Energy Aggregator

Europe’s energy markets – the role of the aggregator

USEF Foundation has completed development of independent aggregator models for Europe’s demand response markets.
Published: Tue 26 Sep 2017

With the decentralisation of the energy system and the growth of distributed resources such as local renewables and storage in homes and vehicles, flexibility and demand response are becoming increasingly important for balancing demand and supply.

Load aggregation

While conceptually straightforward, the model is complicated by the fact that to be of value, multiple loads need to be aggregated, and the smaller the loads the greater the numbers.

The question then in this evolving landscape is, with aggregation as a new role in the market and the aggregator a new player, what is a suitable implementation model?

In the United States, where demand response has been widely practiced, the concept of the energy aggregator is well understood.

In Europe, however, demand response is less advanced and is fragmented across the diversity of markets among the EU member states. Of the 18 markets (mainly in western Europe) reviewed by the Smart Energy Demand Coalition (SEDC) in its latest 2017 mapping, just six have commercial activity in demand response while another six are partially open, two are in preliminary development and four are closed.

With the intention of the European Commission to enable a regulatory framework in which electricity customers are able to participate in demand response markets and be rewarded for flexibility, outlined in the Clean Energy Package (aka the Winter Package), the European energy organisation USEF Foundation, established to accelerate the establishment of an integrated flexibility market, has undertaken the task of developing aggregator implementation models.

USEF (Universal Smart Energy Framework) was formed by seven organisations active in different parts of the smart energy chain: Dutch network operators Alliander and Stedin, supplier Essent, knowledge partner DNV GL, technology providers ICT and IBM and ABB. It has evolved in an industry body to develop a standard for smart energy products and services. Flexibility as key for large scale renewable integration is at the core of the USEF focus.

Aggregator implementation models

After the launch of the USEF framework in 2015, USEF Foundation developed a set of aggregator implementation models, which were conceived to reflect the differences in energy market designs across Europe.

The set of seven models are ordered on whether or not there is a contract between the aggregator and the customer’s supplier and whether there is a single or dual balance responsible party (BRP). As such, one or more may be applicable in any country and some are in use already in the early mover demand response countries.

For example, in Germany the corrected model is preferred, while in France the central settlement model has been implemented.

Subsequently, USEF Foundation has focussed on filling out the details of the models as they would be applied in both the commercial and industrial (C&I) and residential contexts as well as developing recommendations for their implementation.

In an interview with Engerati, Marten van der Laan, who heads up USEF's aggregator workstream together with Hans de Heer, explained that the main focus was on the relationship between the aggregator and the BRP/supplier, which has given rise to a number of “complexities”.

“These pertain to issues such as baselining, data validation, information exchange and the rebound effect,” he says. “We also needed to clarify the relation between implicit (i.e. price-based) and explicit (incentive-based) demand response as a flexible resource may be subject to both at the same time.”

Residential demand response

Another key outcome of this work was the realisation of the need for an additional set of models – named ‘reference profile models’ – for the residential segment.

“The residential segment is more complex due to the large number of small resources and the potentially high frequency, daily or hourly, of demand response activation,” Van der Laan says.

The core set of seven aggregator implementation models are based on the principle that the aggregator only takes balance responsibility during times of demand response activation. However, when activation takes place on a day-to-day basis, it becomes difficult to hand-over balance responsibility to the BRP of the aggregator, as a proper baseline cannot be established.

In the reference profile model, instead of handing over balancing responsibility for the activation times only, the balance responsibility is transferred beforehand, typically day ahead. The aggregator can optimise the load profile of the customer compared to the reference profile, and use the flexibility on every market or product.

Another key conclusion for the residential segment, Van der Laan adds, is that demand response should not be enabled for customers unless they have smart meters, due to the difficulties of working with synthetic profiles based on standard energy usage.

Demand response roadmap

Van der Laan stresses that the intention of USEF is not to advocate a specific model or whether for example, the role of aggregator should be filled by an incumbent or a new player. Rather the intention is to enable decision making on demand response implementation by utilities, aggregators, regulators and other interested parties.

As a regulatory framework may take several years to implement, however, USEF suggests a possible roadmap for Europe which envisages key activities, including product design and market agreements, take place in parallel in order to speed up parts of the market.

Demand Response Roadmap

Possible demand response roadmap. (Source USEF Foundation)

“USEF principles can be applied to capacity products based on an uncorrected model, or can provide input to standardised contracts in the contractual model,” says Van der Laan. “The lessons learned from the first and second track can then provide input for the development of a regulatory framework.”

As an example, he points to countries such as Belgium, Denmark, Germany and the Netherlands, where market organisation is starting to take place and in those the contractual model between aggregators and retailers could be an appropriate starting point.

Van der Laan adds that with the completion of this aggregator implementation modelling, its findings will be fed into an updated USEF market design framework, which to date has not included the new aggregator implementation models.

“This was the starting point of our work and we foresee a good deal of discussion ahead as the Clean Energy Package moves towards implementation,” he concludes.

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