As the levels of distributed energy resources grow, aggregation to provide flexibility is crucial to their integration with the increased variability and price volatility they can bring.
This has brought with it the new market role of the aggregator, which is attracting both a flurry of new entrants to the market and new models for aggregation. Aggregators are defined as legal entities whose aim is to optimise energy production and consumption either technically or economically. The aggregated pool can include generators and consumers and can operate in one or multiple electricity markets.
Across Europe the status of the aggregator varies between countries. In some countries such as the United Kingdom and Germany, aggregation services and the participation of other technologies such as virtual power plants are growing. However, in others, such as Spain and Portugal, the market for aggregations is still relatively closed, while others still, such as France, are in between.
In order to address issues around aggregation, which must in time become ubiquitous in Europe, the BestRES project was initiated with Horizon 2020 research funding support. The three-year project launched in March 2016 is coordinated by the German consultancy WIP Renewable Energies and comprises 11 partners from nine countries including energy companies and research and legal experts. Among these are Good Energy (UK), Oekostrom (Austria), Energias de Portugal, Next Kraftwerke Belgium, Next Kraftwerke Germany and RE-Pro (Cyprus).
Renewable energy aggregators
The approach taken in the project was to start with a review of existing models of the project partners. This analysis found that across Europe, the combination of the aggregator-supplier role and delegated aggregator role is most common while independent aggregators (delegated aggregator and aggregator as service provider) also have a significant presence.
Moreover, across Europe the emphasis is on the demand side management market, in the medium term large-scale DSM and moving into small-scale DSM in the long term.
Within the consortium, a wide variety of models were indicated. For example, Good Energy, Oekostrom and EDP were focused on the aggregator-supplier model and Next Kraftwerke on both the delegated aggregator and aggregator-supplier business models, whereas RE-Pro was developing ESCO services.
The models within the consortium were then analysed and adapted into ‘improved business models’ and following assessment of the economics and technical, legal and regulatory barriers, from these a set of seven models were identified as ready for implementation. Of the others, two were found to have feasibility issues and a further four were found to be not viable or facing impeding barriers, mainly of a legal or regulatory nature. In one case, EDP’s model in Spain, the main issue is that prices (imbalance tariffs) are too low for generating enough revenues to cover for the costs.
Aggregation business models in Europe
Business models that are ready for implementation were found to exist in the UK, Germany, France, Italy, Belgium, Austria and Portugal. So what are these?
Good Energy’s ‘Automation and control’ project uses innovative smart home technology to offer domestic customers insights and benefits of their energy usage through real time pricing.
Oekerstrom’s ‘Demand side flexibilisation of small customers’ project to activate demand side potential is very comparable. In both cases, the aggregator manages to decrease sourcing costs and the costs to end customers (and turnover), i.e. the small-scale providers of flexibility, also go down.
Next Kraftwerke Germany’s German project ‘Supplying ‘midscale’ customers with time variable tariffs including grid charge optimisation’ is aimed to help consumers to benefit from market signals through time variable tariffs but also taking into account grid charges. By optimising the capacity tariffs and individual network tariffs, the revenues can be optimised.
Next Kraftwerke Germany’s Italy project ‘Market renewables on multiple marketplaces’ is focussed on using live data and portfolio effects to increase forecasting quality. The proposal is to valorise flexibility on reserve power markets by generating revenues through capacity and activation fees.
Similarly, Next Kraftwerke Belgium’s ‘Using flexibility of customers as third party’ aims at flexibility exploitation by an aggregator without changing the supplier.
Next Kraftwerke Belgium’s other project ‘Trading PV and wind power’ model is focussed on trading energy from renewables on short term markets while enjoying portfolio effects.
Finally, in Portugal, EDP’s ‘Activation and marketing of end user flexibility’ activates and draws on customer flexibility on energy markets. In Portugal, the market design does not allow for aggregation but EDP can use flexibility from loads to decrease imbalance penalties of their own portfolio.
These models are now being tested in the respective countries, with the intention that they can be scaled up across the region.
Alongside the experience gained in the project so far, BestRES has developed a set of recommendations for policy makers to advance aggregation.
Among these, aggregator participation in the market should be encouraged by all member states and a robust legal framework should be in place to ensure their fair participation as equal market players and without unnecessary or hampering financial charges. Customers should be able to able to act through aggregators and those who do should not be disadvantaged. Aggregators should have access to customers’ data to be able to provide their services and such data should be properly protected.
Aggregators are important market players and aggregation is important not only in respect of demand response, but also in respect of generation.