flexibility: past experiences, the clean energy … · a new aim: flexibility …. but why and how?...

FLEXIBILITY: PAST EXPERIENCES, THE CLEAN ENERGY PACKAGE, AND OPEN ISSUES

WORKSHOP “FLEXIBILITY IN EU ELECTRICITY MARKETS” UNIVERSITY OF ANTWERP AND BAEE

ANTWERP, 13 DECEMBER 2019

Paul Giesbertz, Statkraft

The 4th package – the Winter package – Clean Energy for EU citizens package (30 Nov 2016)

…

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Commission proposes new rules for consumer centred clean energy transition

This is an unprecedented step in empowering consumers

Our proposals provide a strong market pull for new technologies

A new aim: flexibility …. But why and how?

Challenge: increasing sharing of intermittent RES generation

General perception: We have to increase flexibility, e.g. by promoting demand

side response

Article 1 of the Regulation (CEP):

- This Regulation aims to: (a) set the basis for an efficient achievement of the objectives

of the Energy Union and in particular the climate and energy framework for 2030 by

enabling market signals to be delivered for increased efficiency, higher share of

renewable energy sources, security of supply, flexibility, sustainability, decarbonisation

and innovation;

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A new aim: consumer empowerment …. But why and how?

CEP introduces many “new” concepts:

- Active customer

- Aggregation

- Independent aggregator

- Demand response

- Citizen energy community

- Renewable energy community

- Renewables self-consumer

- Sharing of electricity

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Definitions: capacity and flexibility

Capacity: is the ability (or option) the deliver or offtake (sell or buy) electrical

energy

Flexibility: is the ability to use/exploit capacity with few limitations

- Flexibility is a characteristic of capacity

- Flexibility has many different time dimensions

- Example: A battery has short-term flexibility, but no longer term flexibility

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Flexibility is not a separate commodity

One can’t carve out a “flexibility market”

Capacity is used on power market, optimising its flexibility

across the different times

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Gene-ration

Storage Demand

Energy market Capacity MarketForward

marketsDay

aheadIntra-day Balancing

Key: equal treatment of all capacity providers

Gene-ration

Market Access provider

Demand

Supplier

= aggregator!

= aggregator!

Base-load

Peak-load

Y-ahead

Q-ahead

M-ahead

W-ahead

Day-ahead Hourly

Intra-day 15 Min

FCR

aFRR & mFRR

RR

ProfilesCap-futures

Capacity certificates

Products emerge following needs of

market parties

Capacity is used on power market, optimising its flexibility across the different times.One can’t carve out a “flexibility market”.

The reservoir capacity of Lake Blåsjø is 7.8 TWhNorway’s total reservoir capacity is 85 TWh (of which 35 TWh Statkraft)

That is 8.5 million batteries (of 10 MWh each)Or 6 billion Tesla Powerwalls (of 14 kWh each)

Statkraft offers flexible capacity

Statkraft needs flexible capacity

“Direktvermarktung“ of renewables by Statkraftcurrently 11.8 GW (mainly wind) all remote controlled

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Deviations from Day-ahead forecasts are traded at Intraday market

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Quelle: Statkraft Portfolio Donnerstag 17.05.2018

Higher generation must be sold …

…. a lower price…. a lower price

… wind generator receives day-ahead price for actual/meteredgeneration

Do not over-estimate the value of flexible capacity

There is overcapacity

There is a lot of storage

There is a lot of demand response

The reserves–market (FCR, FRR, RR) is a small market / not increasing

Intermittent generation is controllable

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Total installed dedicated storage capacity in the EU (plus CH and NO) is almost 50 GW *)Plus about 27 GW seasonal storage capacity: 77 GWPlus batteriesPlus batteries not yet battery-to-grid*) Source: EASAC policy report 33 “Valuing dedicated storage in electricity grids”






The reserves (FCR, FRR, RR) – market is a small market / not increasing


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the intermittency challenge

Contrary to common believe

is not in the balancing time frame

but in the forward time frames (intraday – seasonal)

There is a lot of (implicit) demand response

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About 3 GW every day

Source: http://www.rte-france.com/fr/eco2mix/eco2mix-consommation







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Decreasing prices for primary reserve (PRL) in GermanyEuro/MW per week

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Increasing share of RES: decreasing activation of operating reserves & increasing use of intraday market

17Graph: Volumes in the activated reserve markets (green) versus intraday market (red) in GermanySource: Statkraft







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Renewables are controllable

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A new aim: consumer empowerment …. But why and how?

CEP introduces many “new”

concepts:

- Active customer

- Aggregation

- Independent aggregator

- Demand response

- Citizen energy community

- Renewable energy community

- Renewables self-consumer

- Sharing of electricity

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How to implement?

Regulators are struggling:

- Enable benefits of communities,

while being compatible with 3rd

package principles

- Communities should not be

vehicle to circumvent market

principles, passing costs to

wider customer base

Consumer empowerment? Give consumer same rights & duties as any other “grid connected entity”

Basic right should NOT be

right to switch supplier,

… but, by having access to

the grid, right to enter into

any transaction with any

market participant

Basic duty: balance

responsibility

- Can be outsourced

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In practice this means that

community needs to become

supplier

License conditions for such

“suppliers light” need to be

revised

- Consumer needs less

protection as it wants to

become active

• Rest is non-regulated• “Sharing” is a concept where prosumers

mutually agree on terms for exchanging energy• This is a commercial arrangement

Only one requirement:correct imbalance price (= an open issue)

Imbalance price is THE basis for price formation in all market segments

Scarcity prices (signal for improving flexibility) can only materialise if imbalance

price can spike up to VoLL

Methodology to set imbalance price is not harmonised. ISH (one element of the

Electricity Balancing Guideline) is still open, but

- … it only rules which components can be used

Take marginal bid price for balancing energy, but

- What about costs for balancing capacity?

- ISP (15 min) can be much longer than activation time of a balancing energy bid

Take VoLL assessment into account in case of load-shedding

Cap needed???

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So far for the value of flexible capacity in matching demand and supply

But what about the grid?

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Gene-ration

Storage Demand

Energy market

Forwardmarkets

Day ahead

Intra-day Balancing

Gene-ration

Market Access provider

Demand

Supplier

The grid (operated by TSOs and DSOs)

facilitates the market.

DSOs/TSOs need to manage congestions (in a

coordinated way) and thus interact with

generation, demand & storage.

• “Grid connected market party” (consumer/prosumer/generator/storage) is at the centre

• He owns its flexible capacity and decides on its use (self-dispatch)

• Market signals are leading. Congestion management should be reimbursed without distorting the market.

Congestion management (sometimes called flexibility market) is not a market.

Congestion costs are transmission costs.

• If that “classical” paradigm remains valid,• - and why wouldn’t it? -• then there is no stacking of revenues from

providing grid support!

www.statkraft.com

THANK YOU

Paul Giesbertz

[email protected]

Back-up slides

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Intraday price developments: Highest volumes and volatility close to delivery30 April 2017 (long weekend, negative prices)

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Data: EPEX

Expected wind generation: Comparison of purelyweather-based and forecast with real-time data

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the intermittency challenge is not so much in the balancing time frame but in the forward time frames (intraday – seasonal)

Imbalance price is crucial!All delivery takes place in the real-time market. Market participants will anticipate and make forward decisions based on expectations

about real-time prices.

Active System ManagementBackground

DSOs are faced with

- increasing share of variable generation connected to DSO grid : congestions (a new phenomenon

for DSOs)

- electrification: need for grid expansion

- perception that demand response is needed for integration of renewables

Solution for DSOs: smart grids & local flexibility markets

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TSOs are concerned that local markets conflict with integrated wholesale markets

DSOs are concerned that TSO controls decentralized assets for balancing that cause

congestions in DSO grids

Limited unbundling of DSOs is also concern

• For the market there is no difference between T and D• Cooperation between TSOs and DSOs necessary to

ensure level playing field

Concerns

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Congestion management is seen as “market” next to “energy market”.Instead CM is supporting grid and grid is facilitating market

Idea that market participant can choose between “energy market” and “CM market” to optimise the value of its flex capacity sounds nice

But it means new market design!Withholding capacity from the energy market to offer it for grid support at a higher price, would classify as a REMIT violation!

Balancing Market is seen as regulated marketAlthough “special” it is integral part of the “energy market”

Freedom of dispatch means that market participant is free to change its consumption/generation pattern or sell flex capacity to TSO for balancing

Focus on balancing is too narrow• Congestions are managed as

early as possible• The challenge of “RES

variability” is not so much in balancing time frame

Idea of combined MOL and a central, regulated platform is worrying

CM should always be compensated and should leave affected parties financially indifferent

Conclusions (1)

Positive: joint effort of TSOs and DSOs

Scope is too limited

Some recommendations are premature (e.g. on product design, flex register, combined MOL)

Avoid confusing terminology (flexibility is vague, congestion management is precise)

Start with fundamental principles, like:- Grid users are owner of their flexible capacity and are free to exploit their flexible capacity at the market (including

the balancing market). The grid (operated by TSOs and DSOs) is facilitating the market. In case of congestions,

TSOs/DSOs procure congestion management services. Delivery of congestion management may become

mandatory (especially in emergency situations) however must always be compensated. Compensation may be price

based (preferably) but can be cost based, in any case the principle is that the dispatched grid user is left financially

indifferent (compared to the case where this grid user is not affected by congestion management).

… only then do problem analysis before to propose solutions

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Conclusions (2)

Market can manage integration of weather dependent generation

Correct imbalance pricing is crucial

Intermittent RES is not mainly causing a balancing challenge

Congestion management is an issue since liberalisation and unbundling. It is

increasingly becoming an issue in Distribution grids. But there is no prove that

a market redesign would be needed.

Flexibility should not be a new target next to reliability, efficiency and

decarbonisation.

Also the other D’s (decentralisation, digitalisation and dynamic regulation)

should not become objectives in itself.

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Installed dedicated (grid connected) storage capacity in the EU (plus CH and NO) in 2016: mainly PHS

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Source: EASAC policy report 33 “Valuing dedicated storage in electricity grids”

Different types of storage with different capabilities

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Source: IEA World Energy Outlook 2016

Types of Demand Side Response

ImplicitResponse on retail price

ExplicitResponse on market prices

Directby consumer

• Well known for decades• Already active to large extent• No regulatory barriers• No involvement/compensation

of supplier• Will further develop with roll-

out of smart meter

• Already active (largerconsumers)

• Should be allowed (consumer should have right for this model)

• Requires agreement consumer-supplier. Commercial terms to be negotiated.

Indirectby aggregator (on behalf of consumer)

• No regulatory barriers • No involvement/compensation

of supplier• Likely to develop with

technological developments

• Relatively new business model• Should be allowed (consumer

should have right for this model)

• Requires agreement consumer-supplier-aggregator. Commercial terms to be negotiated.

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ImplicitResponse on retail price

ExplicitResponse on market prices

Directby consumer

• Well known for decades• Already active to large extent• No regulatory barriers• No involvement/compensation

of supplier• Will further develop with roll-

out of smart meter

• Already active (largerconsumers)

• Should be allowed (consumer should have right for this model)

• Requires agreement consumer-supplier. Commercial terms to be negotiated.

Indirectby aggregator (on behalf of consumer)

• No regulatory barriers • No involvement/compensation

of supplier• Likely to develop with

technological developments

• Relatively new business model• Should be allowed (consumer

should have right for this model)

• Requires agreement consumer-supplier-aggregator. Commercial terms to be negotiated.

IndirectBy supplier (with consent of consumer)

- Not relevant • Well know for decades• No regulatory barriers

Types of Demand Side Response

VoLL (Value of Lost Load)

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If market participants are exposed to the real risk that the imbalance price will be set at least at the:

Then scarcity prices can materialise and market participants will invest in flexibility

Conclusions

Correct imbalance pricing is crucial

Intermittent RES is not mainly causing a balancing challenge

Flexibility should not be a new target next to reliability, efficiency and

sustainability

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flexibility: past experiences, the clean energy … · a new aim: flexibility …. but why and how?...

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