What Is The Energy Aggregator Platform?

What is an Energy Aggregator?

An energy aggregator is a company that brings together multiple small-scale energy resources, such as solar panels, wind turbines, and battery storage systems, to create a combined flexible resource that can participate in energy and grid services markets (1). The main role of an aggregator is to aggregate the capacity of many distributed energy resources (DERs) and create a single point of access to sell services into wholesale energy markets (2).

By aggregating hundreds or thousands of DERs into a single portfolio, aggregators are able to create a sizeable resource that meets minimum capacity requirements to participate in wholesale markets. Whereas an individual home solar and battery system may only provide a few kilowatts of flexible capacity, an aggregator can combine thousands of systems to offer megawatts of energy and grid services (2). This model benefits both individual DER owners who gain access to additional revenue streams and the grid which sees greater flexibility and reliability.

Sources:

(1) https://energy5.com/understanding-the-role-of-energy-aggregators-in-demand-response-for-industrial-consumers

(2) https://www.evolveonline.tech/about-us/what-is-an-energy-aggregator/

History and Origins

Energy aggregators first emerged in the late 1990s as part of the deregulation and opening of energy markets in many countries. As consumers gained the ability to choose their energy supplier, the energy aggregator model was created to help consolidate and simplify this process. The UK was one of the first countries to deregulate its energy market, which led to some of the earliest energy aggregator companies being founded there in the late 90s.

The basic idea behind energy aggregators is that they can pool together buying power from thousands of customers to get better rates from energy suppliers. By acting as an intermediary between customers and suppliers, aggregators can negotiate cheaper prices than individual households could get. This model depends on deregulated energy markets that allow customers to shop for energy and easily switch suppliers.

Some of the pioneering companies in the energy aggregator space included SimplySwitch, Confused.com, and MoneySuperMarket in the UK. In the 2000s and 2010s, many more energy aggregators emerged around the world in deregulated markets like the US, Australia, and parts of Europe. The internet and price comparison websites also enabled these businesses to grow rapidly and reach wider audiences of consumers.

So in summary, energy aggregators emerged in the late 1990s alongside energy market deregulation, mainly in the UK at first. The model then expanded globally throughout the 2000s as more markets opened up to competition and the internet enabled simpler energy supplier switching.

How Energy Aggregators Work

Energy aggregators act as intermediaries between energy producers, consumers, and the grid. Their goal is to optimize the production and usage of energy across their portfolio. Energy aggregators collect real-time data from IoT devices, smart meters, solar panels, EV charging stations, and other distributed energy resources (https://energy5.com/the-role-of-energy-aggregators-in-integrating-energy-efficiency-measures-into-demand-response-strategies). Using this data and predictive algorithms, they forecast energy supply and demand across their network.

When an imbalance occurs between supply and demand, the aggregator can remotely adjust assets to balance the system. For example, they may cue EV charging stations to slow down charging or shift usage to off-peak hours. Or they may cue industrial plants to temporarily reduce non-essential energy usage. This demand flexibility allows the aggregator to reduce peak loads, avoid costly power outages, integrate renewable energy, and maximize grid efficiency.

In exchange, energy consumers receive compensation through bill credits or other incentives structured by the aggregator. By aggregating many small flexible loads into one controllable virtual power plant, the aggregator creates value for energy producers, consumers, and the grid. Their technology and business model helps drive the transition to a more decentralized, sustainable energy system.

Benefits for Consumers

Energy aggregators offer several key benefits for consumers, particularly relating to cost savings, convenience, and access to better energy deals.

The main benefit of using an energy aggregator is the potential for lower electricity and gas bills. By combining many customers into one large buying group, aggregators can negotiate cheaper rates directly with energy suppliers [1]. This bulk purchasing power means they can secure discounts that individual households may not be able to obtain. According to EnergyRates.ca, aggregated rates can be 5-15% cheaper than the utility’s standard offer [2].

Another advantage for consumers is convenience. Once signed up to an aggregator, everything is handled for you – they find competitive plans, switch you over automatically, and provide ongoing account management. This saves individuals the time and hassle of having to shop around for better deals themselves.

In addition to cost savings, aggregators open up access to unique energy offers that households may not find independently. For example, some aggregators negotiate deals for 100% renewable electricity plans at competitive rates. By leveraging their collective negotiating power, they can secure green energy options that appeal to environmentally-conscious consumers [3].

Criticisms and Controversies

Energy aggregation comparison sites have faced some criticisms over the years. One of the main issues is around transparency. Some consumer advocates have accused comparison sites of not showing the full energy market and available plans when making recommendations.

This means customers may not be getting the absolute cheapest rate if certain providers are left out of the search. There is also criticism around commissions and lack of disclosure. Energy providers pay a commission to comparison sites for each new customer referred, but the amount is not always clearly disclosed.

Consumer groups argue these commissions create a conflict of interest, where sites recommend providers that pay higher commissions rather than the cheapest rates for customers. There are also concerns around overly simplistic comparisons that don’t account for differences in contract terms, energy sources, and other services.

According to a 2021 MIT report, some sites provide “incomplete information about services, rates, and risks” to maximize commissions. More transparency around market coverage, commissions, and provider partnerships has been called for.

Major Energy Aggregator Companies

There are several leading energy aggregator companies operating in the market today. Here are profiles of some of the major players:

Constellation Energy is one of the largest competitive energy suppliers in the U.S., providing power and natural gas to over 2.5 million residential, public sector and business customers across the country. They leverage bulk purchasing power to offer competitive rates to customers. Constellation is a subsidiary of Exelon Corporation, one of the biggest utility companies in the country (https://diversegy.com/top-10-energy-companies-in-the-usa/).

NRG Energy is another major energy supplier and the largest independent power producer in the U.S. They provide electricity and natural gas services to over 3 million residential and business customers. NRG utilizes an innovative distributed generation strategy and has invested heavily in renewable energy projects (https://diversegy.com/top-10-energy-companies-in-the-usa/).

EDF Energy is one of the top energy firms in Europe and a leading electricity company in the UK. They supply gas and electricity to over 5 million business and residential customers. EDF Group, their parent company, is the largest producer of electricity in Europe and operates nuclear power plants and renewable energy projects (https://diversegy.com/top-10-energy-companies-in-the-usa/).

ENGIE is a French multinational electric utility company with operations in over 70 countries globally. They service nearly 11 million customers worldwide, providing power generation, natural gas supply and energy efficiency services. ENGIE is also one of the world’s largest independent power producers, with expertise across renewables and other technologies.

Regulation and Oversight

Energy aggregator platforms are regulated by various government bodies to ensure fair market practices and consumer protection. The main regulatory principles for aggregators include:

Relevant regulatory bodies include:

• The Federal Energy Regulatory Commission (FERC) in the United States oversees interstate electricity sales, wholesale electric rates, hydroelectric licensing, and other aspects of the energy industry. FERC Order 2222 enables aggregators to participate in wholesale energy markets.
• The Office of Gas and Electricity Markets (Ofgem) is the industry regulator in the United Kingdom. Ofgem requires aggregators to obtain a license for trading energy.
• The European Union Agency for the Cooperation of Energy Regulators (ACER) provides recommendations and guidance on implementing EU legislation for electricity markets across Europe. This includes rules around the roles and responsibilities of aggregators.

National and state/provincial regulators also oversee retail energy services and consumer protections relevant to aggregators in their jurisdictions. Ongoing policy discussions around aggregator business models, market integration, data access, and consumer consent continue to shape regulations in many areas. (Kerscher, 2022)

Trends and Innovations

The energy aggregation platform market is rapidly evolving as new technologies and business models emerge. Some key trends shaping the industry include:

New business models like energy-as-a-service allow customers to pay for energy services rather than kilowatt-hours. Companies like GridPoint offer energy management as a service by installing smart devices in homes and optimizing energy use.

Integration of distributed energy resources like solar, storage, electric vehicles, and flexible loads through virtual power plants and microgrids. Companies like OhmConnect and Leap operate VPPs to aggregate and optimize distributed assets.

Blockchain integration for decentralized energy markets and peer-to-peer energy trading. Startups like Power Ledger and WePower are using blockchain to enable direct energy transactions between producers and consumers.

Growth of transactive energy systems where devices can automatically respond to signals and optimize the grid. Projects by LO3 Energy and others demonstrate the potential of automated, transaction-based grid coordination.

Adoption Statistics

The number of consumers using energy aggregators has been steadily increasing over the past decade. In the United States, aggregator companies have garnered over 10 million customers as of 2021, up from just a few hundred thousand in 2010. Many key markets in Europe have seen similar growth trajectories. In the UK for example, over 8 million households now use an energy aggregator for their gas and electricity needs, compared to only 2 million households in 2015.

Industry reports indicate the total global customer base for energy aggregators now exceeds 75 million households worldwide. Developing markets are contributing significantly to growth, with over 15 million new customers added in India and South America since 2019. Experts predict the total aggregator customer base could reach 150 million households by 2025 as more consumers shift away from traditional utility providers. This rapid uptake demonstrates these platforms are gaining mainstream consumer adoption across many key markets globally.

Future Outlook

The role of energy aggregators is expected to grow significantly in the coming years as the energy landscape shifts towards more decentralized and renewable sources. According to a report by Capgemini, aggregators will play a vital role in balancing supply and demand in the future energy system by pooling distributed energy resources from prosumers and using AI to optimize their usage [1]. They predict aggregators will help manage the intermittency challenges of renewable energy and enable greater grid flexibility.

Aggregators are also likely to play a key role in enabling peer-to-peer energy trading and decentralizing the grid. A study found that energy aggregator platforms can optimize decentralized renewable generation, storage, and flexible demand to reduce costs and emissions [2]. As a result, aggregators may shift power from traditional utilities towards prosumers and communities.

However, aggregators will need to overcome regulatory challenges as their role expands. Clear standards, policies, and market rules will need to be established to enable aggregators to access distributed resources and provide grid services at scale. The future success of aggregators will depend on addressing these policy and regulatory barriers.