Flexible energy consumption must be increased as part of the energy system – while bearing consumer needs in mind

Demand response appears a reasonable concept, from the viewpoint of both consumers and energy companies. It benefits consumers in the form of comfortable homes, lower costs and positive environmental impacts. The necessary technical prerequisites, such as intelligent energy metering and home automation, are already available in Finland. Nevertheless, we are not taking full advantage of the potential provided by demand response. Why is that? VTT is seeking a solution to this problem through its DyRES project (Dynamic platform for demand RESponse), which we discussed from the viewpoint of consumers in our previous blog post.

Introducing demand response in new area planning

Numerous experiments have been performed in the field of demand response. These typically involve demand response related to either electricity or heating, including individual devices such as electric boilers or room-specific temperature controls. A similar stepwise build-up can be seen in urban development, where the creation of residential areas was previously based on factors such as technical capabilities, cost structure, energy trade that was less open than today, legislation and just a minor emphasis on environmental considerations.

But what if a new urban area was planned as a whole from the early planning stages, instead of being built gradually one fragment at a time? This is now the norm in terms of construction technology, but does energy management still have room for improvement? One example of this approach, familiar to the authors of this blog post, is the Hippos project, a sports and wellness cluster currently under planning in Jyväskylä. At the turn of 2016/2017, we assessed the demand response potential for electricity in this area, in collaboration with Jyväskylä Energy Ltd. Our simulation results showed that energy cost savings of around 15 per cent could be achieved in this area, just by leveraging the demand response for electricity.

Hippos

The Hippos area, which is currently under planning in Jyväskylä, combines significant energy consumption, housing and traffic.

Although the assessment only covered electricity consumption, the energy system of the future would include considerably more, and more flexible, elements than today’s systems. As a result, it seems natural to extend our assessment not only to electricity, but also to heating and, as electric vehicles become more common, to traffic. This will also increase the potential benefits. Regional planning enables interaction between various actors, including matching one actor’s surplus with another’s deficit.

Modelling provides new information on demand response

Demand response is affected by changing external parameters and factors, such as the functioning of the energy market, legislation, integrated sources of energy and the opportunity of consumers to adjust their consumption. These parameters are highly dynamic and interactive. Since real-time use of all this information is virtually impossible without an efficient tool, VTT has developed the DyRES simulation platform that enables the optimal design and implementation of area-specific solutions.

Using this simulation platform, the most extensive work is carried out by the Apros process simulation software, whose applications have expanded in recent years from power plant and nuclear power processes to renewable energy and system assessments. In addition to embedded dynamics, Apros enables the accurate modelling of supply and consumption. Apros’s dynamic simulation model is controlled by an optimisation programme, whose role was aptly summarised by Jukka Aho, CEO of Leanheat, at the Fortum Digitalist Energy Forum in May: ”Why should humans compete with computers and decide on the best algorithm?”

 Numerous parameters form a complex entity that requires a simulation platform such as DyRES, which combines dynamic simulation with optimisation.

By combining two calculation methods – dynamic simulation and optimisation – we can respond much more accurately to practical issues than by using current off-the-shelf tools. Research projects also prefer self-built models (Neves et al. 2016), such as agent-based modelling. Based on this principle, the DyRES simulation platform can be used to model groups of households, devices and equipment via individual consumers making independent decisions.

DyRES simulation platform

The DyRES simulation platform takes account of the operating environment, including legislation, the energy market and weather conditions, as well as consumers’ behaviour and opportunities for flexible response, the increase in small-scale production,
and buildings’ characteristics and life cycles.

From simulation to practice − the consumer lies at the heart of new solution design

VTT participated in the Energy Efficiency 2.0 in Building seminar at Heureka on 22 May 2017. The seminar presentations included the experiences of Salusfin and S-Voima in implementing demand response. Even more importantly, the seminar brought together a comprehensive set of players needed to take demand response, and smart solutions in general, from paper into practice on an increasing scale. In addition to steering mechanisms, this requires input from researchers, constructors and building technology experts.  The seminar’s varied audience was asked what measures were needed to support the implementation of home automation. The result was probably a surprise to some: instead of technical methods, the audience regarded consumer training and communications as the key tools for this.

DyRES poll

The seminar audience regarded training and communications as the key tools in promoting demand response. Other favoured options included influencing building code and introducing usage-based pricing.

The survey results indicate that it is important to understand the whole: demand response as such and as a technology has no absolute value. Instead, its value stems from its role in the energy system and its ability to create added value for the user. For this reason, the DyRES simulation platform not only focuses on demand response, but combines it with decentralised production and the entire energy market – both at building and area level. To take full advantage of this tool’s potential, we need to bear the needs of consumers in mind. A good example of this is the Human Thermal Model (HTM) method developed earlier by VTT for assessing the individual thermal comfort experienced by different user groups. Data obtained from this method can also be used in the DyRES platform. If the consumer’s living comfort improves while peak power energy production output is reduced, consumers will find it rational to participate in demand response, including in the long term. To avoid burdening residents, demand response must be an automatic feature embedded in apartments. If the technology and its supply to customers is simple, its use can be increased through awareness building.

DyRES sign

Instead of technology, the implementation of demand response and other smart energy solutions starts with consumer needs, such as comfortable living, which in turn creates wellbeing. Communication will play a key role in increasing consumer awareness on the use of, and the added value brought by, demand response. The supply of smart solutions to consumers as an integrated part of home energy systems will enable a change in behaviour.

Demand response includes several elements − building technology and automation, regional planning, the use of technology at consumer level − all of which need to be taken into account in order to take full advantage of demand response’s potential. DyRES provides a platform that enables all the pieces to be put together.

Read more:  www.vttresearch.com/services/low-carbon-energy/ 

Elina Hakkarainen VTTElina Hakkarainen, Research Scientist
Twitter: @e_Hakkarainen

Tomi Thomasson VTT

Tomi Thomasson, Research Scientist

Mikko Jegoroff VTTMikko Jegoroff, Research Scientist

Smart codes for future services

Have you seen 2D codes in the market? Have you read them by your mobile phone? Do you read the codes regularly? Have you been interested in the content you are able to find behind the codes?

Smart codes

These are some of the questions we asked from Finnish consumers. And actually, we were not surprised about the answers we got. It was clear that people in Finland are familiar with 2D codes. All the participants had seen the codes for example in the packages, advertisements and tickets. Three out of four had read 2D codes with their smart phones but only 17% said that they read the codes regularly. They had found out that the information behind the codes is boring, usually only a link to the manufacturer’s or service provider’s web page.

New content for the codes

But this is not the case after TagItSmart project! TagItSmart project is part of Horizon 2020 program. In the project, we have altogether 15 partners from Finland, Serbia, United Kingdom, France, Sweden, Romania, Netherlands, Italia, Austria and Spain.

TagItSmart project sets out to redefine the way we think of everyday mass-market objects not normally considered as part of an IoT ecosystem. These new smarter objects will dynamically change their status in response to a variety of factors and be seamlessly tracked during their lifecycle. This will change the way users-to-things interactions are viewed.

Combining the power of functional inks with the pervasiveness of digital (e.g. QR-codes) and electronic (e.g. NFC tags) markers, billions of objects will embed cheap sensing capabilities thus being able to capture new contextual information. Functional inks make it possible for parts of the 2D code to disappear, to appear, or to change colour e.g. after certain time or at certain temperature. These changes in codes enable changing the information content achievable through reading the codes. Beside this, the ubiquitous presence of smartphones with their cameras and NFC readers will create the perfect bridge between everyday users and their objects. This will create a completely new flow of crowdsourced information, which extracted from the objects and enriched with user data, can be exploited by new services.

Where to utilize these smart codes?

In the TagItSmart project, the use of these smart codes has been explained with some concept stories. In the first story, Digital product and recycling, the idea is described by using beer bottles from a local brewery as an example. The consumer in this story has bought a bottle of beer from a local producer and read a unique code from the label on the bottle. The consumer receive useful and entertaining information e.g. about the origin of ingredients, the producer, recycling of the package, and also information if the temperature of the beer is optimal for drinking. By reading the code the consumer is also able to create an interactive connection with the local producer, that makes it possible e.g. to personalize an own drink together with the producer and order the drinks via a digital service.

The second story, Fast moving consumer goods and dynamic pricing, describes a situation in a retail store, where the consumer can easily get information if the best before date of the product is close enough to get a discount. This can be done by LED lights that automatically turn on after a certain time period. While being informative towards the consumer, it also makes the work of the retailer more effective. The retailer can also by reading the codes ensure that the products that arrive to the store, are in good condition after transportation and also the origin of the products. In this story meat products are used as an example, so for example ensuring that the temperature has been correct during transportation is very important for all the stakeholders.

In the third story, Authenticity of the products, a family is on holiday abroad. There, they were able to ensure the authenticity of the medicine and sun classes they purchased by reading the 2D codes from the products in certain lighting conditions. Similar authenticity check could also be done with other products purchased from the internet.

Consumers expect additional value and interactivity

Finnish consumers had a possibility to participate the development work in VTT’s Owela platform (http://owela.fi/) and evaluate and co-develop the concepts. In the study, consumers found all of these concepts interesting. Seventy-nine percent of the participants evaluated it to be interesting to read the codes from local producers’ products and to create an interactive relationship. To utilize the codes in fast moving consumer goods, like meat packages, was in the interest of 55% of the participants. Finnish consumers did not see so much potential in using the codes in cheap products and they were not concerned about the origin and safety of the products. This could have been different in some other country.

In addition, we got lots of information about the advantages of the TagItSmart concepts, and also about consumers’ consernes related to them. First, even if consumers are used to seeing and using 2D codes, they have often been disappointed with the content they can receive by reading the codes. They expect something more – high quality content that offers them additional value. In addition, consumers were also interested in the possibility of interactivity. There were most potential in using codes in unique and/or personalized products, ensuring food safety of the authenticity of the products and also in creationg interactive connection with producers.

Based on this study, consumers were suspicious about if it is too easy to counterfeit the codes, recycling of the tags and also privacy issues related to the novel IoT services. It is essential that the consumers can trust the service and service provider. This issue has a significant role also in TagItSmart project.

This is now our second year in the TagItSmart project. I expect that we are able to have these solutions available in the market after the project. You can follow us in the internet (http://tagitsmart.eu/), on Twitter (@TagItSmart) and LinkedIn (TagItSmart).

Kaisa Vehmas VTT

Kaisa Vehmas
Senior Scientist

Services will take us closer to the circular economy – but what kinds of services switch consumers on?

Maria Antikainen

Maria Antikainen

Anna Aminoff and Outi Kettunen

From the perspective of society in general, there is enormous pressure to transfer from a linear economic model to a circular economy. To generate economic growth, or even to maintain the status quo, we need to move towards a closed loop, where materials are recycled and their value is maintained or even increased. The key issue is the more efficient and smarter use of resources. This is possible through innovative business models and the wise use of technology. Since the circular economy places consumers at the centre, the choices they make and the actions they take will be increasingly important. For this reason, understanding consumers and their behaviour will play a key role in how companies can succeed in developing new business models.

Would you rent a sofa, washing machine or clothes?

Offering services rather than owning products an efficient way of ensuring the recycling of materials and the maintenance of their value. However, the transfer from owning things to buying services is a huge step for consumers. In group discussions arranged as part of the AARRE project, we explored the attitudes of consumers towards various service concepts, whereby commodities such as a sofa, washing machine or clothes were provided as a service. When transferring from selling products to providing them as a service, it is critical to understand how consumers feel about ownership. The discussions revealed that, particularly with respect to objects – such as sofas – connected to key events or to which people become emotionally attached, ownership is important. Different life situations may also have an influence on the kinds of choices people make. For a student, renting a washing machine or sofa may be a way of making life easier.

Consumers may have a very personal attachment to certain technical products, such as cars, while being far less emotionally attached to appliances such as washing machines. In addition, providing such products as a service would enable improved technical features and higher quality. For these reasons, the people who participated in the discussions were more interested in a washing machine than a sofa or clothes as a service. Attractive added value can be offered to consumers by using technology to make machines smart, bringing benefits such as proactive maintenance or more efficient use. Leasing instead of owning can also lower the level of risk for consumers, eliminating the costs due to breakages, for example. Consumers were also interested in eliminating the risk associated with clothes purchases, by leasing.

All three models focused on the group discussions – renting/leasing a sofa, a washing machine or clothes – divided consumers into two groups. Some considered the opportunity very interesting, while others did not, which was summed up very well by one consumer: “I’m not an owner type of person.” The clearest obstacles were doubt that a leasing model could be implemented in a cost-effective manner, or the service acquisition model seeming odd and unnecessary. On the other hand, the clearest benefits associated with leasing were related to higher quality, flexibility, the opportunity to change the product, and lower risk and commitment.

Towards innovative business models

The key issue would be to find the right and most suitable solution for each consumer. Research and practice show that new services are adopted more easily if they have features in common with former services or products and do not require a sudden major change. Changing people’s habits is the key factor when seeking a long-term impact. Major changes in behaviour take time and occur gradually, one step at a time. The group discussions we had with consumers revealed that some are ready to adopt solution-centric service business models, such as buying furniture as a service. On the other hand, some still want to own things, in which case adding a service to the core product will help to close the circular economy loop.

To ensure that circular economy business models spread, we need to face certain facts; for example, not all of us are yet ready to buy services instead of things – particularly if they are provided by another consumer. We therefore need new, innovative business models that take various customer preferences and practices into account. In any case, the journey towards the proliferation of result-centric service business models has already begun.

Headed by VTT, the AARRE project is creating new, user-driven circular economy business activities. This project is a networked research project (2015–2017) being undertaken in partnership with the business sector, with Tekes as the main funder. In addition to VTT, the other research organisations involved include the Finnish Environment Institute (SYKE) and the Consumer Society Research Centre of the University of Helsinki.

Twitter: @AarreResearch

Maria Antikainen, Senior Scientist

Anna Aminoff, Senior Scientist

Outi Kettunen, Senior Scientist

Consumer involvement plays a key role in creating attractive circular economy business models

Maria Antikainen

The dominant linear economic model is coming to its end with non-renewable natural resources dwindling and becoming more expensive. As the current trend continues, the Earth’s carrying capacity will be exceeded five-fold by 2050. We understand the need for change, as demonstrated by the EU’s investment in the related research. In Finland, the circular economy is high on the agenda of both the Government Programme and national research funding programmes.

By ‘circular economy’ we mean a system in which materials are recycled and their value is maintained or even increases. The key issue is the more efficient and smarter use of resources. The circular economy is creating major growth potential for Finnish companies. According to a report by Sitra, such growth potential could even add up to EUR 1.5–2.5 billion per year in Finland (report is in Finnish).

Shift to circular economy still in its infancy

To shift to a circular economy, we need systemic change that impacts on all parts of the related economic system, as well as on the interactions between such parts.  For example, the transition could occur via systemic innovation, in which new, innovative business models are achieved through cooperation between actors.

Traditional business models and boundaries are broken down within a circular economy. As corporate revenue models undergo radical change, companies need to wake up to the need to reform their business operations and value chains.

Much is now expected of consumers: many models require that they embrace radically new practices. Multiple barriers to this exist, such as the desire to own things and the difficulty of changing habits.

Consumer habits can change if people are offered sufficiently cost-effective and easy solutions that meet their needs. Services based on the sharing economy, such as accommodation or car rental from other consumers, car pooling and the buying and selling of second-hand clothes are good examples of innovative models that have been quickly adopted by consumers.

A glance at the business environment and consumers of the future

In addition to the present, we must turn our gaze towards the future circular economy: its business environment and future consumers. What will attractive, global circular economy businesses look like in 2030? And how can interaction between consumers, businesses and other actors be intensified in the future?

Rapid experimentations as a method – The Kalasatama smart grid as a model

The wise use of technology and the transition towards service-based thinking form the basis of the circular economy’s innovative business models. A smart grid has been created at Kalasatama which brings real-time energy consumption data into the pockets of every local resident (article is in Finnish). The rapid experimentations performed at Kalasatama are a prime example of how circulation economy business models should be developed.

Depending on the purpose and objectives, rapid experimentations can be performed based on a number of approaches and methods. The idea behind rapid experimentationsto move quickly from the drawing board to the experiment itself. Analysis of and learning from the information gathered are critical. The advantage of rapid experimentations lies in the fact that tested information is obtained quickly at moderate cost. Rapid, circular economy experimentations mean living for a moment in the future economy and obtaining valuable information on what the best business models will consist of.

New user-driven circular economy business activities being created in AARRE project

We need more rapid experimentations like the one in Kalasatama. Through trial and error, they will take us towards successful business models and accelerate the transition to a circular economy. New, user-driven circular economy business activities are being created under VTT’s leadership through the AARRE project (article is in Finnish). This project is a networked research project (2015–2017) being undertaken in partnership with the business sector, with Tekes as the main funder. In addition to VTT, the other research organisations involved include the Finnish Environment Institute (SYKE) and the Consumer Society Research Centre of the University of Helsinki.

Maria Antikainen, Senior Research Scientist

Anna Aminoff, Senior Research Scientist

Outi Kettunen, Research Scientist

Henna Sundqvist-Andberg, Senior Research Scientist

A discussion of solutions for the circular economy of the future will be held during VTT’s seminar on ‘Foresight and socio-technological change’ on 11 November 2015 in Helsinki: Welcome!