Why a local gateway and cloud optimization are the perfect pair

What is cloud-based energy management?

A cloud-based energy management system (EMS) leverages the power of cloud computing to monitor, analyze, and optimize energy usage across various assets and locations. By collecting real-time data from connected devices like smart meters, sensors, and distributed energy resources (DERs), the system uses advanced algorithms and analytics to make informed decisions on energy distribution, consumption, and cost optimization. The cloud enables scalable data processing, centralized control, and remote access, allowing users to manage energy more efficiently and adapt to dynamic market conditions. This system not only enhances operational efficiency and reduces costs but also supports integration with renewable energy sources, ensuring a more sustainable and resilient energy infrastructure.

What is a local gateway?

Whereas a cloud-based solution is a service that is hosted and delivered over the internet, rather than being installed and run locally. For gridX, this is our small, white, square gridBox, that is manually installed in a home, charge park, etc. This gateway monitors and controls energy assets in near real-time, ensuring that they operate efficiently and in sync with the broader energy management strategy. The local gateway handles immediate, rule-based decisions and optimizations, even in the event of an internet outage, by maintaining offline functionality. It acts as the local execution point for directives received from cloud-based systems.

Should you rely on a cloud-only EMS solution?

Again, like with peanut butter and jelly or milk and cookies, you can have one without the other, but there are limitations to having just peanut butter, just milk or, in this case, just the cloud.

Cloud-based solutions are increasingly popular across various industries, including energy management, due to their cost-effectiveness and ease of installation. The cloud eliminates the need for extensive on-site infrastructure, allowing individuals to sidestep the high upfront costs associated with local gateways and installation. A cloud EMS also offers up the advantage of remote accessibility, enabling users to monitor and control energy usage from anywhere, which is particularly beneficial for managing DERs across multiple locations.

However, while the benefits of cloud-based EMS are compelling, relying solely on this solution can introduce limitations, especially when it comes to managing the intricacies of DERs. Without a local gateway, the EMS’s effectiveness can be compromised during network outages, as it depends entirely on internet connectivity for real-time monitoring and control. This dependency can create vulnerabilities, particularly in situations where immediate, localized decision-making is essential. In this blog, we’ll explore why combining a cloud-based solution with a local gateway is crucial for ensuring a robust, reliable and flexible energy management system that can handle the demands of modern energy infrastructure.

The limitations of a cloud-based EMS

Latency and connectivity issues 

As you might have guessed, cloud technology is entirely reliant on an internet connection. If this connection is slow, lagging or glitchy, this will influence the performance of the EMS. And when it comes to managing energy signals, timing is critical as it not only ensures maximum comfort for end users, but also for greater energy flexibility, which is vital to enabling the transition of our energy system to renewable sources.

Limited offline functionality

Just as internet connection lags and glitches can pose a problem with a cloud-based EMS, internet outages are an even greater risk. When using a cloud-based only EMS, users may lose control over their energy assets when the internet goes down and the cloud becomes inaccessible. This could cause energy to then be taken from the grid during costly peak hours or prevent self-generated power from being maximally utilized.

Limit on connected assets

A cloud-only EMS can often only support a limited number of connected assets due to the inherent constraints of cloud-to-cloud communication and the proprietary nature of many Original Equipment Manufacturers’ (OEMs’) cloud platforms (or, in the case of retro-fitting assets from some OEMs, the lack of a cloud platform). These cloud systems are frequently designed to interact primarily with their own devices, which means that integrating and managing assets from multiple manufacturers can be challenging or even impossible. This lack of interoperability restricts the number of different devices that can be connected and controlled through a single EMS, as each OEM may have its own protocols (or interpretation of protocols), interface, data formats and communication standards. Additionally, the dependence on internet connectivity to communicate between the cloud and these assets can exacerbate the latency and reliability issues, further limiting the system’s ability to handle a large and diverse set of devices efficiently. 

Data privacy and security

Transmitting sensitive energy data to the cloud introduces potential risks, such as data breaches and unauthorized access, which can compromise the privacy and security of critical information. These risks are heightened when a cloud-based EMS communicates with energy assets through the cloud interfaces of individual OEMs, leading to extensive data sharing and greater dependencies on third-party systems. 

In contrast, local data processing and storage significantly reduce these vulnerabilities by keeping sensitive data on-site and limiting external access. By integrating assets locally and communicating only with a secure backend, an EMS can maintain tighter control over data, enhancing privacy and security while minimizing the risks associated with cloud-based data transmission. This approach not only protects sensitive information but also ensures a more secure and reliable energy management system.

The benefits of a hybrid EMS

After reading all of this, you might be thinking you should avoid cloud-based EMS solutions all together, but that’s also not an ideal solution because users will miss all of the perks that come with incorporating the cloud, such as remote accessibility, cost-effectiveness, eliminating the need for extensive on-site infrastructure and more.

Instead, the optimal scenario is for a combination of cloud optimization plus and a local gateway. For gridX, this is achieved through our local gateway, the gridBox and the cloud optimization layer on our XENON platform.

Why use a local gateway connection and cloud optimization?

1. Greater integration and multi-asset optimization

A local gateway facilitates more holistic integration by connecting directly to multiple and varied energy assets. This means users can more easily manage a diverse set of devices, such as an EV, PV, heat pump and battery, in one unified system. Furthermore, as the complexity and diversity of energy systems increases, multi-asset optimization is gaining in popularity and the ability to effectively manage and optimize multiple assets simultaneously is becoming essential. Companies across the energy sector are recognizing this trend and are shifting towards solutions that enable comprehensive multi-asset integration and optimization. This approach allows for more efficient energy usage, better load balancing and enhanced grid stability, all of which are crucial as decentralized residential flexibility provides an ever increasing share of the flexibility in our energy systems. 

2. Fast reaction times

A local gateway offers significantly faster reaction times. The gridBox, for example, responds in 100 milliseconds allowing for more immediate adjustments and control, which is beneficial for efficiently managing energy use and responding to dynamic conditions. In contrast, a cloud-only EMS involves several steps that can delay reaction times: information must be sent to the cloud, processed and then a response must be issued. These cumulative delays can add up, making the system less responsive to fluctuating energy supply and demand. This delay can directly impact the end user’s comfort and convenience, influencing their satisfaction and loyalty toward their service provider. In competitive markets, where, for example, multiple players are vying to offer flexibility services, the speed advantage of a local gateway can be a decisive factor.

Moreover, fast reaction times are essential for participating in balancing and flexibility services, which are time sensitive, and swift responses may be mandatory in some instances. For example, in Sweden, pre-qualification for the frequency containment reserve (FCR) market requires that participants can respond within a specific timeframe, often within seconds (more on this in No. 6). A cloud-only EMS, with its inherent delays, may struggle to meet these stringent requirements, limiting its ability to participate in such markets. On the other hand, a local gateway like the gridBox, which optimizes faster than the blink of an eye, offers the necessary speed to compete in balancing and flexibility markets. 

Additionally, a local gateway offers fast and local optimization independently of any market or price signals, like for time of use (ToU) optimization. Which is relevant because for ToU optimization adjustments are sent within short 15-minute intervals. With a gateway connection, if something happens within these 15 minutes, such as a cloud covering the sun, the local connection can optimize for it. This capability is particularly critical as the number of connected assets increases, leading to more data traffic and potential delays in cloud communication. By handling optimizations locally and efficiently, the local gateway ensures that systems can scale effectively, maintaining their responsiveness and reliability as they grow, thus providing a competitive edge in the energy market.

The fast reaction time also acts as a further level of security. For example, when managing a high power load device such as an EV charge, this response time is essential to preventing electrical overloads. With a cloud-to-cloud connection, the response signal has a higher chance of being delayed and thus raises the risk of overloading such a circuit.

3. Secure, offline-ready local gateway

The local gateway, equipped with a rule-based EMS, ensures rapid response times and cost-efficient communication with the cloud, enabling immediate, real-time adjustments that are critical for maintaining energy stability and optimizing performance. With encrypted authentication processes between the gridBox and the edge connector, the system ensures data security, while offline functionality guarantees continuous operation even during connectivity issues. In the case of gridX, our gridBox is also equipped with a flash storage that prevents the loss of data during a power outage.

Unlike a cloud-based only EMS, a local gateway works independently of OEM cloud systems, meaning there is little impact should the OEM’s cloud go down. Likewise, in the case of an entire internet outage, the local connection will continue to run. Depending on the EMS set-up, the offline functionality could go as long as ten days (for the base-level offering).

4. More options for end users

A key advantage a local gateway has over a cloud-only EMS is that it provides end consumers with greater control and flexibility in managing their energy assets. This is because, in a cloud-only EMS, users are dependent on cloud-to-cloud connectivity. As mentioned, this not only creates issues if the internet connectivity is lagging or out, but it is also dependent on the cloud system of the OEMs. For some OEMs, their cloud systems are designed to communicate only with their own devices, making it challenging to integrate and manage multiple assets from different OEMs within the same home. This lack of interoperability can restrict users’ ability to optimize their energy management system effectively.

5. Better marketability

For service providers wanting to market their EMS to end users, a local gateway connection, like the gridBox, gives a tangible device for cloud value. While this may sound trivial, it can often be the detail that “seals the deal” for end users, who both prefer and have greater trust in seeing a physical asset installed in their home. “When you tell end users their EMS is all in the cloud, they can’t see it,” says Marcel Müller, Head of Engineering at gridX. “They therefore don’t have a lot of trust in whether it’s working or not, but seeing a physical asset that they can hold and have mounted in their home – there’s something about that that gives them an extra layer of security.”

This physical connection also presents upselling potential as consumers are more likely to add on additional services or functionalities for a device/brand that is already installed in their home. With a cloud-only EMS, consumers may be more likely to simply cancel their service since it is all handled electronically and could potentially involve little-to-no human interaction. A physical connection requires human interaction to install and uninstall, making customers more likely to want to stick with the brand that is already in their home.

For end consumers, this physical item mounted in their electrical cabinet can also be seen as the core of their smart energy solution, its status light providing assurance that everything is working as it should, minimizing their costs and emissions. For providers that work with gridX, this physical asset (aka the gridBox) can even be branded with an energy provider’s logo, cementing a user’s brand loyalty to their energy solution provider. 

6. Ability to handle advanced use cases and regulatory requirements

As the energy ecosystem becomes more diverse and complex, advanced use cases are arising that require a local, physical connection. For example, Germany’s new regulatory requirement, §14a of the EnGW, obligates end users to have a local connection. In other cases, such as the UK’s G100 export limitation regulation, a local connection isn’t mandatory, but it’s beneficial and will make the end user’s experience more seamless.

Likewise, when implementing the frequency containment reserve (FCR) a local gateway is essential as it provides the rapid and reliable response necessary to maintain grid stability. FCR is a critical service that helps to balance the supply and demand of electricity on the grid by quickly adjusting the output or consumption of connected assets in response to frequency deviations. These deviations can occur due to sudden changes in electricity demand or unexpected outages of power plants. A local gateway enables the fast, automated response required in these situations by directly controlling energy assets like batteries or EV chargers. With response times often needing to be within seconds or even milliseconds, the local gateway’s ability to react quickly and independently of cloud connectivity is crucial. It ensures that any corrective actions, such as increasing or decreasing power usage, are implemented immediately to stabilize the grid frequency and prevent further imbalances that could lead to more severe grid disturbances or blackouts.

Moreover, the local gateway’s capability to operate autonomously, even during internet outages, is particularly important for FCR. In the event of a connectivity issue, a cloud-only system might be unable to respond in time, compromising the effectiveness of frequency containment measures. The local gateway, however, continues to function and execute pre-programmed rules and algorithms to manage frequency deviations in real-time. This ensures that the grid remains stable even when external communications are disrupted. By providing a secure, reliable, and immediate response mechanism, the local gateway plays a critical role in the overall effectiveness of frequency containment reserves, helping to maintain grid stability and prevent widespread power disruptions.

7. Robust and capable cloud optimization

Complementing the immediate control provided by the gridBox local gateway, cloud-based optimization through XENON plays a crucial role in enhancing both real-time and long-term energy management strategies. Again, using the example of time-of-use pricing, the cloud can forecast and take into account energy demand and price fluctuations up to two days in advance. By doing so, it can adjust energy consumption patterns to take advantage of lower rates, helping users save on energy costs while also ensuring that their energy needs are met. Combined with the local gateway’s ability to run offline for an extended period of time, ensures that the entire EMS operates at peak efficiency both in real-time and in the long-term.

Moreover, cloud optimization is particularly relevant for flexibility use cases, where the system must consider and respond to a variety of external variables, such as weather conditions, grid demand and market signals. For instance, in a scenario where grid stability needs to be maintained or where renewable energy generation is highly variable, the cloud can process this information and provide optimized control strategies that balance energy supply and demand in near real-time. 

The physical, local asset future-proofs our solutions for advanced EMS use cases, where response times and complexity are increasing in a more decentralized energy market." – Marcel Müller, Head of Engineering at gridX

Why a local gateway and cloud optimization are the perfect pair

To achieve the ideal energy management solution, integrating a secure, offline-ready local gateway, like the gridBox, with advanced cloud optimization through platforms, like XENON, creates a powerful synergy. And this hybrid EMS set-up gives users the best of both worlds: a local gateway that works on a power level, and cloud optimization that focuses on the energy level. 

With its planning and forecasting, the cloud serves as the backbone of the entire EMS, handling critical infrastructure tasks such as data storage and providing both backend and frontend support. This allows for continuous refinement and optimization of energy management strategies, ensuring that the system operates at peak efficiency not just in the immediate term but also over the long haul. And while the local gateway ensures resilience with its ability to function offline for an extended period of time, the cloud’s predictive capabilities ensure that the EMS is always one step ahead, making proactive adjustments that keep energy systems running smoothly and cost-effectively.

While a cloud-based EMS carries a lot of perks, such as remote access and cost-efficiency, it also has drawbacks, which a local gateway can compensate for, such as operating offline, no cloud OEM interference and a tangible, marketable product. A hybrid EMS is also future-proof as its speed is essential for energy flexibility and advanced use case, and a local connection can be a requirement for many current (and most likely future) regulations, such as Germany’s §14a. 

Many players in the industry are realizing the importance of multi-asset optimization and are now strategically placing local gateways as a core part of their strategy to deliver their customers more benefits in the future. As more and more energy players turn toward this hybrid EMS set-up, those that don’t may soon find themselves with a dwindling customer base.

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