Georgia:

Hello, and welcome back to Watt's up with energy, a gridX podcast. This is the third episode of season three, what's up with HEMS, and I am still joined by gridX Head of Growth Services,  Robert van der Meulen.

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Robert:

Welcome back, Robert. Hi, Georgia.

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Georgia:

So we've talked about what HEMS is, its current state here in Europe. So for this episode, let's dive into the future outlook of this market and technology. So to start, in your opinion, what are the most promising future directions for the development of HEMS?

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Robert:

I see two future developments, which I think are super exciting. The first one is what we are going to see is a significant rise of the rollout of distributed energy resources, as we call it, DERs. Not only will the markets for PV, heat pumps, EVs pick up momentum again, but also we see an increase in assets being connected across sectors through an HEMS system.

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And I believe that there's three main drivers behind this shift towards connected systems. That's regulation, the customer demand, and the emergence of strategic partnerships within the HEMS ecosystem. But let me dive deeper into every one of them.

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So what do I mean with regulatory push? What we see is that digital control of multi-asset HEMS and the integration in the energy market is a clear priority of regulators worldwide to enable all the benefits of load shifting for the energy system.

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So take Germany, for instance. Under section 14A, grid operators are allowed to dim decentralized assets during grid congestions, and a HEMS plays a significant role in that. It enables this steering for the grid operator.

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Georgia:

Because that dimming under 14A cannot happen without a HEMS, or it does happen without a HEMS, but the HEMS makes it easier.

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Robert:

Exactly, so it can take into account more than just one asset. It can take into account the PV production that is locally produced, and can all make the dimming effect less impactful for the end customer.

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Georgia:

Okay, yeah.

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Robert:

So there's the second one, besides the regulatory push, I see growing customer demands. Just like, take the smart home space, for example. What customers expect is that all their devices work seamlessly together. And with HEMS, it often starts with simple use cases, like cross-device energy monitoring, basic optimizations. So customers expect things like, hey, charge my EV when the sun is shining. And these are super easy, understandable use cases that customers are more and more asking for right now.

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And finally, as a third main drivers towards more connected devices, I think there is that strategic partnerships are gaining momentum in the HEMS ecosystem, because all players that are involved, like hardware manufacturers, tariff providers, energy service companies, or HEMS players like us, they are more open than ever to collaborate, because what they see is to meet all the future demands, by regulatory, by customer demands, it will be hard to tackle this on their own.

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And at gridX, for instance, we are in discussions currently with a wide range of partners about even joint product development, about joint approach of sales channels, to enable sales channels together.

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And also to share customers and benefit both from them.

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Georgia:

Okay.

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Robert:
So it's an incredibly exciting time. And driven by these factors, we gradually see the HEMS infrastructure being built, starting, of course, in individual homes.

Georgia:

And then you said there are two main directions that you see. So what would the second one be?

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Robert: 

The second one is the more fun part. So once the infrastructure is widely deployed in individual buildings, we'll see entirely, what we will see is entirely new product offerings emerge on top of that. Think about smartphones.

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So when only a few people had smartphones, there were just a few apps, right? Fewer exciting features. But look at your phone now. How many apps do you have? 

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Georgia:

I feel like 500.

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Robert:

Yeah, exactly.

And what I'm convinced of is that the same is true for HEMS. So once we've built this large infrastructure, so many individual homes have HEMS, there will be new opportunities that arise to create value.

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Georgia:

That's true, yeah.

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Robert:

So for example, to name an example, we could aggregate all these individual buildings into a large virtual power plant to serve the energy system. This way we could make the exit from fossil fuel power power plants easier to replace a nuclear power plant, for example.

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And yeah, by dynamically managing these large infrastructure based on price signals, grid signals, et cetera, you can really unlock real value.

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Georgia:

Okay. And then what are the challenges of rolling these out and developing these?

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Robert:

That's a really good question. And let me be honest, I don't think that the technical development of this individual controls is a big challenge. So I wouldn't consider it as a big challenge. A lot of it already works in lab environments or in small setups in the field even. To name a few, just mentioned VPP.

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Georgia:

The Virtual Power Plant.

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Robert: The Virtual Power Plant, exactly. But also bidirectional charging of EVs. But the real question is, how can you really scale it? How does it come into the masses? And for that, you need customers to understand products, the product.

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So, the real question here is, who or which company will be able to take this highly technical world I just talked about, of the energy market, with all these potential value pools, and package that into simple and easy to understand products for the end customer? Easy customer experience. 

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And this is actually super tricky, especially when it comes to electricity, because the majority of people still think electricity comes just out of a socket, right?

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Georgia:

That would be me, yeah.

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Robert:

Exactly. But there is an outlook, right? So we've already seen some cool approaches in the market here. For example, take Octopus' zero bill home, or take 1KOMMA5°’s claim to offer the cheapest electricity of the country in Germany.

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All these products only work if the HEMS infrastructure, which I just talked about, is widespread and fully operational.

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Georgia:

Okay, yeah.

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Robert:

So what I believe is, there will be many products in the future that we can't even think of today. Similar to how smartphones evolved, right? Who would have guessed that you've been controlling your washing machine with your phone? Do you?

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Georgia:

Do I control my washing machine at the moment? No, because my washing machine is like 20 years old, but I wish. I control my lights with my phone.

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Robert:

Oh, I do that as well.

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Georgia:

I love that.

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Robert:

That's pretty cool.

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Robert:
So, but besides this product development, so this very customer-centered approach of product design, I see another major challenge. And this is mostly about how quickly will regulation adopt? How fast can the existing key players in the energy market adjust to this new technology, to this new reality, right? Because they have built over time so many standard processes. They have so many processes in place, and this is for good reason, to ensure stable energy supply.

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Think of the bathtub analogy I gave you last time.

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But how fast can they adapt to these new processes and update them to take advantage of this new technology that we built? That's going to be a major challenge.

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And a prime example for that is the smart meter rollout in Germany. A smart meter is absolutely essential for all future HEMS use cases that support success of the energy transition.

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And yet, the market players are still struggling to move beyond their existing business models and to adopt these new processes.

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Georgia:

Is that why the smart meter rollout in Germany hasn't done as well as it has in like, I think Sweden, it did really well? Maybe Norway?

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Robert:

Sweden, like you can take a lot of European countries. I think Germany is far behind compared to every European country.

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Georgia:

With the smart meter rollout.

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Robert:

With the smart meter rollout, exactly. But to be honest, to be fair, other countries started way earlier. And other countries didn't take, or what Germany does is, they do a lot of regulations on security on the smart meter infrastructure. And this is a super big challenge for players to roll that out.

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Georgia:

Because all I ever hear about is that Germany started the rollout, and the rollout failed. But is the rollout still continuing, or did they just stop it?

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Robert:

No, it is continuing. It's still rising.

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Georgia:

Ah, okay.

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Robert:
We have first hardware in place that is able to be rolled out, which we waited on, for example. And market processes are adopting at the moment, so they have a duty or an obligation to roll smart meters out. And this will be happening over the next years.

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Georgia:

Okay.

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Robert:

But it is still not as fast as it could be.

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Georgia:

Okay, yeah. You said that a lot of use cases already work in the lab. Can you share some real world examples or case studies where HEMS has made a significant impact already in the field?

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Robert:

Oh, absolutely. And I'm happy to share some real world examples of how we created value for end customers and our partners and customers with our XENON platform in different countries.

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I can give you two examples, which I really liked. So in Germany, we've helped our partners' customer to achieve significant cost savings through self-consumption optimization, dynamic price signal controls, and 14A-readiness. And this results in savings above 900 euros.

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Georgia:

That is . . . Annually.

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Robert:

Annually.

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Georgia:

Okay, nice.

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Robert:

And this wasn't, to be honest, this wasn't just due to our technology alone, but it was also because of strategic partnerships that we built with an energy provider, because the energy provider, and I'm coming back to the end customer product design, and with the energy providers, we were able to, in this compilation, to make the savings visible directly on the customer and customer bill. And this really made the benefits tangible for the end customer.

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Georgia:

Nice.

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Robert:

That's one example, and another is in the Netherlands, where there is the so-called imbalanced market. It's a kind of flexibility market.

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And here we manage, here we manage, qualify, and aggregate and desegregate de-central flexibilities from households, from small-scale households. And this allows the end user to participate in the imbalanced market even with their smaller loads.

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Georgia:

Okay.

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Robert:

And working with our partners, in other words, what we achieved in terms of savings is more than 1,500 euros annually. But just participating in with the small-scale load in the imbalanced market. And this is quite a good value, right?

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Georgia::

Yeah, I would love to have 1,500 just like in savings.

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Robert:

Yeah. This reduces your payback time for your assets, right? Tremendously. If you buy a battery for, I don't know, let's say 10K, because it's easy to calculate with that. If you get annually 1,500 euros for that, the payback period is quite short.

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Georgia:

Yeah. That would be very nice.

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Robert:

So these examples highlight the potential of our technology, but also highlight the potential of strategic partnerships that we create, right, in different markets. And this is why I really foster the thinking of the gridX ecosystem.

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Georgia:

Okay. And our solution really pushes energy, flexibility, and value stacking. And so for these to work, HEMS needs to be the foundation. It always kind of makes me think of those circus shows where you have like the strong person at the bottom, and then a bunch of acrobats on the top, kind of branching out and holding on to each other, like they kind of look like a tree. At the end of it. Could you speak to this stacking?

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And my weird analogy is HEMS, the strong person at the base, and if so, does it serve any other purpose than just holding all of the acrobats, or I guess the energy assets up?

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Robert:

That's a good analogy. And I think if you want to put it that way, yes, HEMS is a strong foundation. I talked about infrastructure, and this is basically a strong foundation on which you can build a lot of things on.

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As mentioned earlier, it's all about interoperability between these DERs and about controlling them, and HEMS makes that possible. But you mentioned our value stacking approach, right? So maybe I dive deeper into that. It's going to be a little bit a tech perspective, but I think it makes clear how we think.

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So first, our robust EMS platform XENON is designed in three distinct layers. It's the system and asset integration layer, it's XENON EMS layer, and our new XENON Flex layer.

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Let me start with the first layer, system and asset integration. This is the one where we ensure fundamental compatibility between different DERs, different OEMs, and provide also locally functioning optimization that even works offline. So even if the internet connection is broken, it still works with the basic functions.

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Georgia:

Okay.

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Robert:

And on top of that, we develop our XENON EMS layer. With that, we leverage the cloud to access much more data, something like data like weather forecasts, energy prices, and enabling with that even better optimization. So with cloud connectivity, we can enhance the decision-making of the EMS and optimization in real time much more advanced.

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Georgia:

Okay.

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Robert:

The third layer is our XENON Flex layer, and this is where we aim to take the optimization even a level further, using much more aggregate, accurate forecast to improve system efficiency.

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And but beyond that, our XENON Flex allows to aggregate multiple systems into pools, and then disaggregate control signals down to an individual asset level again.

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We talked about the VPP, right? So the virtual power plant, and this is the example, or taking part of the imbalanced market in the Netherlands, this is exactly what we do with our XENON Flex layer.

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So thanks to that layered approach, we are able to adopt quickly to the unique requirements of different markets and address these associated value pools.

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Georgia:

Okay.

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Robert:

And I think this really sets us apart from the competition, as most of our competitors tend to focus on just one of these layers.

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Georgia:

Okay. In our HEMS Report from this summer, we found that the HEMS market is due to grow 11 fold by the end of the decade. And so as electrification and the use of DERs continues to rise, and if HEMS really does grow 11 fold by 2030, what shifts do you anticipate in the HEMS market dynamics, such as the competition, partnerships, and business models?

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Robert:

Well, as I said, I think it's going to be super dynamic. Given the number of challenges, I think, and I really believe that building strategic partnerships with players in the HEMS ecosystem is the success for everyone here.

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When it comes to competition, at least for the HEMS sector, I'm not talking about the asset, so the DER field, just talking about HEMS here. I still see a largely untapped market, even midterm.

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So it's more like a blue ocean than a red ocean, if you want to, if you like to say that.

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Georgia:
What is a blue ocean versus a red ocean?

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Robert:

A blue ocean is like, ocean where everybody can like move and have a part, and the red ocean is like, okay, you fight for the market shares, right?

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Georgia:
Ah, okay, I thought you were going with 

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Robert: 

No blood involved. 

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Georgia:

There's no of blood involved, okay. Okay, so we're in more of a blue than a red.

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Robert:
There's still a lot of market for everyone in the HEMS market, I guess. And what we'll see is a lot of variety of product approaches, and I think we will see over time which one prevails.

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And you mentioned business models, right?

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I think this will all come down to who can offer the best products to the end customer, and with that, increase customers' willingness to pay. But it is not just about maximizing energy savings, which we love to talk about, but it's also about the overall customer experience. So many value streams from a customer's perspective can be generated behind the scenes.

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For instance, through flex trading in the energy markets, right? But don't tell the customers that you trade flexibility on energy markets.

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For example, in Germany, people don't even buy stocks, right? Because they are afraid of market development. So it comes down to how do you sell the product? What's the product?

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And this is where, 1KOMMA5°, for example, I think they have a clever approach. They just say, you get the cheapest electricity tariff, you pay like, I think it's 15 cents per kilowatt hour.

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And this is something super comparable with their existing power tariff, right? Because it's just super cheap.

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Georgia:

But how are they enabling that? 

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Robert:

It's behind the scenes. In using this flexibility and trading, making their processes more efficient.

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Georgia:

Well, thank you, Robert. So this brings us to the end of our three conversations for this season. Before you go, I was actually just curious, because you obviously have a lot of knowledge, a lot of passion in this area. What would be your favorite thing about either working in energy or working in home energy management systems specifically?

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Robert:

For me, I always wanted to have an impact with my work. And I started as an engineer or studying chemical engineering. And I looked for a place where I, with my work, could have an impact on sustainable development. And I love the energy transition with all its challenges.

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So that's my favorite part. And to work in an environment of people who are eager to do so as well, it's just super motivating.

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Georgia:

Nice. I agree with all of those points. Well, thank you again for joining Watt's up with energy.

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Robert:

Thank you. It's nice to be here.

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Georgia:

If you'd like to learn more about the world of renewable energy or energy management systems, be sure to check out our website, gridx.ai, where we produce regular blogs and glossaries about the subject.

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You can also follow us on LinkedIn, or on Twitter and Instagram @getgridX.