Overview of flexible demand management

Overview of flexible demand management

A few weeks ago, SmartEn1 association published an estimate of the benefits that could be achieved through flexible demand management. Recall that flexible demand management is the set of actions that stimulate consumers to change their usual pattern of electricity consumption in response to some kind of request.

It is considered that demand flexibility management will be one of the pillars to achieve the complete decarbonisation of the energy system. As the weight of classic generation systems, based on fossil fuels, decreases, it will become more difficult to match production with demand, since renewable energies are not controllable. This problem can be solved by storing energy in some way, such as hydrogen generation, heating water and using batteries. But, in addition to storage, attempts can be made to shift demand to coincide with times when renewable generation is most abundant. If demand is flexible, this could be done without prejudice to the consumer.

Let´s go back to the SmartEn report. They have used electricity market models and estimates of consumption and generation for 2030 published by the European Union and have come to some interesting conclusions. The first is that in 2030 there will be 164 GW of flexible power available in Europe to ramp up (consume less in the case of demand, generate more in the case of generation) and 130 GW of flexible power to ramp down. In terms of energy this is 397 TWh and 340.5 TWh respectively. To put these figures in perspective, all the nuclear power plants in Spain typically produce around 60 TWh per year, or that Europe’s electricity demand in 2021 was 3,399 TWh per year, or that Europe’s electricity demand in 2021 was 3,399 TWh2 per year.

Source: https://smarten.eu/report-the-implementation-of-the-electricity-market-design-2022-smarten-monitoring-report/

Exploiting demand flexibility will reduce the price of electricity because it can be managed to increase the use of renewable energy. The report estimates that these savings could amount to 4.6 billion euros. The increase in the use of renewables would occur because up to 15.5 TWh of renewable energy would not be wasted and would not have to be “thrown away” because the system, thanks to flexible demand management, will be able to consume them when they are available.

If we take into account that the trigger for the whole transformation we are undergoing is the fight against climate change, the report estimates that flexible demand management could lead to 37.5 million tonnes less greenhouse gas emissions than if demand flexibility were not used. This would represent 8% of total emissions and would allow the power generation sector to exceed Target 553, i.e. to have reduced GHG emissions by 55% by 2030 compared to 1990 emissions.

The energy transition could threaten security of supply, i.e. the everyday gesture of flicking a switch and the light coming on could no longer be so commonplace. The report picks up on this threat and says that by 2030 Europe will have a generation capacity shortfall of 60 GW. Solving this problem by building generating plants could cost around 2.7 billion euros, an investment that could be avoided if 60 GW of flexible demand were made available. Related to security of supply are balancing markets, where energy is sold to avoid problems in the stability of network. If these markets were given access to flexible demand management, SmartEn estimates that the price of energy in these markets could be reduced by 43% to 66%, which would ultimately benefit consumers. The distribution grid may also face problems in ensuring its proper functioning when the presence of distributed renewable generation gains the expected weight. To solve these problems, it would be necessary to invest between 11.1 and 29.1 billion euros less than expected if flexible demand were to be managed correctly.

The end consumer would also benefit from flexible demand management, not only if they have loads that are flexible, such as electrified air conditioning or electric vehicle charging, to name two, but they will also have to pay less in terms of grid usage tolls. SamrtEn`s report estimates that these terms would result in direct cost reductions for consumers of up to 64% per year, some 71 billion euros in total. It would also benefit from indirect cost resuctions due to lower energy prices, reduced investment in the distribution network to keep it up to date and reduced costs associated with greenhouse gas emissions. The report estimates that this indirect reduction would be around €300 billion.

Source: https://www.consilium.europa.eu/es/infographics/fit-for-55-how-the-eu-will-turn-climate-goals-into-law/

From the SmartEn report it seems that there would be nothing but benefits if flexible demand is managed correctly. So is flexibility already being exploited for the benefit of the energy system, consumers and the environment? The answer depends on the country, but in general, progress is slow. In the case of Spain, steps have been taken to define the role of the independent aggregator in the management of flexibility, but the necessary regulation has not been developed and, therefore, there are still no business models that can attract any type of consumer. The association Entra Aggregation and Flexibility has just presented a roadmap for demand flexibility according to which independent aggregators and market adaptation will be ready by the end of 2023. A plan that seems very ambitious considering the delays that have been dragging on, but which, if fulfilled, would represent a great step forward in achieving the decarbonisation objectives sought by both the Spanish government and the European Union.

Also in Spain we find an opportunity for flexible demand participation through balancing markets, where very large consumers can obtain economic benefits thanks to their flexibility. In addition to this, the first auction has recently been held. Consumers with flexibility have committed to reduce their demand by the amount they have bid when rewuired to do so by the system operator, for which they will receive a remuneration of 69.97€/MW. The bad news is that only 497MW have been allocated.

Demand-side flexibility management is set to be an important element in the new energy system. It can be achieved through voluntary and remunerated mechanisms as long as consumers adapt quickly enough and regulation is favourable. If this is not achieved, we will learn to be flexible by imposing restrictions on consumption.

1 https://smarten.eu

2 https://datos.enerdata.net/electricidad/datos-consumo-electricidad-hogar.html

3 https://www.consilium.europa.eu/es/policies/green-deal/fit-for-55-the-eu-plan-for-a-green-transition/

4 https://www.ree.es/es/sala-de-prensa/actualidad/nota-de-prensa/2022/10/el-sistema-electrico-peninsular-cuenta-con-cerca

You may end up owning a power generation company.

You may end up owning a power generation company.

You thought it would never happen, but you´re watching it happen. Your world upsidedown at an unexpected speed. Ecologists announced a different world according to their believes, but it turns out that in the end it will be the cold sceptics of the Excel sheet who will do it. Ukraine war has caused an energetic crisis, and we wil se if it won´t also be food, that it doesn´t only brings us high energy prices, but also could cause shortage of gas, petroleum and offshots.

We are seeing that in order to resolve this situation it is being proposed to tap into Europe´s subsoil resources, especially shale gas, and to increase generation capcity based on nuclear fission. All these measures could serve to alleviate the energy crisis, although it does not seem at this stage to be willing to disengage from greenhouse gas and pollutant emissions. So it is likely that we will not see much hydraulic breakup, we will probably see more nuclear reactors and, above all, we may see a strengthening of the energy efficiency and renewable generation policies that the European Union has been promoting for some time. And it will not be for environmental reasons, but simply to maintain an economic system that does not take us back to the 18th century.

The sun and its child, the wind, will increase their weight in the electric system faster than expected if access to the raw materials needed to manufacture generators is not interrupted. The stoarge of energy could be developed with intensity and we end up getting acquainted with hydrogen as we have made in the past with butane. But surely what we have the hardest time getting usd to would be the new figures that will appear in the energy system management.

The energy communities are one of the news that are getting shape in Spain. Although still aren´t frequent, there are several examples of people that joint to generate and manage the energy they consume. The downgrading of the photovoltaic panels favours their installation in domestic roofs, which achieves that generation and consumption are close. Energy management could be done from the cloud thansk to Internet of Things and specialized companies could offer this service to communities. Hydrogen and batteries seems to be called to be the energy storage medium, although it will depend on the cost and availability of raw materials. Internet of Things woul allow to manage demand flexibility inside the community. It seems to start being possible that a group more or less big of citizens constitute their own electricity generation company.

But for these participative companies, this capitalism at a human scale, could be possible, we have to defeat some obstacles. And leaving aside reluctance to change, the mosr important is the cost of setting up such a community. Are being made huge efforts to understand people motivations1 to get involved in an energy community and to design mechanisms to set them in motion2, but perhaps not as much effort is being put into designing the business models that would make them economically viable.

We can think of some business models for energy communities. The most clear is the save in energy purchase. If the community generates their own energy and distributes it betweent their members, they will save at least the trasnport tolls that are payed in a conventional bill. Other possible business would be the sale of energy surplus, but current legislation imposes limitations on the distance at which the buyer can be located. The demand flexibility could also give rise to another businees model based on promote a distribution grid of auxiliary services, but this is not easy. If this were to be attempted through balancing markets, the regulations impose minimum power values that will be difficult for many communities to achieve. Moreover, it should be borne in mind that it is not possible to interact with the network without complying with a whole series of complex technical rules. It becomes necessary the independent aggregator figure, which is already provided for in existing legislation, but which is not fully developed and which would have to intermediate between the community and the electricity grid. These problems could be solve if they existed energy local markets or flexibility markets, but in Spain are in an embryonic state and it will still take some time to see them in operation.

But, despite of these deficiencies, nowadays energetic crisis overview joint with the directives that came from the European Union will boost the development of energy communities. The problem will be finding resources to do so. Administrations and the cold sceptics of Excel spreadsheets who come up with innovative business models may have the last word.

1 https://socialres.eu/

2 LocalRES. https://www.cartif.es/localres/

Consumer energy flexibility

Consumer energy flexibility

There are two things that have nothing to do with each other but that in real, they have to: the perplexity of a roe deer in the foothills of the Torozos hills when she founds a fence surrounding a photovoltaic park and that the 64%1 of the Spanish people do not know if our electrical supply contract is from a free or a regulated market.

The roe deer ignores the fact that the place where he walks is going to be subjected to radical changes. Tens of thousands of hectares are going to be covered with photovoltaic panels and closed by fences. We will have to see how this will afect to biodiversity, what will become of the bustards and of the foxes that walks throguh those places and if roe deers will learn to see fences before they colide with them.

But we have to take in count that human activity will be affected. All those hectares will be excluded from agriculture, shepherding will be limited and the landscape will be radically transformed, what could affect to local business of the rural tourism. In exchange of this destruction, energy will be generated without emitting greenhouse gases, energy that also will be cheap and that will help to decrease the price resulting from the daily market matching. But the sun does not usually shine at night, at least in our latitude, and what could happen with the electricity price and with the electric system stabilisation from the time of sunset or the days without sun is something that we will have to talk about in other moment.

Spanish consumers may be just as unaware as the roe deer, because it seems that manyof us are not informed about the possibility of choosing between a regulated rate and non-regulated one, and surely we are far less conscious about the changes that decarbonization of the electric system brings.

This situation of unknowledge raises the fear that it is going to be hard to let people know that they have in their hands a powerful weapon for combating the problems that could appear as a consequence of the massive introduction of renewable energies.

It is the flexibility or capacity of consuming electricity at different times than initially desired without having a loss of comfort or utility. To complicate things further, the household consumers could take better advantage of their own flexibility if they offer it on a joint basis. And this offer should be made in energy local markets, still non-existent, but already in development.

To imagine that a consumer that does not know if he has a free rate or a regulated one may become involved in the energy local market seems harder to achieve than a herd of roe deers jumping the fences of a photovoltaic park.

Several things are required for demand flexibility to be useful. On the one hand, it is necessary that all flexible electricity-consuming assets, such as air conditioning, should be able to accept external signals that allow regulating its operation automatically. Also, it is necessary that control systems that generates these signals are available and acting in an aggregated manner on a significative number of air conditioning systems, to mention a flexible load. In addition, it is necessary to define business models that will allow users to be remunerated for their flexibility. And finally, rules and regulations must be developed to define new market agents, such as the recently created independent aggregators, and to regulate the consumer participation in the new local electricity markets.

But all of this is not going to be possible without a change of mind. Consumers have to realize that there are ways to actively participate in the electricity system that go beyond switching companies when the bill seems too high. One of these ways could be energy communities, which are already opening the door to collective self-consumption and will hopefully soon also open the door to flexible, consumer-centered demand-side management.

Perhaps these communities allow the consumer to adapt to the new electricity system in the same way that roe deers of Torozos hills will have to adapt to a new environment full of unfamiliar things.

1 https://blog.cnmc.es/2019/11/15/panel-hogares-cnmc-electricidad-gas/

The dynamic electricity prices and the washing machines with initiative

The dynamic electricity prices and the washing machines with initiative

The day all of us enjoy electricity dynamic prices thanks to the smart grid, we will see how the washing machine and other home appliances come into life. And they will do it to allow us to pay less for the energy they need to do their duties. This will be one of the advantages of dynamic prices that are those that change along the day to encourage us to use energy when there is a surplus and to dissuade us of using energy when there is a shortage.

To have a better understanding of how dynamic prices will impact on our lives, there has been a research project conducted in Belgium that involved 250 families equipped with smart home appliances, namely washing machines, tumble dryers, dishwashers, water heaters and electric car chargers. Smart home appliances are those that receive information about electricity rates and that can make decisions about their own operation. For the purposes of the project, the day was divided into six time slots with different electricity prices according to the energy market. The families involved in the experiment were divided into two groups.

Researchers of Liner Intelligent Networks project in a demostration

The first group got information about next day electricity prices through an app installed in a mobile device. Then, they have to plan the use of the appliance for the next day considering the prices and their needs.

The second group have appliances that reacted to the prices in an automated fashion while preserving the owners’ utility. To understand how it worked, imagine a family who wants to have their dishes ready for dinner at 6PM. At 8AM, when they left home to work, they switch on the washing machine and indicate the hour the dishes must be ready. In the case the washing machine needs two hour to complete the work, the machine knows it could start to work at some moment between 8AM and 4PM and it chooses the moment in the time slot with lower price. In the case the energy were cheaper after 4PM, the washing machine started to work at 4PM to assure the dishes were clean and dry at the moment the owners needed them. Other appliances, like the water heater, just chose the time slots with cheaper energy to keep water at desired temperature.

The customers in the first group found the system annoying and they left the experiment. However, those in the second group found the method did not affect their comfort and that their appliances preferred the night to work. Besides this, there was a reduction in the electricity bill: 20% for dishwashers, 10% for washing machines and tumble dryers, and 5% for water heaters.

One of the findings of the project was that customers do not like to be on the lookout of the next day prices. This result is quite surprising if we consider the success of the Opower company, that according to them they were capable of reducing the bill, energy use and CO2 emissions using a customer information system quite similar to the one used by the Belgians with the first group, the one based on getting information the day before to make decisions in advance. But today Opower is in the Oracle realm, maybe because this big company was more interested in the data and knowledge Opower had about how people demand energy than in the possible benefits for environment, electric grid and customers’ wallets. Anyway, it seems the original’s Opower spirit remains alive.

The smart grid will make possible our washing machines will be connected to the power company through Internet soon and it will be in charge of making decisions about when to work in order to reduce our electricity bill. After that, if the washing machine makers were able to design a machine capable of ironing the clothes our happiness would be complete.

What is ‘Blockchain’?

What is ‘Blockchain’?

The “Blockchain” is the technology supporting Bitcoin, the infamous cryptocurrency known for being the first widely used and reportedly used in some criminal activities. Blockchain is also the technology underlying Ethereum, which is also a means to implement smart contracts. There is an increasing interest around Blockchain because it promises disruptive changes in banking, insurance and other sectors narrowly involved in everyday life. In this blog entry, I will try to explain what is Blockchain and how it works. In the next entry, I will present some uses in the energy sector.

Blockchain is an account book, a ledger. It contains the transaction records made between two parties, like “On April 3, John sold 3 potatoes kilos to Anthony and paid 1.05 Euro”. The way Blockchain works avoid any malicious change in the records. This feature is not granted by a supervisor, but is a consequence of the consensus reached by all peers participating in the Blockchain. This has consequences of paramount importance. For instance, when Blockchain is used to implement a payment system, like Bitcoin, it is not needed a bank supervising and facilitating the transaction anymore. Even it would not be necessary to have a currency as we currently have.

The blockchain is a decentralised application running on a peer-to-peer protocol, like the well-known BitTorrent, which implies all the nodes in the Blockchain have connections among them. The ledger is stored in all the nodes, so every node stores a complete copy of it. The last component is a decentralised verification mechanism.

The verification mechanism is the most important part because it is in charge of assuring the integrity of the ledger. It is based on consensus among nodes and there are several ways to implement it. The most popular ones are the proof-of-work and the proof-of-stake.

The proof-of-work is the most common verification mechanism. It is based on solving a problem that requires certain amount of computing effort. In a nutshell, the problem is to find out a code called hash using the block content (a block is a set of recent ledger inputs). The hash is unique for a given block, and two different blocks will always have different hashes. The majority of the nodes must agree in the hash value, and if some of them find a different hash, i.e. if there is no consensus, the transactions in the block are rejected.

Applications based on Blockchain can be classified into three different categories according to their development status. Blockchain 1.0 are the virtual cryptocurrencies like Bitcoin and Ether. Blockchain 2.0 are the smart contracts. A smart contract is a contract with the ability to execute by itself the agreements contained in it. This is done with no need for a supervisor who verifies the contract compliance. Finally, Blockchain 3.0 develops smart contract concept further to create decentralised autonomous organisational units that rely on their own laws and operate with a high degree of autonomy.

In my next post I will present some smart contract applications in the field of energy delivery.