olivoENERGY: Don’t kick the can down the road

DSOs should proactively ask the regulator for approval to invest in smart infrastructure, says Alicia Carrasco.
Published: Wed 19 Jun 2019

Spain is the first European country to achieve 100% domestic smart meters, but with the regulator only recently becoming fully independent, many regulatory changes are yet to come. Engerati speaks to Alicia Carrasco, a leading expert in energy flexibility and Spanish power market design and CEO of consultants olivoENERGY, about upcoming reforms in Spain designed to support the energy transition and how utilities should prepare.

E: Spain has been very successful with its smart meter rollout, why do you think that was?

AC: The main reason is that the Spanish government decided in 2007 that even without a cost-benefit analysis, by the end of 2018, 100% of the meters should be smart. So it was a mandate from the Spanish government and, of course, the industry's efforts. In fact, in Spain we have two communication protocols that are really supported in Spain, one is Prime, led by Iberdrola, and one is Meters and More, led by Enel and Endesa.

E: What is the next step now Spain has 100% smart meters?

AC: Following the successful introduction of smart meters in Spain, the information must be made available to consumers and third parties in a neutral, useful and harmonized manner. For this reason, the first step is to get all distributors to provide and share data in formats that are easy-reading and useful for customers.

100% smart meters deployed should allow high participation of demand. In this regard, the European Electricity Balancing Guideline requests the system operator to open the balancing markets for demand response aggregation. The TSO Red Eléctrica España has already sent a proposal to the regulator CNMC, in order to set the terms and conditions by which aggregation of demand response and storage can participate in the balancing markets. Minimum requirement is still to be approved by CNMC.

Parallel, and regarding flexibility of the system, the Spanish market Operator (OMIE) together with IDEA (Instituto para la Diversificación y Ahorro de la Energía), are defining a local flexibility market pilot project called IREMEL, to support DSOs to integrate renewables, more active consumers and distributed energy resources. A consultation ran from 26 February to 6 May, a webinar on the 14th of June presented the main highlights of the responses, and the next steps will be to choose five pilots that will take part in IREMEL.

 

E: What regulatory changes are needed to support the transition?

AC: Currently, many regulatory changes are being addressed in Spain. To focus on one, the electricity market rules need to be changed to allow for an independent aggregator under the clean energy package.

At the moment, many changes are taking place in the Spanish market. The national climate plan must be adopted by the end of the year. Storage is a central issue. The design includes 6GW of storage, of which 2.5GW will come from batteries and the remainder from hydropower. However, IDAE has already received recommendations that it should not narrow down to the technology, but have an overall 6GW storage capacity target, including innovative methods such as hydrogen.

There will be a new category for large energy consumers called electro-intensive and for which some new incentives will have to be defined.

Finally, we also see a strong potential for P2X, conversion technologies that allow for the coupling of power from the electricity sector for use in other sectors, to decarbonize the energy system, but still regulation is not clear in this sense.

In addition, the CNMC got more power from the government in January to become a truly independent regulator rather than just a “supervisor”. Major vertically integrated utilities were asked to change their names as it was confusing to the consumer. Gas Natural Fenosa became Naturgy and Iberdrola Distribución recently changed its name to i-de.

E: How are the utilities progressing with their transition plans?

AC: There is a constant investment in the grid, and utilities know they will have to use flexibility from distributed energy resources. That means investing in modernization. However, most investments are made only in the equipment instead of preparing for the use of flexibility. As always in life, some proactive players take action and start calculating their investment needs for flexibility. We believe the utility community should go directly to the regulator to clear the necessary investments rather than waiting for each other and kicking the can down the road.

E: What is the biggest challenge in Spain with regards to energy sector digitalisation?

AC: Spain was in a kind of hibernation with a view to a more ambitious energy transition. Many things need to be changed, and now the pace of change is increasing, and it's challenging to keep track. The CNMC has several regulations to release by the end of July - the challenge is to bring them all together at the same time. But the good news is that we arrive there.

E: What do you see as the most significant changes?

AC: What we have been witnessing for some time now is that there is a new way of thinking - and the most dramatic change will come from self-consumption and aggregation of distributed energy resources. If you have a PV installation at your home in Spain, you will be able to share your performance with those from next door - and that will significantly change the way consumers are involved. In addition, consumers will have the chance to inject into the grid part of the energy they produce but not consume and be remunerated for that. This and the new legal options for developing diverse models of flexibility will be the two main drivers of change.

E: Can you tell us about olivoENERGY’s activities and the association you head up?

AC: olivoENERGY is one of the leading experts in energy flexibility and market design at national and European level. olivoENERGY was founded to provide visionary guidance to all stakeholders in the sector on how current and upcoming regulations affect innovation and, consequently, market development. We function as an interface between all stakeholders, businesses and public policy, civil society and academia, we hope to help with our expertise defining suitable goals and solutions for the energy transition.

olivoENERGY has now become an adviser of the market development to several European and national administrations and a partner for multiple European companies that use olivoENERGY as a regulatory partner for their business development.

In addition to our consulting services, olivoENERGY is co-founder and executive director of the association “ENTRA aggregación y flexibilidad”, the leading Spanish association for regulatory changes regarding the involvement of end consumers and their resources in the energy markets. ENTRA provides its pooled know-how to develop a market-oriented and holistic approach that ensures the success of the Spanish energy transition.

Both olivoENERGY and ENTRA rely on the strong belief that a holistic approach to innovation in the integration of all renewable energy resources will lead to the success of a decarbonized energy sector. And that is what our generation owes to the future.