Living Lab 2.0: Innovation for the Home Energy Market

Energy Systems Catapult is developing Living Lab 2.0 to provide a first-of-a-kind, agile and scalable real-world trial and demonstration environment for the home energy market.

This will provide national capability to test and demonstrate energy innovations, market arrangements, policy and regulations with real consumers – as we move towards a Net Zero carbon future.

Research and Innovation for Digital Home Energy

Living Lab 2.0 will upgrade existing homes from across the UK to become digitally connected smart-homes,  allowing innovation to focus initially on low carbon heating and the integration of smart controls, electric vehicles and distributed energy technologies. New integrations will be added in response to evolving policy and market needs.

The agile and scalable approach to building the Living Lab 2.0 lends itself to responding to the dynamic nature of heat decarbonisation and future industry needs, and could potentially be part of a larger, more extensive, programme of place-specific pathfinder projects.

Living Lab 2.0 will leverage Catapult capabilities and assets, along with those of our partners, to provide innovators with a safe, affordable, shared space to test products, services and business models, with the aim of de-risking and scaling innovations for market.

The Digital Energy Opportunity

To transform the energy system to meet Net Zero carbon reduction targets and achieve our clean growth ambitions, it is crucial that the UK energy sector overcomes systemic barriers and open new markets to deliver the innovative products, services and value chains required.

According to the International Energy Agency, “whole new industries will be created” in transforming the global energy system to be clean, secure and affordable. Statista (2019) estimated that the UK smart homes market will have a value of £2.6bn by 2024, while Imperial College, London (2018) estimate that smart electric heat could generate system savings of £3.9 billion a year. The investment opportunity to retrofit UK homes is estimated at £100 billion.

The low carbon economy is expected to “grow four times faster than the rest of the economy”, while over £20billion will need to be invested in electricity networks over the 15 years to upgrade infrastructure and the energy digitalisation sector alone will be worth £45billion by 2025.

The UK needs to respond urgently to the transformation already underway in the energy system. Digitalisation and decarbonisation are likely to reverse the current value flow from the centralised, supply-side dominated system to the consumer. The new cultural and technological dynamics will change the whole shape of the energy sector from one of a linear supply-driven system to a diverse, distributed and dynamic market that will no longer be determined by a few players.

A new wave of technology and service firms is likely to focus on exploiting this value behind the meter, but the UK supply chain is not geared up to respond to the new value drivers. The same is true of most other developed countries. While many of the technologies required to reach Net Zero already exist, much of the competition is for innovation in market design, the creation of new value chains and the business models that operate within them.

However, at the moment no-one is clear how to respond. Policy makers can’t design new market arrangements because they lack evidence on the efficacy of one choice versus another; investors can’t evaluate returns, either in assets or in innovation, as they don’t know how the future market will operate; while regulators can’t design rules to protect consumers since they don’t know which solutions are viable and will get traction. Without change, the likely outcome is disrupted and fragmented value chains, and stranded assets.

Innovation programmes, including Smart Systems and Heat and Prospering from the Energy Revolution, have shown that:

Meanwhile, the policy levers and regulatory adjustments needed to optimise behind-the-meter flexibility are not yet fully in place. The trials identified above have established some guiding principles and objectives for a smart, consumer-centric, low-carbon energy system. But further trials are needed to work out how to deliver new low carbon products and services in people’s homes at the pace and scale required.

Living Lab 2.0: Digital Energy Platform

Energy Systems Catapult is currently scoping with industry, academia and government, the opportunity to lead on the design and governance of Living Lab 2.0.

Living Lab 2.0 will build of the learning from our existing Living Lab of 100 connected homes to address the urgent need for change by providing a national capability allowing innovators to test and demonstrate new ideas, technologies and business models with real consumers. A safe, affordable, shared space to test, improve, and scale-up new products and services – deployed across homes and business premises in our towns and cities.

Policy makers and regulators can use Living Lab 2.0 to gather evidence to inform policy design and trial new policy and regulatory measures with quality insight and huge amounts of data provided from the Living Lab into how consumers respond. For both private and public sector stakeholders, Living Lab 2.0 provides a potential pathway to facilitate a more open, competitive and fair market, for instance through co-creation of digital interoperability standards and consumer protection measures.

A new digital platform for Living Lab 2.0 is currently being developed in the UK.