The energy transition has created new challenges for the energy market - from increased competition and new entrants to local production and consumption changes.
This trend of liberalised and digitised markets becomes a key issue for distribution system operators (DSOs), which must adapt to remain efficient and competitive, while still being agile and innovative.
Everything from electric vehicles to smart meters and renewables integration will directly impact how DSOs operate, and the key focus as always is how best to capitalise on the changes and ensure efficient, effective service.
In our webinar “Balancing the energy market: how will new central market systems affect you?”, Martijn Frints, Director of Consulting, Central Market Systems at CGI and Mattijs van den Hoed, Vice President Consulting, Central Market Systems at CGI, gave us their view of what the liberalised market means, what it will change and how DSOs should adapt.
Using key insights from these industry experts, we delve deeper into how DSOs can realise the value of new market structures through the lens of central market systems.
Three waves of the liberalised energy market
In the webinar, Van den Hoed explains how liberalisation tends to be viewed in terms of three waves. The first, he says, is the liberalisation of markets.
Previously, energy companies were responsible for both the transport and provision of energy towards retail customers.
The first step in moving from the traditional market to a liberalised market, van den Hoed explains, is offering consumers the freedom to choose their own energy supplier, thus separating the commercial side of the energy market and the regulated or complied part, allowing for a competitive retail market.
Frints explains: “We need processes in place that allow customers to suppliers, and that means that we need to be able to exchange information between the supplier and the DSO, and sometimes also the programme and metering responsible parties so that we make sure that we register and are in agreement of which supplier is now responsible for a specific metering point.”
With a new volume of players in the energy market, however, van den Hoed says that maintaining connections between the energy market players becomes difficult: This drives a shift from point-to-point information exchange to central market facilitation.
So, how does this come together? Van den Hoed says: “A central market system is set up either by the network or by a central facilitator, and that creates a simpler IT concept and provides a lot of benefits in the market. It provides a lot more standardisation and consistency in the data provided, reduces the cost, and creates a new, level playing field. It doesn’t really matter if you’re small or large, a new entry or incumbent, you can all enter the market at the same cost.”
New market structure driving central markets
The next wave of liberalisation is smart meters. Van den Hoed says: “A lot of countries are moving towards that smart meter model, replacing old meters to have more smart meters and engage customers more in understanding what their usage is and how they can use that information to be more energy efficient.”
The increase of smart meters, he says, naturally impacts the level of data processing and settlements, which the new market system must account for.
Frints explains how this metering data needs to be exchanged across a variety of parties including the suppliers and metering responsible parties, especially in markets with multitudes of DSOs.
He says: “If you don’t have a central platform, each supplier would have to connect to each DSO because the supplier is not regionally bound and can have DSOs across the country. Having a central platform would seriously simplify the communication.”
The final wave of liberalisation is the energy transition and consumer participation, with Van den Hoed citing the changes in energy distribution in relation to increased local energy production and distributed energy resources.
With the market and grid in its current state, this poses serious concerns across stakeholders and players: “All of that is coming into the network in a decentralised manner, and is much less controllable than it was. We’re going to see energy communities and congestion issues.”
Ensuring balance-responsible parties (BRPs) full visibility on the dynamic load created by renewables is key. Frints says: “The grid has never been designed to cope with this. It makes the prediction of load more and more complicated for the BRPs.”
This also adds further layers into the market, dividing suppliers into production and consumption for homes with locally produced energy.
A recognised way of combating the changing load to the grid will be through demand-response, which necessitates further information exchange and flexibility.
CGI’s central market system
All of this change creates a complex, heavily saturated information exchange network. To combat these trends and issues, CGI has developed their own central market system (CMS) to bridge the gap between current and future challenges.
In the webinar, van den Hoed explains how central market operators and associated systems are uniquely positioned for the provision of necessary information exchange and services required by all market participants, enabling an efficient and innovative market while ensuring a level playing field.
He says: “To move to flexibility at the consumer level where we’re talking about millions of devices, we need to have this whole process and flexibility commoditised such that it can be handled in a way that is almost transparent to a user.”
Based on the key issues of sustainability, security, new technologies, quicker time to market and regulatory changes enabling a more level playing field and affordable services, CGI has created its central market solution to handle a vast amount of market processes, and be able to flexibly change them.
Van den Hoed says: “All of these aspects are brought into our CMS, where all of the market participants connect to a single integrated platform which has modules to allow different functions to be used and added by ourselves as well as third parties.”
He continues: “It provides access to different interfaces such as a business-to-business interface for larger parties, but also web interfaces for small parties that only have maybe tens or hundreds of connections, and they don’t have the capability to invest in large IT solutions. We’re already seeing this being used in Denmark and the UK effectively.”
Addressing the new demands for security and data visibility, van den Hoed also explains how CMS tackles Europe’s general data protection regulation (GDPR): “It also has consumer access, which is very important both from a customer service perspective, but also from a GDPR perspective. Customers have the right to see who is using their data and what it’s being used for, and have the right to give consent.”
Another key layer is the functional element; the structural contract and master data that needs to be managed. This is where players can also register the flexibility characteristics and meter data management at a central level.
Van den Hoed says: “Having all of this master data allows us to do settlement in different ways for the entire market. This depends on how you manage your market, but where we see the best ability to innovate quickly and strongly, is where users have put together a complete platform with settlements and grid fee management included, which is going to be one of the key incentive capabilities of the grid operators to use electricity at non-peak hours.”
CGI has thus far seen great success with CMS, with Van den Hoed saying: “We’ve got 12 clients for CMS across the globe, who we work with in day-to-day business, and have a regular combined event with all of these parties to discuss together what is happening in the market and how to move forward.”
Watch the webinar
To learn more of the key use points for CMS and best practices for approaching the liberalised market, watch our webinar “Balancing the energy market: how will new central market systems affect you?” on-demand.