacity exceed 20 GW – one of the highest capacities per capita in Europe.

The abolishment of the net metering scheme, “Salderingsregeling”, in 2027 has been long discussed and the phase out timeline has been continuously pushed back and forth. Due to political indecisiveness and the high burdens (i.e., costs) on the grid level, all major Dutch energy utilities started to impose feed-in penalties as a countermeasure to uncontrolled surplus feed-in. With those penalties and the heavily anticipated phase out of the netting scheme, it is clear that local self consumption plus smart curtailment will be of central importance to optimize usage as well as individual household energy bills and the entire Dutch energy ecosystem overall. 

When net metering ends (and even before), Dutch residents can seize cost-saving and energy-efficient opportunities by using a HEMS. They can also equip their HEMS solution with additional, more advanced features that both account for these kinds of regulatory changes and allow households to profit from them by unlocking further potential. Imbalance market optimization allows Balancing Service Providers (BSP) to enhance their portfolio by aggregating the flexibility of residential distributed energy resources (DERs) and counteracting an observed imbalance. This not only ensures a BSP’s balancing requirement is fulfilled but also contributes to a more resilient and efficient energy system, while also opening up new value streams for energy companies.

2. Italy: Position yourself in an open market

Italy’s share of renewable energy in the overall electricity market is nearly 34.5% of the country’s total energy consumption. And, with the southern European country’s recent switch from a “closed” energy market to an “open” one, energy players have an even greater reason to position themselves more competitively in the Italian market because an open market (sometimes called a “free” market) permits consumers choose offers from competing power and gas companies. By choosing the offer, the consumer automatically switches to the open market. Customers that choose to not participate in the open concept will transition to a gradual protection service that is defined by regulatory authorities. 

With this switch, millions of customers will need new energy suppliers. Competition will increase significantly as service providers will be eager to attract new customers by offering the most attractive incentives. Thus, it is important for energy players to stand out and offer a holistic, user-friendly and future-proof solution, such as a HEMS. 

By opting to increase cost-efficiency in a HEMS solution with a Tariff Timer module, users can minimize electricity costs by holistically controlling flexible energy assets based on market price signals. This is of particular interest to the Italian market, which recorded the highest energy prices in Europe in June 2024 – even topping Germany for most of the month except for one day when the two countries had equally high prices. An EMS that incorporates a time-of-use tariff allows energy players to act on current market prices to keep both their own and consumers’ electricity costs to a minimum. This way, energy players are able to offer more flexible pricing options that improve grid stability and amplify customer satisfaction in an ever-more competitive market. 

3. Sweden: Fluctuating prices and FCR

With one of Europe’s highest share of renewables in final energy consumption, Sweden is a highly lucrative market for renewable energy players. An increasingly crucial offering in Sweden's energy landscape is Frequency Containment Reserve (FCR), as it helps balance electricity production and consumption across the country. 

In late spring and early summer, the Frequency Containment Reserve for Disturbances (FCR-D) market in Sweden experiences occasional periods of high prices. To counteract this and adapt to these swift changes, a HEMS that allows companies to tap into aggregated residential flexibility for FCR-D is particularly beneficial. While high prices are a natural byproduct of Sweden's production landscape and grid design, a flexibility module can provide system-wide flexibility and overall reduced costs. 

Likewise, as of February 1, 2024, FCR markets will transition to marginal pricing. This change means that all accepted bids will be paid according to the highest accepted bid price, rather than each bid's individual price. The FCR capacity will be procured through two supplementary auctions each day, resulting in two different marginal prices per product and hour. With this marginal pricing, the cost of electricity can fluctuate based on the highest accepted bid price in the market. Based on the day-of pricing, a HEMS can help households manage their energy in a cost-efficient manner.

Energy players that participate in this market need to contribute to grid stability and reliability by mitigating imbalances during peak demand or supply fluctuations. Due to the intermittent nature of FCR-D, using pooled residential battery capacity to support FCR-D services can ensure optimal usage of energy and maximize cost-saving effects during peak price periods for households. 

4. Germany: §14a for emergency grid control

Paragraph §14a of the Energy Industry Act (EnWG) came into effect in Germany in January 2024. The new regulation requires grid operators to dim controllable energy-consuming, household assets above 4.2 kW in emergency situations. The reformed paragraph had an immense impact on the German energy market as grid operators are now obliged to manage assets and offer consumers fee reductions when they comply with grid control interventions. Companies are now further incentivized to invest in smart energy management systems to enable seamless holistic integration of signals and, most importantly, provide transparency to end users about when consumption will be dimmed, and even compensate for control interventions by optimizing the use of locally-generated solar power. This is all only possible with an advanced and adaptable HEMS.

Building a HEMS on a modular, future-proof platform thus also enables enhanced grid stability, regulatory compliance and can help energy players to tap into the growing market demand for grid-supportive technologies. This ensures that when future regulatory changes come, such as the mandatory introduction of dynamic tariffs in January 2025, energy providers are ready with the right solution that enables seamless additions of new functions. It all starts with the right foundation.

Why you need a modular platform for your Home Energy Management System  

All parts in the modular platform work together to ensure a reliable and cost-efficient operation, while also enabling customization for energy players depending on the markets where they are active. Going back to our original orchestra conductor metaphor, this is similar to how an ensemble works together to create harmonized rhythm. By opting for this solution, customers can adapt their offerings easily and quickly to different markets and utilize a technology that allows them to scale rapidly, and which grows alongside their business. The combined architecture helps generate value for end customers across different markets and regulatory requirements. 

According to Tobias Mitter, CTO and Managing Director at gridX: “European energy markets vary. What constitutes value in one country doesn't necessarily match the value drivers in another. In order to win market shares across different countries in the energy transition, companies need the right technology that allows them to scale fast in heterogeneous conditions. With our modular platform approach, we provide a solution that enables you to adapt one HEMS product swiftly and simply to each unique use case and the regulatory framework of individual energy markets without the need to develop a specific solution for every country.”