By Jeff Hardy and Madeleine Morris, Grantham Institute, Imperial College, London
Over the past few months we have been undertaking a review of digital energy platforms. This forms part of our review series on the policy and regulatory landscape of smart local energy systems. As we come to the end of this review, we thought we would briefly tantalise with some insights we have gleaned.
Before, we do so, we would like to thank those who responded to our call for evidence and those who have reviewed and improved the report.
First up, it’s important to define what it is we are talking about. In our review, we adopted the definition of digital energy platforms from the Universal Smart Energy Framework:
‘[Platforms are] digital spaces where users can communicate and interact with each other and get (temporary or permanent) access to products, services, or more broadly ‘resources’ provided by peers or organisations.’
The concept of digital platforms is not new; the trend of digitalisation has long been seen across the economy, which has driven the emergence of innovations in many sectors, including mobility (e.g. Uber), travel (e.g. Airbnb) and retail (e.g. eBay). Even in energy, some digital platforms, such as Active Network Management and Home Energy Management Systems, have been active for several years.
So, whilst digital platforms aren’t a new phenomenon in the energy sector, they haven’t yet had the disruptive impact seen in other sectors. This means that the energy sector has the luxury of time to consider the benefits, impacts and means of regulating such platforms.
We are beginning to see more potentially transformative platform business models – such as peer-to-peer energy trading and local flexibility markets – emerge and operate. They are doing so, however, in an unregulated space. This creates a potentially risky situation; energy is, after all, an essential service, so ensuring the safety of the system and its users is crucial. Regulating too soon, however, is likely to stifle innovation and limit opportunities for them to help build a cleaner, more flexible and fairer energy system.
The sector is now in the position where it can learn valuable lessons about the benefits and impacts of digital platforms from others which have already experienced transformation.
Getting the balance right on issues like this is a challenge for policy and regulation. The regulatory approach must become agile and adaptable so that it can keep pace with rapidly evolving technologies and business models, and the new risks (e.g. data privacy and cybersecurity) that come with them. Fortunately, there may be light at the end of the tunnel gleaned from other sectors and countries where there is increasing interest in approaches such as NESTA’s anticipatory regulation or information-based rules, where users are free to act, but are held accountable through data and accumulated reputation.
There is a lot detail and nuance in the final report, which we look forward to sharing with you soon. This will be presented on our website.