A Danish consortium including the TSO, DSOs, balancing responsible entities and the Danish Energy Association is planning to launch a flexibility market pilot later this year on the island of Lolland in the southern part of Zealand.
The island is connected to the mainland with a transmission line that is short of capacity, and so the goal of the first phase of the project is to determine if generators can manage congestion using a flexibility trade mechanism, and the second phase will bring in large consumption entities. The problem is that the generation sources are connected to the distribution grid, while the congestion problems are in the transmission grid. “We want to create a market solution where the TSO’s actions do not hamper the operations of the DSOs. It’s quite an ambitious task but we are confident we will be ready to launch a pilot in the third or fourth quarter,” says Michael Arentsen, chief consultant at the Danish Energy Association.
The first phase of the pilot will determine whether there is a business case and whether companies submit bids, using NOIS, the existing common balancing market for the Nordics, rather than setting up a bespoke platform. “The philosophy is to keep it as simple as possible,” Arentsen says.
Initially only wind generators are likely to bid in for ‘down regulation’, or to switch off, with a negative bid price meaning the TSO pays them not to generate. Those receiving them would lose their subsidies, but would already have been paid for their day-ahead power on the Nordpool trading system. Some of the newer turbines have a control system which allows them to partially shut down, which is a new grid connection requirement if they are over a certain size.
Solar PV generators are less likely to participate at first because their subsidies are higher, and they have not yet figured out how to regulate their output to the same extent. Newer wind turbines and PV installations that have emerged without the need for subsidies will have more incentive to participate in the pilot, says Thomas Rasmussen, engineer at TSO Energinet and project lead. The project should provide some short-term and long-term solutions to managing the grid by both increasing automation and reducing cost, he says.
“In the short term, hopefully it will give us a handle on real-time solutions for bottlenecks in the transmission grid. Currently when we have local congestion due to bottlenecks we do not know where the bids are coming from, many are aggregated. By introducing this geographical tag, we can do some counter-trading to remove bottlenecks on a market platform at the optimal cost. In the long-term perspective, it is an alternative to grid investment, and production and consumption can be situated in more optimal locations.”
The consortium is self-funded and also includes three DSOs including Cerius, as well as balancing responsible entities Hofor and Centrica Energy Trading (formerly NEAS Energy).
Such flexibility markets are part of a wider range of solutions when it comes to increased decentralisation, says Signe Horn Rosted, Director of Electricity Markets at Energinet. System operators are working on strengthening the grid and are also analysing local pricing and tariffs which will provide signals for locating resources in optimal places. The cooperation between the TSO and the DSOs is one of the important outcomes of the project, she said. DSO/TSO cooperation is encouraged in the EU’s Clean Energy Package, and has been fostered in Denmark by Energinet and the Danish Energy Association.
“It’s a very crucial project to introduce a market-based solution, but we are aware of other tools in the toolbox for instance the need to strengthen the grid and provide the right investment signals. We are taking cooperation from talking to doing. Here we actually have the same problem, and we can work together and take a common responsibility to find a solution.”
An internal report is being prepared for the steering committee and if approved, the pilot will move forward for tender. “If the pilot is successful a further project will likely focus on the western part of Denmark which has vast wind resources, and so is expected to run into congestion problems in the coming years,” says Arentsen.