Can you tell me a bit about yourself and the company.
Absolutely. So, I am trained as a physicist, first in Vienna and at CERN. I did particle physics and AI. I started off being partly tech and partly sales, starting with cold calling to sell merchandise, clothing products. Then I built a data company in Berlin, which dealt with supply chain data and then started Podero around three years ago. We write software for utilities so they can tap into device flexibility to retain their customers better, to earn trading revenues, to reduce the purchasing cost of energy. The utility integrates the software into their own user interface, into their own billing system and trading system. Through this, they can offer products which can out-compete Octopus when it comes to device flexibility, enabling savings for customers.
Do you think the Warm Homes Plan is realistic or too ambitious?
It depends. In the past, across Europe, we’ve seen that these policies start and then often they’re cancelled when the government changes. This causes quite a bit of turbulence in the markets, but overall, you notice that these policies do actually drive installations and accomplish the installation goal. Now, do they accomplish the goal of cheaper prices and a more reliable grid? That is a different question, but they are actually beneficial, the subsidies generally work I would say.
Also, once you have a critical base, a critical number of installers who can install heat pumps well, they can sell solar well and the installation quality rises. There was an article in The Times recently that claimed heat pumps are more difficult and more expensive than gas boilers. That is true if you install them incorrectly, but if you install them correctly, of course they then work. They work in Northern Norway at minus 30 degrees Celsius and they work at plus 40 degrees as well to cool a house with passive cooling.
The Tories have said that the plan will saddle households with high ongoing running costs. Do they have a point?
This is nuanced. If we now install 3,000,000 heat pumps, and we can talk about inverters later on, those heat pumps would run at the time. It’s like if you say, “Well, I’m going to subsidise cars” and then everybody will buy a car and then the highway will be congested. Now, if you say “Well, I’ll subsidise the car, but I’ll also make it so there’s a highway toll”, and the highway toll is much cheaper at night than during the day, then, maybe, you can incentivise some people to drive at a time when it’s not so congested.
Of course, with driving, you have to be physically present, but if you do the same with an automatic system, like Podero does, and predominantly when power prices are low, then you spread out the energy consumption through the whole fleet of devices across the day. This leads to less grid congestion and also less cost. So, it depends how you use them.
Now, of course, with solar, you have the opposite problem. When there is high solar production, there is a traffic jam not towards the houses, meaning everybody wants to use power at the same time, but a traffic jam away from houses. This is where the analogy breaks a bit - maybe a water pipe to and from the house is more helpful as an analogy. Due to overproduction/low demand, prices are often very low or even negative.
So, what can be done? It is at those times that we have to turn on consumers such as EVs, chargers, and heat pumps, or of course store the energy in batteries. This reduces the traffic jam, and the problem can be circumvented.
It took two years for the details of the plan to be finalised. What does this say about the prospects of the plan for success or failure?
This is hard to know, it’s a question that is very difficult for me to answer. I would say that I think people are often very worried about the unintended consequences of their plans and whether there is a way to misuse it. This might be a reason, but it’s difficult for me to comment on, because it’s not a technical question.
When the Government mentions solar in the plan, does it mean solar thermal panels or solar PV powering heating devices?
So far as I understand, it is mostly for rooftop solar, and of course that can be used across the energy market. This is like the stock market in that when you produce energy you sell it to the wholesale market and any participant in the system can pick up that power from the market. In a way, you’re always adding to the market to some extent. Even when we enable utilities to trade, we basically trade on low prices that are caused by a lot of solar, a lot of wind, or high prices which are caused by a lot of other people using power, or there would be no solar and wind, with the system running predominantly gas and coal. These effects of more solar are intrinsically included in the wholesale energy price, but that’s just one price curve. As you use them intelligently, you can install more solar and expect that a lot of it will go to heating in the times when you need heating.
Many people have concerns about heat pumps, including a perceived lack of suitability for older properties and initial cost. Are these concerns realistic and if so, how can they be resolved?
I think it is good to look at where heat pumps have been successful. Sweden is sometimes a difficult market because heat pumps have been there for such a long time. There’s a lot of air-to-air heating, so no radiators but air heating. But in Austria, where it gets quite cold, the initial heat pump installations were lacklustre fifteen years ago, where the piping was incorrect or just the setting on the heat pump was wrong, and then the heat pump constantly uses the auxiliary power unit, which uses three or four times the power than the regular heat pump in regular conditions, and then it’s very expensive. Some insulation helps, but once you have underfloor heating, then it gets extremely efficient.
For newbuilds, it is much better than a gas boiler. For all heating, it depends a bit on the household, but in countries like Sweden, which has, I think, 42 percent heat pumps, it works in all building types. It also down to the learning rate of the installer as well. We actually work with E.on UK on energy-as-a-service, where they have installed the partners that install the devices. With the first one or two, there’s a learning rate among installers. Once they have mastered the new energy installations, when they switch from gas to heat pumps, then the systems they install are efficient.
How effective will batteries be in complementing solar and heat pumps?
Battery prices have been falling for decades, but now we’re seeing them fall to a level where it makes sense for consumers to buy them at scale. The more green energy we have in the system, the more you can benefit from having batteries. That means the price is always high and the grid is congested in the evening. If you have a battery, you can circumvent that. It’s like the battery is taking the country road instead of the motorway, you have a replacement that allows you to drive through an area quickly, meaning that you can use power cheaply from the battery. So, the more houses we can equip, the more there is a buffer against congestion. The cool thing is that when you add a heat pump, an EV, and you also have a household battery, you add this localised buffer, so that not even the local grid is congested, nor the large national transmission grid. Batteries are the perfect buffer. It matters that they are controlled intelligently, which is really when a consumer has the most cost benefits. That is something that is becoming a vital part of the grid now.
Your main concerns seem to be around smart devices and how to reduce strain on the grid, driving down energy bills. How can these smart devices be implemented to shift demand and what kind of tools are we talking about? Are there any signs that the government is considering the use of these, and if not, why not?
I guess you can think of these smart energy systems like personal energy conservation. Essentially, you have this robot adviser who helps you to automatically use energy better. The idea is that the system must be automatic, because the consumer has a limited amount of interest in energy, except for the energy bill, which is very interesting to consumers, while the other aspects are not so interesting. Therefore, the system must be simple to understand and abstract the complexity the whole system. Nobody wants to be educated in detail on why a particular action increases the power price by 2 pence. That is too much information.
So, what we essentially do is, we say, well, we have a very simple system and you can connect your device via an email and password. So, you log in, like you would with Facebook or Google and then the device is connected. We monitor it and we send steering commands, like “charge now” or “discharge now” or “heat now”, or “try to avoid heating if you can over the next one or two hours”. Those signals enter the device and this allows the utility to trade in the markets, save money themselves and send the savings back to the consumer as a form of cashback. The simplest way is to say to the customer, “connect your device and you get £10 a month back”. The customer then doesn’t have to think about it, they don’t have to think about how they save £9.95 a month, you just say £10 and that’s it. It’s much easier for the customer to understand.
This helps the utility because suddenly there is a product that is differentiated from the competition, especially with Octopus being so strong in the UK. The more utilities see that there is something to be gained by helping the customer in a smart way, the better, and the nice thing is that the utilities don’t actually lose when they present these offerings. They are not paying for the savings of the customer, they are earning those savings on the markets and just forwarding it, maybe keeping some percentage of it. The utility can do this profitably, and from a government perspective, everything that helps utilities to trade with these smart devices to liberalise markets is beneficial for the end customer, as they save money for the utility by improving their offering while also driving their margins, and the government then is less concerned about grid costs. When you drive down these operational costs, then you have to use less subsidies in the long term, which of course saves the government money as well.
What are your recommendations? And what are you doing to drive this forward and make the Warm Homes Plan more popular and acceptable?
What we’ve learned across Europe, regarding what works with these subsidies, is that they need to be easy to understand. They need to be consistent, because homeowners plan for the longer term. If the subsidies change too much, then they erode trust and then installers will not actually change their offers. Consistency is key. It is often good to have a period of time where most consumers can benefit and where it’s not like a lottery system, where you don’t know what you’re getting. It needs to be a certain outcome on which consumers can make reasonable financial decision. You can do this as a ‘back of the napkin’ calculation. So my heat pump costs £5,000, the government gives me, say, £2,000.
I know this because it has worked for three of my friends. I know the installer supports this and that is part of the scheme. I don’t know the exact price, but I know that it is key for it to be simple to understand and consistent. If that can be accomplished for a couple of years, then you can really see installations pick up, business adapting and the industry shifting to that mode of operation. This then makes it a default option, which also makes it cheaper and reduces the need for subsidies. Everything that is too hectic and jumpy will drive business away in the end.
Is there anything I haven't mentioned or extra things you want to say?
I guess that there’s a huge opportunity to have funding at scale, but it needs to be used correctly. I think the core benefit is that consumers will now be starting to move towards these systems and industry will accelerate. It is important that utilities offer the right tools so they can actually capitalise on the subsidies. If a utility plays its cards well, it can benefit by tracking customers and those customers can suddenly use three to five times the power they did before. It’s much more lucrative and if you trade with the power correctly you can benefit massively and improve your margins.
It’s now time to play the hand well.
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