By Oliver Sartor, Chief Economist, Voltalis
The property sector is on the brink of a major technological transformation, driven by two mutually reinforcing developments: the gathering momentum of the energy transition and the rise of advanced automation and operation thanks to digitalisation and AI.
Approached intelligently, these twin transformations offer unprecedented opportunities for tenants and homeowners to save money on their energy bills; for developers increase their property values by providing the next generation in building energy services; and for facility managers and landlords to make properties greener, more efficient and offer a better experience to users.
Buildings: flywheel of the future energy system
In the UK, buildings consume a lot of energy. They account for approximately 50% of the country’s natural gas consumption and 24% of its CO2 emissions. Thus, as part of the energy transition, there is a strong trend towards the electrification. For instance, in heating, there has been 400% growth in the sale of heat pumps since 2020, adding to the more than 2.4 million households already using electric heating in Britain. In transport, one in five passenger vehicles sold was electric in 2024 and EVs are anticipated to grow to 31% of sales this year. These often charge at home or at the workplace. Meanwhile, over 1.4 million households now have solar PV on their rooftops and a growing number are adopting home batteries.
All this additional electricity consumption and production means buildings must not only become more energy efficient, they must also become much more intelligent.
By 2030, up to 80% of power generation is projected to be from variable renewable sources like wind and solar. During hours or days when there will is low sun and low wind, the supply of clean power will be scarce and electricity prices will spike. To keep the lights on, to avoid CO2 emissions from expensive gas peaking plant, and to keep prices down for consumers, it will be essential to make the demand for power much more reactive to such events.
The need for this demand-side “flexibility” is enormous. By 2050 up to 20% of total UK electricity demand will need to be flexed each year. Buildings will thus be critical to this equation. Even with a massive roll out of grid-scale batteries, up to 16 Gigawatts of flexible load could be harnessed from UK buildings. That’s around a quarter of peak UK power demand today.
Such developments would make distributed energy assets in property sector the most important single source of demand-side flexibility services for the UK’s power system.
Low-hanging fruit of the energy transition
This need to make our buildings more flexible dovetails with another new trend: the digitalisation of the economy and advent of AI and advent of technologies such as “Demand-side Management (DSM) 4.0”. DSM 4.0 allows for service providers to offer dynamic automation and operation of millions of distributed energy resources, aggregating lots of small micro-adjustments to your home or office electricity consumption in response to market needs, but without any loss of comfort or convenience for the end consumer.
The resulting energy savings and flexibility services can then be provided the power system creating a trifecta of benefits: secure clean energy, lower bills and better control of energy consumption for building inhabitants, and CO2 savings without the consumer needing to lift a finger, or the building owner needing to pay for expensive retrofits.
Thanks to some smart policy by Ofgem, property owners or tenants of all kinds – including social housing estates, university campuses, etc. – may not even need to pay to install DSM4.0 technology, but they can still reap the benefits. Thus, all types of energy consumers and property owners can benefit from annual energy savings, lower bills, and upgrades of their devices from dumb to smart to improve their comfort.
Integrating DSM4.0 into new and existing buildings is thus in many ways the cheapest and easiest way to start saving energy in buildings. It’s both the “low-hanging fruit” of the energy transition, while also being absolutely crucial to our ability to decarbonise the energy system.
