We need smarter electricity for our power-hungry future

Hello there,

The phasing out of transition away from fossil fuels is going to cause a big increase in demand for electricity as we increasingly rely on things like electric cars and heat pumps.

How will the electricity grid handle that shift? Today’s startup has some ideas, and it wants to sell them to energy suppliers. Scroll down to read all about OptiSpark.

This is the last PreSeed Now before new year. We’ll be back with more startups very much worthy of your attention from Tuesday 9 January.

– Martin

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You can catch it in person in Manchester, or watch the livestream on LinkedIn.

OptiSpark wants to help energy providers get smarter about heat pumps… and beyond

Using less energy is an obvious way to address the climate emergency, but it’s not always that simple. 

Electric cars might be cheaper to run than petrol or diesel alternatives, but they can do shocking things to your electricity bill. And as temperatures rise, demand for power-hungry air conditioning units is likely to rise too.

So getting smart about energy usage is important. It’s good for the environment if you switch from a gas boiler to a heat pump, but while they are more efficient and cheaper to run, they place more demands on your electricity supply.

And this is a potentially significant problem. The UK government wants to see 600,000 heat pumps installed across the country by 2028, but can the electricity grid keep up?

That’s why there’s an increasing drive to deliver electricity to specific devices in a smarter way. A good example of this is Octopus Energy’s work to intelligently charge electric cars in a more efficient and lower-cost way.

But not every energy supplier has the in-house tech chops of Octopus or OVO Energy.

That’s where startup OptiSpark wants to step in. With a focus initially on heat pumps, it intelligently adjusts their power usage to reduce heating costs by–they say–around 20%. At the same time, it can reduce demand on electricity infrastructure, benefiting power companies.

How it works

The Manchester-based startup has developed software that takes in data about factors like how quickly your house warms up and cools down, and the ambient temperature of your heat pump (is it in the sun or the shade, for example).

“We've got a mathematical optimisation model that takes all these inputs and forecasts how your house would heat without OptiSpark,” explains CEO and co-founder Timothy Capper.

“And then how we can slightly adjust that heating profile based on the needs of the electricity system, on the varying electricity price, and on congestion in the system.

“We will send your heat pump or air conditioner a new demand profile which will be slightly different from the old one, and will slightly shift electricity demand to off-peak times or away from times of congestion. You won't really notice the difference. It will slightly preheat at cheaper times and let it cool down slightly at more expensive times.”

OptiSpark taps into heat pumps via their existing APIs, and it can also use data from smart thermostats and other sensors and control systems in homes. Its calculations are done in the cloud and then sent to the heat pump directly.

The route to market

Knowing that most consumers aren’t engaged with their energy supply enough to seek out a solution like OptiSpark’s, the startup sees its primary route to market as being through energy suppliers.

“The idea is that we can sell energy suppliers the ability to optimise the energy use of their customers. To their customer, this might just look like a cheaper per-unit tariff rate,” says Capper.

“The benefit to the energy suppliers is partly that they can offer their customers slightly cheaper rates. But also, the reason energy suppliers exist is to balance supply and demand of electricity. They have to predict how much electricity their customers are going to use and buy that electricity on wholesale energy markets. 

“They're penalised if they get this wrong, which they inevitably will, because it's based on predictions. And what we can offer energy suppliers is a physical way to balance their supply and demand.”

In practice, that means if energy suppliers haven’t bought enough energy, or have bought too much, OptiSpark can adjust the power usage of their customers’ heat pumps to balance things out.

And as energy demands increase, the energy suppliers that are innovating to save customers–and themselves–money will likely win in the long run. There’s a real selling point in helping traditional suppliers keep up with those who have invested heavily in their own tech.

“One thing we've heard from some energy suppliers is that the minute one of their customers gets a heat pump they move to Octopus, because Octopus can sell you energy for a heat pump so much cheaper. So energy suppliers that are not doing this, they need to do something to survive,” says Capper.

The startup is also exploring partnerships with heat pump manufacturers, who could install OptiSpark’s software directly on the hardware itself. There’s also the possibility of incentivising heat pump installers to upsell OptiSpark to their customers as a money-saving benefit.

The story so far

Capper is an oil and gas engineer by background. After working for BP for a few years, he did a PhD looking into ways to reduce the energy industry’s reliance on gas. He says that while battery technology to store power, and grid expansion are other solutions, demand response technology interested him the most.

“The problem is being caused by heat pumps and electric vehicles. And if you can solve that problem to some extent with those same heat pumps and electric vehicles, you don't need a second solution on top of that,” he says.

“Also, it's zero capex. So if you can solve that problem with devices that people are installing and buying for other reasons, it's a lot more cost efficient than installing secondary batteries.”

He met his OptiSpark co-founder William Murphy on the Conception X programme earlier this year. With Murphy’s background in A.I.-based forecasting, the pair teamed up and got to work.

In the seven months or so since they met, they’ve developed the tech into a product they say is close to being ready to be deployed and tested. This initial version takes the form of a plugin for home automation software Home Assistant, which provides a way of connecting up to heat pumps.

The startup will begin by testing the software with the early-adopter crowd who already have heat pumps and are interested in home automation.

Over the next year, Capper and Murphy want to prove their tech’s benefits in around 200 homes, helping them move towards their B2B market opportunity.

Go deeper on OptiSpark

Read more about their funding, investment plans, vision, competition, and challenges:

Funding:

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