October 27, 2022
Last updated:

From energy monitoring to flexibility marketing: different Home Energy Management System use cases

Philipp Schockenhoff
Account Executive

Just like you can use your phone for anything from texting to navigating, use cases for Home Energy Management Systems (HEMS) also vary widely: you can use a HEMS to simply gain insights into power consumption and generation, or go as far as monetizing the flexibility of a household. In this blog post, we look at the use cases that lie between these two extremes, what circumstances give rise to them and how they benefit consumers.

A closer look at the regulatory and infrastructural differences between European countries revealed that high electricity prices are just one of the many reasons for residential energy management. Therefore, we want to summarize the most common use cases and how they benefit consumers. 

Monitoring of power flows

Energy monitoring: The foundation of any HEMS

You can only improve what you can measure. So not a big surprise that energy monitoring is the starting point for any HEMS. By harnessing the data of smart assets like PV inverters, batteries or EV chargers, service providers are able to digitally track the performance of devices. This opens the door to a whole array of use cases – to name a few:

  • Balancing group management: Real-time data on power consumption and production eases the maintenance of the balance in the grid. Moreover, the granularity of the data enables grid operators to forecast imbalances and prevent them proactively.
  • Diagnostics: Anomalies in load profiles can be detected in real time and alert operators to potential disruptions. This allows them to act on issues before they have grown into bigger problems.
  • Consumer insights: Consumers/prosumers can be provided with deep insights into their energy consumption and production. These insights can be used, for example, to assess the savings potential of new investments. Say a homeowner currently has a PV system but no battery. With the historic production data and electricity prices one can find the most suitable battery capacity and make a pretty accurate forecast on the investment’s payback period.

Self-sufficiency: Maximizing self-consumption

There are many upsides to consuming electricity where it is produced. Primarily, it reduces the demand for power transmission through the public grid. With flexible loads like batteries, electric vehicle (EV) charging points and heat pumps, energy management solutions allow users to make the most of excess solar power and utilize locally-generated power at all times of the day. As a result, consumption of locally-generated electricity is maximized and the strain (feed-in and off-take) on the grid is minimized. 

This self-sufficiency is incentivized in many countries by a spread between retail prices and feed-in remuneration. In Germany, for example, prosumers pay around 50 cent/kWh that they draw from the grid but may receive as little as 6 cent/kWh for power they feed into the grid. 

Fuse Protection: Ensuring capacity is not exceeded

If not managed, heat pumps and EVs can easily increase peak loads of individual households. This growth in peak loads, however, had not been anticipated when most residential dwellings were built. Consequently, the grid connection capacity of many households is insufficient to support those additional loads and leaving those loads unmanaged bears the risk of blowing fuses. 

A HEMS can protect against such overloads by considering the physical constraints and curtailing flexible loads before the capacity is exceeded. Successfully rolling out HEMS that provide such protection will reduce the need for timely and costly grid expansion. With less infrastructure work electric mobility and heating can be ramped up quicker and cheaper.

Optimization on dynamic power prices

Time-of-Use Tariffs: Shifting loads to off-peak hours

Wholesale electricity prices vary widely throughout the day. On the EPEX spot market, for example, the Dutch day-ahead price varied from -8.80€/MWh (2pm) to 294 €/MWh (7pm) within the span of just 5 hours on October 6. Consequently, dynamic electricity tariffs tied to wholesale markets can offer substantial incentives for prosumers to shift their consumption to off-peak hours. 

Consider the aforementioned prices and a Renault Zoe with a 52 kWh Battery. When charging the Zoe during peak hours, the wholesale electricity cost stands at (0.29€ x 52) 15.08€. If the owner charges during off-peak hours, they might even get paid for taking power off the grid (-0.08 x 52) -4.16€ – a difference of 19.24€ in absolute terms, a cost reduction of 127% in relative terms.

This also goes the other way. If feed-in remuneration is tied to wholesale prices, i.e. it varies throughout the day, then consumers can maximize their payout by timing their feed-in. However, few people will be willing to stay on top of electricity prices all day. Consequently, a HEMS that incorporates price signals into its optimization is needed to easily capture this value.

Peak Shaving: Reducing peak loads

Large consumers like factories are already charged for their peak loads. Under this regime, known as capacity tariffs, the grid operator charges a fee per kW of the maximum load in a given period. Say a commercial building usually consumes 100 kW, but once in a while the load jumps to 150 kW. The grid operator will apply a charge to the 150 kW regardless of the usual load of 100 kW.

With the arrival of increasingly larger loads in the residential sector, caused by EVs and heat pumps, grid operators also want to provide incentives for individual households to level their loads by applying capacity tariffs.

To accommodate for such charges, a HEMS needs to consider overall consumption and flexible loads to decide whether loads can be shifted to shave peaks,  for example by pausing EV charging until the cooking is done and the stove is turned off.

Flexibility Marketing: Make your assets make you money

We love repeating things: electricity prices vary throughout the day… a lot. This variance is a reflection of a wide range of underlying causes. A sophisticated HEMS can take advantage of this and provide its owner with revenue from ancillary services to power trading:

  • Ancillary services: Simply put the HEMS offers flexibility to the grid. In case power demand exceeds supply, electricity is fed in. Vice versa, the battery is charged if too much power is in the grid. Grid operators pay large sums to suppliers of balancing power. HEMS could tap into this revenue – provided regulation allows.
  • Intraday trading: Given its insights into consumption and production pattern a HEMS is in a unique position to forecast and provide flexibility. Based on such a forecast flexibility can be traded. When this flexibility is then called upon the HEMS has to translate the call signal into an actual power flow out of/into the grid.

In both cases, however, no individual system will have the magnitude to act on its own. More likely, aggregators will bundle a fleet of HEMS into virtual power plants (VPPs), trade their flexibility and handle pay out to the HEMS owners.

More complexity. More value.

Nokia really “connected people”, as their slogan claimed. The 6310 model provided a phone’s basic functionalities – calling and texting. The big value of connectivity, however, was only unlocked when smartphones arrived. Similarly, monitoring is the basis for any sophisticated HEMS but the big value lies in more complex applications such as shifting loads in response to price signals, reducing peak loads and marketing otherwise unused flexibility.

To provide these sophisticated services, HEMS will need to be compatible with a wide range of DERs, abstract the complexity and hassle away from the user, and be flexible enough to accommodate different, evolving regional and user specific needs.

Our XENON platform provides all the tools to build such a HEMS. We are compatible with devices from 43+ manufacturers, our mobile apps consistently achieve 4+ stars ratings and our modular approach has allowed our partners to build solutions for various customer groups in more than 10 different European markets.

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HEMS: Evolution and how to win the race
As heating, mobility and electricity become increasingly intertwined, the home is becoming the energy hub of the future.
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