Sensible – DELIVERABLE

D5.4 Energy market interaction of business models

This project has received funding from the European Union's Horizon 2020 research and

innovation programme under Grant Agreement No. 645963.

Deliverable number: D5.4

Due date: 31.12.2017

Nature1: R

Dissemination Level1: PU

Work Package: 5

Lead Beneficiary: Empower

Contributing Beneficiaries: EDP, INDRA, INESC, USE

Editor(s): Olli Kilkki, Empower

Reviewer(s): André Leonide, Siemens

1 Nature: R = Report, P = Prototype, D = Demonstrator, O = Other

Dissemination level PU = Public PP = Restricted to other programme participants (including the Commission Services) RE = Restricted to a group specified by the consortium (including the Commission Services) CO = Confidential, only for members of the consortium (including the Commission Services) Restraint UE = Classified with the classification level "Restraint UE" according to Commission Deci-sion 2001/844 and amendments Confidential UE = Classified with the mention of the classification level "Confidential UE" according to Commission Decision 2001/844 and amendments Secret UE = Classified with the mention of the classification level "Secret UE" according to Commis-sion Decision 2001/844 and amendments

DOCUMENT HISTORY

D5 4_SENSIBLE_Deliverable_final

Version Date Description

0.10 14.06.2015 First version by EMP

0.20 29.1.2016 Reviewed ToC by EMP

0.30 26.4.2016 Detailed planning by EMP

0.40 26.8.2016 Sections 4.2 and 4.3 by USE

0.50 14.9.2016 Sections 4.1 and 5.2 by EDP/Indra

0.60 24.2.2017 Sections 2, 3 and 5 by EMP

1.0 27.2.2017 Final version by EMP

1.1 14.03.2017 Review done for first version by M.

Metzger (Siemens AG)

1.2 29.3.2017 Updates based on the review by EMP

and EDP

1.3 3.11.2017 Initial second version by EMP

1.4 17.11.2017 Final version by EMP

1.5 27.11.2017 Included further energy market contribu-

tions from EDP

1.6 7.12.2017 Updated based on review by André Le-

onide (Siemens AG)

TABLE OF CONTENT

C O N F I D E N T I A L until public release by the SENSIBLE project consortium

D5 4_SENSIBLE_Deliverable_final

1 Introduction 5

1.1 Purpose and Scope of the Deliverable ......................................... 5

1.2 References ..................................................................................... 6

1.3 Acronyms ..................................................................................... 10

2 State-of-the-Art of the energy markets 11

2.1 Market participants ...................................................................... 11

2.2 Market levels ................................................................................ 14

2.3 Energy market in the European Union ....................................... 27

3 Business model framework overview 41

3.1 Framework overview ................................................................... 41

3.2 Overview of the stakeholders ..................................................... 42

4 Enabling new energy market services 44

4.1 A framework for new electricity market products ..................... 44

4.2 Automatic market decision system ............................................ 51

4.3 Definition and design of new ancillary grid services ................ 54

5 Energy market connectivity of the business models 57

5.1 Connected energy market processes......................................... 57

5.2 Market interfaces ......................................................................... 65

6 Market structure development to enable new business models 68

6.1 Smart Building services .............................................................. 68

6.2 Microgrids and community services .......................................... 69

6.3 Distribution grid services ............................................................ 70

7 Conclusions 71

EXECUTIVE SUMMARY

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Executive Summary

This deliverable studies the connectivity and function of storage enabled energy busi-

ness models in the energy markets and is the outcome of task 5.4 Energy market inter-

action of business models. The results highlighted in this document continue the work of

deliverables D5.1 Storage enabled energy business model framework for demonstration

and D5.2a Storage enabled energy business models (preliminary analysis). D5.1 intro-

duced the key value propositions and stakeholders of the developed 11 business models

and in D5.2a the strengths, weaknesses and business environment specific aspects of

the business models were analyzed. The goal of this deliverable is to show how the

developed business models could interact with the energy markets.

D5.4 provides an overview of the market connectivity issues and requirements, and will

analyze the different market connectivity issues from the demonstrators’ point of views

in more detail. In addition, solutions for market connectivity are proposed and new market

structures will be analyzed that could potentially stimulate and foster the introduction of

new energy business models.

In this document, the energy market connectivity requirements were divided into five

categories: 1. Balance management; 2. Energy measurement; 3. Balance settlement; 4.

Customer information management and billing; 5. Trading. It was identified that the dy-

namic and distributed nature of the business models put pressure on the market partici-

pation scenarios. The new business models introduce new market players (consumers,

prosumers, buildings etc.) that will interact either locally amongst themselves or at the

centralized markets. Either way, this requires new approach to enable more transactive

customer information management, formation of balancing areas and trading frame-

works. The new business models also have more distributed resources that will be con-

trolled. This affects how energy measurement should be managed and how the meas-

urement data is handled amongst the market parties.

However, the energy market structures are currently under transition and several aspects

have to be addressed when considering the implementation of the business models. The

energy market transition affects the business model cases in multiple domains such as

the smart building services, microgrids and community services and distribution grid ser-

vices.

INTRODUCTION

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1 Introduction

1.1 Purpose and Scope of the Deliverable

This deliverable is the outcome of the task 5.4 Energy market interaction of business

models. In this document, an analysis is provided on how the business models devel-

oped in D5.1 and D5.2a can be connected to the different levels of the energy markets.

The document has been divided into five main sections. In Chapter 2, the State-of-the-

Art solutions and processes of the energy markets have been described. Chapter 3 gives

an overview of the business models that have been defined earlier in WP5. The main

stakeholders and value propositions are identified, in order to understand who needs to

interact with the energy markets and how. Based on the business models, chapter 4

describes a framework for new ancillary services. In Chapter 5 the energy market con-

nectivity requirements of the business models will be evaluated. Finally, in Chapter 6,

energy market structure developments to enable new business models are analyzed.

The D5.4 considers the energy market interaction of the business models. The purpose

is to identify all the relevant requirements for the energy market interaction of the busi-

ness models. In addition, the business models and demonstrators, and how they meet

the requirements of the energy market interaction, are evaluated.

INTRODUCTION

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1.2 References

1.2.1 Internal documents

D1.1 Energy storage domain roles & classification

D5.1 Storage enabled energy business model framework for demonstration

D5.2a Storage enabled energy business models (preliminary analysis)

1.2.2 External documents

[1] Power Market Players. https://www.next-kraftwerke.be/en/knowledge-hub/players-in-the-belgian-power-

market/

[2] What does a transmission system operator do? 2013. http://www.statnett.no/en/Market-and-operati-

ons/Market-information/Market-functions/What-does-a-transmission-system-operator-do/

[3] http://www.eurelectric.org/media/44143/role_of_dsos_as_information_hubs_final_draft_10-06-10-2010-

200-0001-01-e.pdf

[4] The Role of Distribution System Operators (DSOs) as Information Hubs. 2010. http://ec.eu-

ropa.eu/energy/en/news/commission-proposes-new-rules-consumer-centred-clean-energy-transition

[5] Imbalances (Electricity Balancing Market). 2017. http://www.emissions-euets.com/internal-electricity-

market-glossary/572-imbalances#yvComment572

[6] Balancing Service Provider (BSP). 2017. http://www.emissions-euets.com/-balancing-service-provider-

bsp

[7] Facts about the energy markets. 2010. https://corporate.vattenfall.com/about-energy/energy-markets/

[8] About the European Energy Regulators. http://www.ceer.eu/portal/page/por-

tal/EER_HOME/EER_ABOUT

[9] Wholesale market: Timeframes. 2016. https://www.nve.no/energy-market-and-regulation/wholesale-

market/wholesale-market-timeframes/

[10] Financial market. http://www.nordpoolspot.com/How-does-it-work/Financial-market/

[11] Day-ahead market. http://www.nordpoolspot.com/How-does-it-work/Day-ahead-market-Elspot-/

[12] Intraday market. http://www.nordpoolspot.com/How-does-it-work/Intraday-market/

[13] Balancing and Ancillary Services Markets. 2015. https://www.entsoe.eu/about-entso-e/market/balanc-

ing-and-ancillary-services-markets/Pages/default.aspx

[14] Imbalance Settlement (Electricity Balancing Market). 2017. http://www.emissions-euets.com/imbal-

ance-settlement

[15] Fingrid. Market places. 2015. http://www.fingrid.fi/EN/ELECTRICITY-MARKET/DEMAND-SIDE_MAN-

AGEMENT/MARKET_PLACES/Pages/default.aspx

[16] Market Design for Demand Side Response. 2015. https://www.entsoe.eu/Documents/Publications/Po-

sition%20papers%20and%20reports/entsoe_pp_dsr_web.pdf

[17] ENERGY STORAGE AND STORAGE SERVICES. 2016. https://www.entsoe.eu/Documents/Publica-

tions/Position%20papers%20and%20reports/entsoe_pp_storage_web.pdf

INTRODUCTION

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[18] Energy storage. 2017. https://ec.europa.eu/energy/en/topics/technology-and-innovation/energy-stor-

age

[19] Eyer, J. & Garth C. (2010) Energy Storage for Electricity Grid: Benefits and Market Potential Assess-

ment Guide - A Study for the DOE Energy Storage Systems Program [Online] Albuquerque, N.M.: Sandia

National Laboratories. Available from: http://www.sandia.gov/ess/publications/SAND2010-0815.pdf

[20] Rastler D. (2010) Electricity Energy Storage Technology Options - A White Paper Primer on Applica-

tions, Costs, and Benefits [Online]. Palo Alto, CA: EPRI – Electric Power Research Institute. Available

from: http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=000000000001020676

[21] PRICES AND COSTS OF EU ENERGY. 2016. https://ec.europa.eu/energy/sites/ener/files/docu-

ments/report_ecofys2016.pdf

[22] EU:n sähkön vähittäismarkkinat. 2015.

http://188.117.57.25/sites/default/files/erikoistyo_raininkonayttoversio.pdf

[23] Electricity prices for industrial consumers, second half 2015. 2016. http://ec.europa.eu/eurostat/statis-

tics-explained/index.php/File:Electricity_prices_for_industrial_consumers,_sec-

ond_half_2015_(%C2%B9)_(EUR_per_kWh)_YB16.png

[24] Iberian Electricity Market. http://www.mibel.com/index.php?lang=en

[25] The Iberian Energy Derivatives Exchange. http://www.omip.pt/

[26] The Iberian Energy Derivatives Exchange. http://www.omie.es/en/inicio

[27] Intraday market in MIBEL. http://www.omie.es/en/home/markets-and-products/electricity-market/our-

electricity-markets/daily-and-intradaily

[28] Redes Energéticas Nacionais. http://www.ren.pt/

[29] Red Eléctrica de España. http://ree.es/en

[30] Interruptibility Service. http://www.mercado.ren.pt/EN/Electr/ActivitiesServices/Interruptibil-

ity/Pages/default.aspx

[31] Interruptibility Service. http://www.ree.es/en/activities/operation-of-the-electricity-system/interruptibil-

ity-service

[32] C. M. Gouveia, Carlos L.; Lopes, João A. P.; Varajão, Diogo; Araújo, Rui E. (2013, 12 December

2013) Microgrid Service Restoration - The Role of Plugged-In Electric Vehicles. IEEE Industrial Electronics

Magazine. 26-41.

[33] Z. Wang, J. Zhong, D. Chen, Y. Lu, and K. Men, "A Multi-Period Optimal Power Flow Model Including

Battery Energy Storage," presented at the IEEE Power & Energy Society General Meeting, Vancouver,

BC, 2013.

[34] P. Wang, D. H. Liang, J. Yi, P. F. Lyons, P. J. Davison, and P. C. Taylor, "Integrating Electrical Energy

Storage Into Coordinated Voltage Control Schemes for Distribution Networks," IEEE Transactions on

Smart Grid, vol. 5, pp. 1018-1032, 2014.

[35] The Future Role of DSOs, A CEER Public Consultation Paper; Council of European Energy Regula-

tors, December 2014

[36] State of the art and trends review of Smart metering in electricity grdis, Noelia Uribe-Pérez, Luis Her-

nández, David de la Vega and Itziar Angulo, 2016.

INTRODUCTION

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[37] MODERNIZING THE ELECTRIC GRID (Chapter 3 – QER Report: Energy Transmission, Storage, and

Distribution Infrastructure, April 2015)

[38] DOE/EPRI 2013 Electricity Storage Handbook in Collaboration with NRECA. 2013.

http://www.epri.com/Pages/Understanding-the-Cost-Effectiveness-of-Energy-Storage.aspx

[39] Energy Management Control to meet MTRs in PV plants, Víctor Andrés Díaz, José Ramón Gordillo,

Carlos Infante and Manuel Lagares (http://www.greenpower.es/en/communication/new-detail/Energy-

Management-Control-to-meet-MTRs-in-PV-plants/)

[40] California Independent System Operator - Integration of Renewable Resources. 2007.

http://www.caiso.com/1ca5/1ca5a7a026270.pdf

[41] Control for Renewable Energy and Smart Grids. 2011. http://ieeecss.org/sites/ieeecss.org/files/docu-

ments/IoCT-Part1-06RESG.pdf

[42] Flexibility and Aggregation Requirements for their interaction in the market. 2014. http://www.eurelec-

tric.org/media/115877/tf_bal-agr_report_final_je_as-2014-030-0026-01-e.pdf

[43] Regulatory Recommendations for the Deployment of Flexibility. 2015. http://ec.europa.eu/en-

ergy/sites/ener/files/documents/EG3%20Final%20-%20January%202015.pdf

[44] DOE/EPRI 2013 Electricity storage Handbook in collaboration with NRECA, Abbas A.Akhil, Geor-

gianne Huff, Aileen B. Currier, Benjamin C. Kaun, Dan M. Rastler, Stella Bingqing Chen, Andrew L. Cotter,

Dale T. Bradshaw, and William D. Gauntlett.

[45] The economics of battery energy storage, how multi-use, customer-sited batteries deliver the most

services and value to customers and the grid, 2015

[46] Study on future information exchange solutions in the electricity retail market. 2014. http://www.fin-

grid.fi/fi/asiakkaat/asiakasliitteet/Datahub/Datahub_final_en.pdf

[47] DR pooli, 2015. Kysynnän jousto - Suomeen soveltuvat käytännön ratkaisut ja vaikutukset

verkkoyhtiöille (DR pooli). https://tutcris.tut.fi/portal/files/4776899/kysynnan_jousto_loppuraportti.pdf)

[48] Statnett, Fingrid, Svenska Kraftnät, Energinet.dk, 2016a, Nordic project on finer time resolution – In-

formation to stakeholders. November 2016. http://www.fingrid.fi/fi/ajankohtaista/Ajankohtaista%20liit-

teet/Ajankohtaisten%20liitteet/2016/Finer%20time%20resolution_information%20to%20stakeholders_No-

vember%202016_Final.pdf

[49] European Commission, 2016c, Commission regulation establishing a guideline on electricity balanc-

ing, EB – Version 10.10.2016. https://ec.europa.eu/energy/sites/ener/files/documents/informal_service_le-

vel_ebgl_10-10-2016nov.pdf

[50] Energy Authority, 2016, National Report 2016 to the Agency for the Cooperation of Energy Regulators

and to the European Commission, Finland. http://www.ceer.eu/portal/page/por-

tal/EER_HOME/EER_PUBLICATIONS/NATIONAL_REPORTS/National_Report-

ing_2016/NR_En/C16_NR_Finland-EN.pdf

[51] SGTF-EG3, 2015, Regulatory recommendations for the deployment of flexibility, January 2015.

https://ec.europa.eu/energy/sites/ener/files/documents/EG3%20Final%20-%20January%202015.pdf

[52] https://ec.europa.eu/energy/sites/ener/files/documents/2008_eu_wholesale_energy_market_histori-

cal.pdf

INTRODUCTION

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[53] Guidelines Facilitating Access to and Participation in GME’s Electricity Market. 2016. http://www.mer-

catoelettrico.org/en/MenuBiblioteca/Documenti/20041011GuidaMe.pdf

[54] Energy market trading systems in G6 countries. http://www.cs.rug.nl/~andrea/publications/ener-

gyMarketG6.pdf

[55] TRADING DOCUMENTS. 2017. http://www.epexspot.com/en/extras/download-center/trading_docu-

ments

[56] API. http://www.nordpoolspot.com/TAS/api/

[57] STORAGE BUSINESS MODELS IN THE GB MARKET. 2014. http://www.poyry.com/sites/de-

fault/files/374_elexon_storagebusinessmodelsandgbmarket_v2_0.pdf

[58] MARKET AND POLICY BARRIERS TO ENERGY STORAGE DEPLOYMENT. 2013. http://www.san-

dia.gov/ess/publications/SAND2013-7606.pdf

[59] Transactive Energy. 2014. www.cpuc.ca.gov/NR/rdonlyres/F67634A7.../PPDTransactiveEn-

ergy_30Oct14.pdf

[60] Smart Grid Security. 2012. https://www.enisa.europa.eu/topics/critical-information-infrastructures-and-

services/smart-grids/smart-grids-and-smart-metering/ict-inderdependencies-of-the-smart-grid

[61] How renewables will change electricity markets in the next five years. Energy policy 48 (2012): 64-75.

Schleicher-Tappeser, Ruggero.

[62] Best practices on Renewable Energy Self-consumption, EC, http://eur-lex.europa.eu/legal-con-

tent/LV/TXT/?uri=CELEX%3A52015SC0141

[63] Designing fair and equitable market rules for demand response aggregation, 2015, Eurelectric

http://www.eurelectric.org/media/169872/0310_missing_links_paper_final_ml-2015-030-0155-01-e.pdf

[64] Overview of Current Microgrid Policies, Incentives and Barriers in the European Union, United States

and China. Ali, Amjad, et al, Sustainability 9.7 (2017): 1146.

[65] Development options for distribution tariff structures in Finland, Honkapuro, Samuli, et al., European

Energy Market (EEM), 2017 14th International Conference on the. IEEE, 2017.

[66] DSO – tariffs: Current issues in Finland, Energiavirasto / Energy authority (Finland)

http://www.nordicenergyregulators.org/wp-content/uploads/2017/02/DSO-tariffs-in-Finland.pdf

INTRODUCTION

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1.3 Acronyms

ACER Agency for the Cooperation of En-ergy Regulators

ID Intraday (Market)

AEP American Electric Power IPEX Italian Power Exchange

aFRR Automatic Frequency Restoration Reserve

IPP Independent Power Producer

AMI Advanced Metering Infrastructure ISO Independent System Operators

API Application Programming Interface LCT Low-Carbon Technologies

BRP Balance Responsible Party LSE Load-serving entity

BSP Balance Service Provider LV Low Voltage

C&I Commercial and Industrial mFRR Manual Frequency Restoration Reserve

CAES Compressed air energy storage MG Microgeneration

CCGT Combined Cycle Gas Turbine MTR Minimum Technical Requirements

CEER Council of European Energy Regu-lators

MV Medium Voltage

CES Community Energy Storage PGE Pacific Gas and Electric

CHP Combined Heat and Power POI Point of Interconnection

CSV Comma Separated Values PPA Power purchase agreement

DA Day Ahead (Market) PPC Power Plant Controller

DESS Distributed Energy Storage Systems PPS Plug and Play Storage System

DG Distributed Generation PUC Public Utility Commission

DR Demand Response PV Photovoltaics

DSM Demand Side Management RES Renewable Energy Sources

DSO Distribution System Operator RES Renewable Energy Resources

DSO Distributed Storage RR Replacement Reserve

EC European Commission RTO Regional Transmission Organizations

EES Electrical Energy Storage SCE Southern California Edison

EEX European Energy Exchange SDG&E San Diego Gas and Electric

EPRI Electric Power Research Institute SG Smart Grid

ESCO Energy Services Company SMUD Sacramento Municipal Utility District

EU European Union T&D Transmission & Distribution

FCR Frequency Containment Reserve TOU Time-of-Use

FCR-D Frequency Controlled Disturbance Reserve

TSO Transmission System Operator

FCR-N Frequency Controlled Normal Oper-ation Reserve

UC Use Case

FERC Federal Energy Regulatory Com-mission

UCSD University of California, San Diego

ICT Information and Communication Technologies

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2 State-of-the-Art of the energy markets

In order to understand the energy market interaction of new storage enabled business

models, one has to be familiar with the market levels and participants. The markets can

be divided into wholesale and retail markets that have been described in sections 2.2.1

and 2.2.2. Both of the market levels have specific participants or stakeholders that are

active in the markets. These will be described in section 2.1 together with the partner

specific requirements and responsibilities.

2.1 Market participants

An overview of the different market participants and their roles/responsibilities has been

provided below in Table 1. The table introduces the main market participants that will

have an impact in the business models. The participants may be the owners of the busi-

ness models or they may influence them e.g. through regulation.

Table 1 Overview of the market participants

Market

Party

Role of the Party

(requirements/responsibilities)

TSO Transmission System Operator (TSO) is responsible for transmitting elec-

tricity generated in large power plants over long distances using high volt-

age lines [1]. TSOs are responsible for keeping the national power sys-

tems in balance, and thus responsible for the overall physical manage-

ment and control of the national power system. Technically this means

that the frequency is maintained at 50 Hz [2]. To maintain balance, TSOs

issue a reserve market where the required power can be exchanged. The

volume of power that TSOs trade in this manner is called regulating/bal-

ancing power [2]. The TSOs choose who will change their production or

consumption based on a price offer that the producers and consumers

have given for this. The producer or consumer who has given the lowest

price for the change that is required will be chosen [2]. Furthermore, TSOs

facilitate the power market by making it physically possible to transport

power from sellers to buyers. This is achieved by taking into account phys-

ical laws, which dictate for example that there must be balance between

the production and consumption of power at all times [2].

DSO Distribution System Operator (DSO) is responsible for distributing elec-

tricity to end customers typically at medium and low voltage levels [1].

Electricity distribution (and transmission) is considered to be a "natural

monopoly" activity, meaning that on this specific market segment one firm

can produce a desired output at a lower social cost than two or more firms

because of both high fixed costs and economies of scale [3]. This explains

why distribution tariffs are regulated by the national regulatory authorities

STATE-OF-THE-ART OF THE ENERGY MARKETS

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who also define approved level of profits that DSOs are allowed to make

[3]. Articles 15-20 of the 2003/54/EC Directive has set a requirement that

distribution of electricity has to be separated from other segments of the

electricity value chain i.e. generation and supply. DSOs have a key role

to play in enabling competitive retail markets in Europe since they facili-

tate supplier changes, renewables/DER integration in the grid, consum-

ers’ participation at the centralized markets and transparent/non-discrim-

inatory access to network and customer information [3]. DSOs are typi-

cally also responsible for metering services in their respective grid area.

DSOs measure the actual consumed and produced energy in the delivery

points and the data is afterwards used for billing and balance settlement

purposes.

BRP Balance Responsible Party (BRP) is a market participant or its chosen

representative responsible for its imbalances in the electricity market [4].

Electricity imbalance most commonly means deviations between genera-

tion, consumption and commercial transactions of a BRP within a given

imbalance settlement period [5]. More formally, imbalance is an energy

volume calculated for a BRP and representing the difference between the

allocated volume attributed to that BRP, and the final position of that BRP

and any imbalance adjustment applied to that BRP, within a given imbal-

ance settlement period [5]. Any imbalances after the closure of the intra-

day market should be balanced by TSOs within the regulating market

timeframe [5]. An Imbalance has a size and a direction, indicating the di-

rection of the settlement transaction between BRP and TSO, with nega-

tive indicating BRP's shortage, and positive indicating BRP’s surplus [5].

Each party injecting to or taking from the grid needs to have a BRP [1].

Each access point has to be assigned to a balancing group (also balanc-

ing perimeter) of a BRP. The BRP is responsible for quarter-hourly (or

hourly) balance between total injections and total offtakes (measurements

at all assigned access points, trades on the power markets, cross-border

import/export and power exchanges with other BRPs) [1].

BSP Balance Service Provider (BSP) is a market participant providing balanc-

ing services to its connecting TSO [6]. This can be either balancing energy

and/or balancing capacity [4]. Each balancing energy bid from a BSP has

to be assigned to one or more BRP [6]. Settlements between TSOs and

BSPs are among tasks and functions that are fundamental to the core

objectives of ensuring operational security and integrating the balancing

market. These tasks include the calculation of activated volume of bal-

ancing energy and for invoicing purposes also price information about

each activation needs to be included [6].

Aggrega-

tor

An aggregator is a market participant who combines several decentral-

ized production and demand units in one portfolio. The aggregator can

STATE-OF-THE-ART OF THE ENERGY MARKETS

D5 4_SENSIBLE_Deliverable_final 13/71

then operate the portfolio in a coordinated manner and deliver the same

services as a large central power plant. This gives access to markets (re-

serve power and electricity markets) that cannot be entered by individual

units of the portfolio. This way the portfolio can be traded on the relevant

markets while furthermore system services can be offered to the TSO or

DSO supporting overall grid operation and integration of renewables. [1]

Producer Typically, producers refer to parties who generate electricity/energy in

large centralized power plants. This can be a nuclear, coal fired, natural

gas, offshore wind park, CHP etc. [1]. In addition to power generation,

producers can offer ancillary services to TSOs to help them maintain the

balance on the transmission grid. Most important ancillary services are

reserve products (frequency containment and restoration reserves), volt-

age regulation and black-start capability. [1]

Energy

supplier

Like it was written earlier, articles 15-20 of the 2003/54/EC Directive has

set a requirement that different electricity segments of the electricity value

chain i.e. generation, distribution and supply have to be separated from

each other [3]. This has led to the introduction of energy suppliers who

sell the electricity to the end-consumer [1]. Consumers can choose which

supplier they prefer (depending on the tariffs and services offered) [1].

Each supplier has to have a BRP to manage the energy balance of the

supplier.

Con-

sumer

An end-user (industrial, commercial or residential) that uses electricity to

drive industrial processes, household appliances, provide lighting or heat-

ing etc. [1]. Acquires electricity through a supplier. Access point to the grid

facilitated by the DSOs who measure and settle the use of electricity.

Prosumer Prosumers are consumers who also have their own production of electric-

ity. Prosumers can take electricity from the grid when their own production

is not sufficient or inject electricity into the grid when they are self-suffi-

cient. Likewise, prosumers can have storage resources and the use of

electricity can be managed for example by aggregators in relation to mar-

ket prices.

Power

exchange In Europe, there are more than twenty different energy exchanges. The

most liquid exchanges are the European Energy Exchange (EEX) and the

Nord Pool Spot / Nasdaq Omx Commodities [7]. The main markets within

an energy exchange are the spot market, for short-term trading, and the

forward market, where the physical delivery of, for example, electricity or

gas takes place at a future date [7]. The actors on the spot market are

producers, retailers and traders as well as large end users [7]. Power Ex-

changes are used for anonymous and transparent energy trading. A mul-

tilateral trading platform is set up, where market participants submit de-

mand or supply bids. The market operator will aggregate all the demand

STATE-OF-THE-ART OF THE ENERGY MARKETS

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bids and all supply bids and clear the market once every 15min (in Bel-

gium). The products offered on the power exchanges are standard prod-

ucts for which the demand is high enough to ensure liquidity and a good

price. [1]

Trader/

broker

Energy trader/broker is a company or a division of a supplier that assists

in procuring of electricity (or natural gas). Traders do not own or distribute

energy nor are they allowed to sell energy to customers. They are simply

participants that act on the markets and can influence market prices.

Regulator Since the transmission and distribution grid are operated as natural mo-

nopoly, there has to be an independent party, which checks the TSO and

DSO are not abusing their market power. They also keep an eye on pro-

ducers and consumers, to make sure (large) players do not try to influence

the prices. [1] The independent national regulators cooperate on Euro-

pean level through Agency for the Cooperation of Energy Regulators

(ACER) and the Council of European Energy Regulators (CEER). ACER’s

focus is on what is required in the legislation and CEER does everything

else in energy regulation [8].

2.2 Market levels

2.2.1 Wholesale markets

2.2.1.1 Traditional power markets

The wholesale electricity markets can be divided into four main categories. These cate-

gories enable the stakeholders to plan and manage their energy production and con-

sumption on both long and short term. The four main markets are: First, the financial

forward market; Second, the Day-Ahead Market; Third, the Intraday Market; Finally the

balancing markets. In addition to these four, the participants may also have bilateral con-

tracts with each other.

The financial forward market is regulated by the Financial Supervisory Authorities and

is placed under financial legislation. The financial market enables market participants to

secure their positions months or even several years ahead of the delivery day [9]. In the

Nord Pool for example, the contracts have a time horizon up to six years, covering daily,

weekly, monthly, quarterly and annual contracts [10]. There is no physical delivery for

financial power market contracts. Cash settlement takes place throughout trading and/or

the delivery period, starting at the due date of each contract, depending on whether the

product is a futures or a forward [10]. Technical conditions such as grid congestion and

access to capacity are not taken into consideration when entering financial contracts.

However, buyers and sellers can with the help of the financial (forward) power market

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manage the risks associated to the physical market prices. [10] A well-functioning finan-

cial market and trade with power derivatives is important for market participants in the

physical power market because it allows them to off-set their positions and hedge future

income to adjust their risk profile. [9]

The Day-Ahead Market is the main arena for trading power. There, contracts are made

between seller and buyer for the delivery of power the following day, the price is set and

the trade is agreed. [11] The trading happens through a so-called implicit auction where

price and volume are calculated for every hour for the following day. This auction is based

on bids from both producers and consumers, and takes into account physical constraints

of cross-zonal capacity [9]. Consumers (typically suppliers) assess how much energy

they will need to meet demand the following day, and how much they are willing to pay

for this volume, hour by hour. The producers, on the other hand, assess how much power

they can deliver and at what price [11]. The bids are delivered through a trading system,

which feeds the information into a specialist computer system, which calculates the price.

Simply, the price is set where the curves for sell price and buy price meet. [11] By setting

price and volume for each bidding zone, the auction also determines the scheduled day-

ahead flows between bidding zones. The TSOs rely on the market clearing results when

planning next day’s operation of the grid. [9]

Figure 1 Formation of day-ahead electricity price

The system price is calculated based on the day-ahead market results and it represents

the unconstrained equilibrium price, i.e. by assuming there are no congestions in the

transmission grid. This price is used as reference for price setting in the financial market,

as well as for bilateral contracts and retail contracts in the market. The area specific

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prices, i.e. the day-ahead price for each bidding zone take into account the restrictions

in the transmission grid. These capacities are given daily by the TSOs. [9]

The Intraday Market supplements the day-ahead market and helps secure the neces-

sary balance between supply and demand [12]. Market participants can trade until one

hour before the production hour in order to correct possible imbalances (such as if it

becomes colder or more windy than anticipated) [9]. The market opens once the day-

ahead market has closed, for example in Nord Pool three hours after the day-ahead

market closure [9]. Different to the day-ahead market, the intraday market has continu-

ous trading and trading takes place every day around the clock until one hour before

delivery [9,12]. Prices are set based on a first-come, first-served principle, where best

prices come first – highest buy price and lowest sell price [12]. The intraday market is

getting increasingly important as more intermittent wind and solar power, which is pre-

dictable only with uncertainty, is introduced to the markets [12]. In this sense, the market

plays a key role enabling larger shares of renewables in the grids.

The balancing (regulating) markets are operated by the TSOs who are responsible for

balancing the system [9]. According to ENTSO-E, balancing refers to the situation after

markets have closed (gate closure) in which a TSO acts to ensure that demand is equal

to supply, in and near real time [13]. Efficient balancing markets ensure the security of

supply at the least cost and decrease the need of back-up generation [13]. Within Eu-

rope, there is a will to harmonize the balancing markets in order to increase competition,

liquidity and efficiency [13]. Balancing also includes ancillary services, which refers to a

range of functions, which TSOs contract so that they can guarantee system operation.

These include [13]:

- black start capability (the ability to restart a grid following a blackout)

- frequency response (to maintain system frequency with automatic and very fast

responses. Includes Frequency Containment Reserve (FCR) and Automatic Fre-

quency Restoration Reserve (aFRR))

- fast disturbance reserve and strategic reserves (which can provide additional en-

ergy when needed. Includes Manual Frequency Restoration Reserve (mFRR)

and Replacement Reserve (RR))

- the provision of reactive power (provided only locally and not traded) and various

other services

The balancing markets can be accessed by both generators and demand response [13].

The ancillary services/markets defined above, can be divided into primary reserves

(FCR), secondary reserves (aFRR) and tertiary reserves (mFRR, RR) [9]. FCR and

aFRR are activated automatically while mFRR is activated manually. Furthermore, FCR

is the fastest, while mFRR is the slowest with a response deadline of 15 minutes. mFRR

is activated depending on need and with an hourly price resolution. Gate closure time for

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bids in the balancing market is 45 minutes before time of production, but since mFRR

has a response time of 15 minutes, activation can happen within the production hour. [9]

An important aspect in the balancing markets is the imbalance settlement, which takes

place after the operational hour and is a TSO responsibility [9]. Imbalance settlement

means a financial settlement mechanism aiming at charging or paying Balance Respon-

sible Parties for their imbalances for each imbalance settlement period [14]. The general

principle of imbalance settlement is that all injections and all withdrawals should be cov-

ered by balancing responsibility and, depending on the state of the system, an imbalance

charge is imposed per imbalance settlement period on the BRPs that are not in balance

[14]. It typically aims at recovering the costs of balancing the system and include incen-

tives for the market to reduce imbalances while transferring the financial risk of imbal-

ances to BRPs [14]. This is especially important aspect also for storage enabled busi-

ness models and demand response. It is crucial to understand that all actions, made for

example by aggregators, affect the BRPs position and may cause it to be imbalance.

In addition to mentioned four marketplaces, power can also be exchanged through bi-

lateral contracts. A bilateral contract in the wholesale market is a market based contract

between a buyer and a seller with an agreed price, volume and time period [9]. Tradi-

tionally, power in the wholesale market was bought and sold through bilateral physical

contracts – both in short and long-term [9]. After the introduction of power exchange,

trading moved away from the physical bilateral contracts. However, there are still many

bilateral long-term contracts in the market, but most of these are financially settled [9].

For example in the Nordic countries, over 90 % of the physical power is traded through

Nord Pool and the Day-Ahead Market [9].

An overview of the described marketplaces and their relation to the delivery hour is de-

fined below in Figure 2.

Figure 2 Marketplaces for wholesale energy in relation to delivery hour

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The stakeholders identified in Table 1 can act on variety of different markets. Some of

the parties directly bid or ask power from the markets. Others are there to enable the

marketplaces to exist. Stakeholders like consumers and prosumers usually require a

middleman, like an aggregator, to represent them in the markets. All in all, Figure 3 high-

lights the main markets for each of the stakeholders.

Figure 3 Stakeholders in the different marketplaces

2.2.1.2 Markets for demand response and energy storage

Typically, the marketplaces, that were introduced earlier, have been designed for large-

scale production units. This means that for example the minimum acceptable bid size

and activation/measurement requirements assume that there is a large power plant (e.g.

hydropower, gas turbine, etc.) offering the capacity. This is highlighted in Table 2. Large

centralized power plants usually have measurement and control systems that are capa-

ble of providing accurate monitoring and control information without a need for additional

investments. This is not always the case with demand side management.

Anyhow, regarding market access for demand response, there is a possibility for DR to

participate in all relevant markets [16]. If the DR capacity is aggregated from consumers,

the markets can be accessed either directly via suppliers or through independent aggre-

gators. However, ENTSO-E identifies that many markets today still have barriers to entry

for DR players and that demand side management requires significant adaptations to

allow its participation in energy markets [16]. This is especially true for day-ahead and

intraday markets but not in the case of reserve capacity markets, for which DR participa-

tion is much easier [16]. This is partly because DR often has a high capacity value rela-

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tive to its energy value. Participation in reserve capacity markets therefore opens signif-

icant opportunities for the development of DR and provides an additional revenue stream

for DR capacities that can match technical requirements. [16]

Table 2 List of markets, products and market attributes for demand response in Finland

[15]

Marketplace/

product

Type of contract

Mini-mum size

Mini-mum time

Activation time

How many times acti-vated

Price level 2014

Po

we

r m

ark

ets

Day-ahead Hourly market 0,1 MW

1h 12h - Market price

Intraday Hourly market 0,1 MW

1h 1h - Market price

Balancing power market

Hourly market 10 MW Not

defined

15 minutes According to bids, several times per day

Market price

An

cill

ary

ma

rke

ts/r

ese

rves

Frequency controlled normal operation re-serve (FCR-N)

Yearly and hourly mar-kets

0,1 MW

Not defined

3 minutes Constantly 15,8€ / MW, h (yearly market) + price of electricity

Frequency controlled disturbance reserve (FCR-D)

Yearly and hourly mar-kets

1 MW Not defined

5 s / 50%

30 s / 100%,

when f < 49,9Hz or 30 s,

when f < 49,7Hz and 5 s,

when f < 49,5Hz

Several time per day

4,03€ / MW, h (yearly market)

Frequency controlled disturbance reserve ON/OFF model (FCR-D)

Long term contract

10 MW Not

defined

Instantly when

f < 49,5Hz

About once a year

~0,5€ / MW, h + 580€ / MWh + acti-vation fee 580€ / MW

Automated Fre-quency Restoration Reserve (aFRR)

Hourly market 5 MW Not

defined

Must begin within 30 s of the signal’s re-ception, must be fully acti-vated within 2 minutes

Several times a day

Hourly market +

energy price

Fast disturbance re-serve

Long term contract

10 MW Not

defined

15 minutes About once a year

~0,5€ /MW, h + 580€/MWh

Strategic reserves Long term contract

10 MW Not

defined

15 minutes Rarely -

When introducing demand side capacity in the energy markets, particular care must be

paid to preservation of the pivotal role of BRPs in the market design [16]. As it was ex-

plained earlier, BRPs are financially responsible for balancing their own positions and

thus they contribute to the balance of the entire electricity system. The growing share of

renewables and demand response will increase the complexity and risks related to the

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responsibilities of BRPs. Therefore, it is essential that BRPs are correctly informed about

the demand response actions so that they are able to fulfill their role and thereby avoid

counterbalancing and ensure proper forecasting. [16]

For storage resources, the participation on energy markets can be tricky because for

example European Commission and ENTSO-E see that storage is neither generation

nor demand [17,18]. Regarding energy market interaction, this will affect how storage is

handled in BRPs positions that consist of generation and demand portfolios, which have

to be matched. Eyer and Garth have identified below five categories for storage applica-

tions in the energy domain [19]. The issue of specifying storage as either generation or

demand will affect especially the category number two, ancillary services. For the other

four categories, there are no as significant barriers. Anyhow, their energy market inter-

action will also have to be taken into account since they affect billing and settlement.

Table 3 Five categories of electrical energy storage applications [19]

Another way to categorize storage participation/interaction in the energy markets is to divide it into groups from generation and system-level applications to T&D system applications and all the way to end-user applications. This is established in EPRI’s report, whose overview is defined in Table 4 [20].

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Table 4 Definition of Energy Storage Applications [20]

Value Chain Application Description

Generation &

System-

Level Appli-

cations

T&D System

Applications

End-User

Applications

1 Wholesale Energy

Services

Utility-scale storage systems for bidding into en-

ergy, capacity and ancillary services markets

2 Renewables Inte-

gration

Utility-scale storage providing renewables time

shifting, load and ancillary services for grid inte-

gration

3 Stationary Storage

for T&D Support

Systems for T&D system support, improving T&D

system utilization factor, and T&D capital deferral

4 Transportable Stor-

age for T&D Sup-

port

Transportable storage systems for T&D system

support and T&D deferral at multiple sites as

needed

5 Distributed Energy

Storage Systems

Centrally managed modular systems providing in-

creased customer reliability, grid T&D support and

potentially ancillary services

6 ESCO Aggregated

Systems

Residential-customer-sited storage aggregated

and centrally managed to provide distribution sys-

tem benefits

7 C&I Power Quality

and Reliability

Systems to provide power quality and reliability to

commercial and industrial customers

8 C&I Energy Man-

agement

Systems to reduce TOU energy charges and de-

mand charges for C&I customers

9 Home Energy Man-

agement

Systems to shift retail load to reduce TOU energy

and demand charges

10 Home Backup Systems for backup power for home offices with

high reliability value

T&D=Transmission and Distribution; C&I=Commercial and Industrial; ESCO=Energy Services

Company; TOU=Time of Use

A key step in the EPRI’s report is the mapping between applications/benefits and the technical and energy storage performance requirements for each application [20]. This feature enables to see what kind of energy market interaction requirements there is for example in the wholesale energy market services. An overview of this study is shown in Table 5.

Table 5 General Energy Storage Application Requirements [20]

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Application Description Size Duration Cycles Desired

Lifetime

Wholesale

Energy Ser-

vices

Arbitrage 10-300 MW 2-10 hr 300-400/yr

Ancillary Services See note 2 See note 2 See note 2 See note 2

Frequency regulation 1-100 MW 15 min >8000/yr 15 yr

Spinning reserve 10-100 MW 1-5 hr 20 yr

Renewables

Integration

Wind integration: ramp

& voltage support

1-10 MW

distributed

100-400 MW

centralized

15 min 5000/yr

10,000 full

energy cy-

cles

20 yr

Wind integration: off-

peak storage

100-400 MW 5-10 hr 300-500/yr 20 yr

Photovoltaic integra-

tion: time-shift, voltage

sag, rapid demand sup-

port

1-2 MW 15 min-4 hr >4000 15 yr

Stationary

T&D Support

Urban and rural T&D

deferral. Also ISO con-

gestion mgt.

10-100 MW 2-6 hr 300-500/yr 15-20 yr

Transporta-

ble T&D

Support

Urban and rural T&D

deferral. Also ISO con-

gestion mgt.

1-10 MW 2-6 hr 300-500/yr 15-20 yr

Distributed

Energy Stor-

age Systems

(DESS)

Utility-sponsored; on

utility side of meter,

feeder line, substation.

75-85% ac-ac- effi-

cient.

25-200 kW 1-phase

25-75 kW 3-phase

Small footprint

2-4 hr 100-150/yr 10-15 yr

C&I Power

Quality

Provide solutions to

avoid voltage sags and

momentary outages.

50-500 kW <15 min <50/yr 10 yr

1000 kW >15 min

C&I Power

Reliability

Provide UPS bridge to

backup power, outage

ride-through.

50-1000 kW 4-10 hr <50/yr 10 yr

C&I Energy

Management

Reduce energy costs,

increase reliability. Size

50-1000 kW

Small footprint

3-4 hr 400-

1500/yr

15 yr

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varies by market seg-

ment.

1 MW 4-6 hr

Home En-

ergy Man-

agement

Efficiency, cost-sav-

ings

2-5 kW

Small footprint

2-4 hr 150-400/yr 10-15 yr

Home

Backup

Reliability 2-5 kW

Small footprint

2-4 hr 150-400/yr 10-15 yr

1. Size, duration, and cycle assumptions are based on EPRI’s generalized performance specifications

and requirements for each application, and are for the purpose of board comparison only. Data may

vary greatly based on specific situations, applications, site selection, business environment, etc.

2. Ancillary services encompass many market functions, such as black start capability and ramping ser-

vices, that have a wide range of characteristics and requirements.

2.2.2 Retail markets

2.2.2.1 Roles and responsibilities

After the liberalization of energy markets, the supply of electricity was separated from

generation and distribution. This has led to multiple stakeholders in the retail markets.

The main relevant stakeholders in the storage enabled business models are retailers,

DSOs, industrial/commercial clients and prosumers/consumers.

In the business models and on retail markets in general, retailers are responsible for

supply/sales of electricity to end customers. The retailers procure electricity from the

wholesale markets and supply that to the households or commercial/industrial custom-

ers. In addition to that, retailers may provide additional services like flexibility manage-

ment, like it is done in the Évora demonstrator.

Distribution System Operators are responsible for delivering the electricity to end cus-

tomers. An important responsibility for DSOs, regarding retail markets, is to measure the

actual consumption and production amounts in the delivery points. This information is

used for invoicing and balance settlement purposes. Likewise, in the integration of re-

newables, DSOs play a key role, since most of the capacity is connected to medium or

low voltage levels.

Large industrial or commercial companies are an important stakeholder in the retail

markets as they consume a significant part of the overall electricity. They can acquire

electricity either through retailers or they may be independent by procuring electricity

directly from the wholesale markets. Large companies or sites are also able to provide

substantial amounts of flexibility to the markets, like is the case in Nuremberg demon-

strator.

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The European Commission identifies in their new winter package that consum-

ers/prosumers will play a key role in the future energy systems [4]. Consumers will not

only use electricity but they will introduce renewables in the distribution grids and thus

affect the retail market. The regulation and subsidies for renewables will have an impact

on consumer behaviour and the way in which new technology and services will be

launched.

2.2.2.2 Pricing and tariffs

Since the retail markets’ main task is to enable end customers to consume electricity, it

is natural that the corresponding pricing structures and tariffs are considered. The pricing

structures affect how people consume electricity, how energy efficiency and demand re-

sponse services are conceived and how attracting it is to develop new technology for the

energy markets.

The Figure 4 below highlights the three components of electricity retail price. End cus-

tomers price consist of energy, network and tax/levy components. Each of the compo-

nents can be divided into more detailed sub-components, which are also visible in Figure

4.

Figure 4 Components, sub-components and elements of consumer prices for energy [21]

Some of the cost components are easier to control and manage than others. Many de-

mand response services for example concentrate on transferring energy consumption

from expensive to cheap hours. Looking at the retail cost structure these actions only

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address one of the three components, namely the energy part. Therefore, for the end

customer it is significantly more profitable if the storage enabled business models can

tackle also network and tax components by decreasing the overall intake from the grid.

The distribution and evolution of retail price components in EU has been described below

in Figure 5. This figure clearly shows the growing share of taxes and levies, which like

said can only be tackled with decreased intake from the grid.

Figure 5 EU distribution and evolution of retail price components between 2008 and 2015

[21]

The overall electricity retail price development in EU countries is highlighted in Figure 6.

The overview shows quite significant change in the average price from 2008 to 2015.

The average price has increased approximately from 0,16 €/kWh to 0,20 €/kWh, which

means 20 - 25% increase [21]. The household prices vary from 0,10 €/kWh to 0,30

€/kWh.

The price development means that an average household consuming 4000 kWh energy

per year will have a total yearly energy bill of 800 € (0,20 €/kWh). A typical demand

response or energy efficiency service usually promises a minimum 10 % savings in en-

ergy costs. Regarding the business models, this results in an 80 € savings per year for

the end customer, who therefore would be able to pay just under 7 € per month for the

service. This is naturally in the case, that the service provider cannot deliver any addi-

tional benefits for example in comfort.

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Figure 6 Total electricity price development for households [21]

The retail price structures differ significantly between the EU countries (see Figure 7).

Some countries have substantial subsidies for renewable energy, which can directly be

seen in the retail prices. Take Denmark and Germany for example. Both countries have

retail prices where over 50 % of the costs come from taxes and levies. At the other end

is UK where under 5 % of the retail costs are taxes and almost 75 % is made up of energy

supply. These price differences will have a significant impact on the business models

that can be offered to end customers.

Figure 7 Household electricity price in selected countries in 2014 (€ per kWh) [22]

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In addition to household electricity prices, the storage enabled business models will have

to take into account separate prices for industrial consumers. Depending on the scope

of the business model and its key customer segments, it might be more relevant to con-

sider the prices shown in Figure 8. As with households, also the retail prices for industrial

customers have significant variance in the amount of taxes and levies [23]. Still, same

countries top the list in both household and industry energy costs. For industrial clients

in EU, the electricity prices vary roughly from 0,05 €/kWh to 0,15 €/kWh [23].

Figure 8 Electricity prices for industrial consumers, second half 2015 (EUR per kWh) [23]

2.3 Energy market in the European Union

This chapter aims to present key numbers about the electricity consumption and produc-

tion as well as electricity prices for the European Union countries. Then, a comparison

on wholesale electricity prices for the countries around Europe is performed and the his-

torical data of the last three years is depicted for each market. Furthermore, it is provided

some additional information on that markets.

2.3.1 Electricity consumption and generation in the European countries

Electricity consumption in European Union has been decreasing over the last years as it

is shown in Fehler! Verweisquelle konnte nicht gefunden werden., although a slight

increase in 2015 has been noticed. During the period from 2005 to 2014, the consump-

tion of electricity fell in the EU-28 by 6 %.

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Figure 9 - Electricity consumption in European Union (28 countries) between 2006 and

2015. Source: Eurostat

Germany, France, United Kingdom, Italy and Spain are the countries with higher con-

sumption of electricity, although the consumption has decreased between 2006 and

2015 as well.

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Figure 10 - Electricity consumption in the European countries. Source: Eurostat

Regarding electricity generation mix in 2016, Norway, Austria, Hungary, Luxemburg, and

Sweden are the countries with higher electricity generation from renewables. On aver-

age, more than 20% of electricity was produced from renewable sources in the European

Union.

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Figure 11 - Breakdown of electricity production by source, 2016. Source: Eurostat.

During the second semester of 2016, the highest electricity price for households in the

European Union (28 counties) was recorded in Denmark (EUR 0.308 per kWh), followed

by Germany (EUR 0.298 per kWh) and Belgium (EUR 0.275 per kWh). On the hand,

Bulgaria (EUR 0.094 per kWh), Hungary (EUR 0.113 per kWh) and Lithuania (EUR 0.117

per kWh) were the countries with the cheapest electricity prices.

Figure 12 - Electricity prices for households in 2016 semester 2 (EUR kWh)

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Figure 12 also demonstrate that the proportion of taxes varies widely among countries.

The lowest amount of taxes contributions is paid in Malta (4.8 %) where a low VAT rate

is applied to the basic price and no other taxes are charged to household consumers. In

opposition, in Denmark, the taxes and levies account for 67.8% of the total electricity

price paid by households.

On the other hand, if one considers the purchasing power standards (PPS)2, Portugal,

Germany, Romania and Spain are the countries where electricity presents the highest

impact on the available budget of consumers.

Figure 13 - Electricity prices for household consumers, 2015s2 (PPP kWh)

2.3.2 Wholesale electricity markets in Europe

There are several wholesale electricity markets around Europe, exhibiting different rules

and prices. The map bellow depicts the price range of the wholesale baseload electricity

prices for the second quarter of 2017, where we can notice that the southern counties

such Portugal, Spain and Greece along with the UK are the ones where the wholesale

price is higher, ranging from 44,9 to 47.7€/MWh. In opposition the countries in the North

benefits from the lowest prices of the Nordpoolspot market.

2 PPS is an artificial common reference currency unit that eliminates price level differences between coun-

tries. One PPS thus buys the same given volume of goods/services in all countries (Eurostat definition).

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Figure 14 - Comparison of average wholesale baseload electricity prices, second quarter

of 2017. Source: Quarterly report on European electricity markets, Market Observatory for

Energy of the European Commission, 2017

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In the following sections, a more detail information about the electricity prices in the most

relevant European wholesale markets is presented as well as some details about its

functioning.

2.3.2.1 Central Western Europe (Austria, Belgium, France, Germany, the Nether-

lands, Switzerland)

One of the most important market in Europe is the EPEX SPOT3, which covers France,

Germany, Austria and Switzerland and it accounts for more than one third of the Euro-

pean power consumption.

EPEX SPOT is 100% owner of APX Group, operator of the spot power markets in the

Netherlands (APX Power NL), Belgium (Belpex) and in the United Kingdom (UKPX).

Figure 15 - Monthly traded volumes and prices in Central Western Europe. Source: Market

observatory for Energy of the European Commission

The CEW prices typically ranges between around 25 and 40 €/MWh, except during the

last months of 2016/ first month of 2017 mainly to weather conditions (colder tempera-

tures and low wind). Typically, the price goes down during summer and reach higher

values during the winter.

For the EPEX day-ahead market, a daily blind auction occurs once a day, 365 days a

year. There is a floor price of 500€/MWh and a cap price of 3000€/MWh. The publication

time is as soon as possible from 12.42 pm CET for all markets but Switzerland, where it

should be as soon as possible from 11.10 am CET. The order book opens 45 days in

3 http://www.epexspot.com/en/company-info/about_epex_spot

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advance for France, Germany, Austria and Switzerland, 14 days for Netherlands, Bel-

gium and UK and closes one day before delivery at 12 pm CET (all markets but Switzer-

land, where it closes at 11 am.

Regarding the intraday market, it is divided into continuous and auction trading. The cap

and floor prices are the same as the intraday.

For the APX4, the rules are similar. The minimum price of any Day-Ahead Market instru-

ment is -500 €/MWh and the maximum 3000 €/MWh. Figure 16 summarises the activity

time line for the day ahead market.

Figure 16 - Activity Time Line for the APEX Spot Market. Source:

https://www.apxgroup.com/

Regarding the intraday, the APX Power NL is coupled to the Belpex Continuous Intraday

Market in Belgium and the Nord Pool Spot intraday markets in the Nordic region.

The Intraday market offers APX Power NL members the opportunity to continuously

trade power products in hourly intervals as well as freely definably block orders up to 5

minutes prior to delivery.

The floor price -9 999.90 €/MWh and the cap price is 9 999.90 €/MWh.

Concerning the APX Power UK, the floor and cap prices are the same as in Netherlands.

The market closes at 11 am and the preliminary market results are known at 11:42 on

the day prior to delivery.

4 https://www.apxgroup.com/

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In addition, the market members at UK have also the opportunity to submit half hour bids

in a local Day-Ahead auction (double-sided blind auction) at 15:30 and the market results

are published 30 minutes later.

The physical power exchange for Belgium is the Belpex5 and the Day-Ahead market is

coupled with APX in the Netherlands and EPEX Spot in France and Germany. The order

books close at 12:00 and the results are published under normal circumstances no later

than 13:05. As for the other APX countries, the floor price is -500 €/MWh and the cap

price is 3000 €/MWh, whereas for the intraday the prices are between -9999.99 and

9999.99 €/MWh.

2.3.2.2 British Isles (UK, Ireland)

Figure 17 - Monthly electricity exchange traded volumes and average day-ahead wholesale

baseload prices in the UK and Ireland. Source: Market observatory for Energy of the Euro-

pean Commission

The monthly average price in the UK and Ireland ranges between around 35 and

70€/MWh over the last three years. More recently, in the autumn of 2016, the prices

increased rapidly but in the beginning of the 2017 the trend was reversed and currently

the prices continue to going down after the end of the heating season.

5 https://www.belpex.be/

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As explained above, the UK market is operated by the APX power spot exchange, spe-

cifically by the APX Power UK. The floor and cap prices are the same as in the APEX

countries (-500€/MWh and 3000€/MWH, respectively). The market closes at 11 am and

the preliminary market results are known at 11:42 on the day prior to delivery.

The wholesale electricity market in Ireland and North Ireland is the Single Electricity Mar-

ket6 (SEM), which operates with dual currencies and in multiple jurisdictions, being the

first market of its kind in the world. In this case, the floor price was set at -100€/MWH

and cap price was set at 1000€/MWh.

2.3.2.3 Northern Europe (Denmark, Estonia, Finland, Latvia, Lithuania, Norway,

Sweden)

Figure 18 - Monthly traded day-ahead volumes and prices in Northern Europe. Source:

Market observatory for Energy of the European Commission

In the Northern Europe, the global trend indicates a decrease of electricity price over the

last months. The monthly average price in the NordPool market typically varies between

around 20 and 35€/MWh. The summer of 2015 was an unusual period where average

monthly prices were as low as 10€/MWh due to an extraordinary hydro power generation

in the electricity mix which reduced the generation costs.

The Nordpool market has been integrating the Nordic and Baltic markets since the de-

regulation of its individual markets and the regional electricity capacity connections have

been improved over the years.

6 http://www.sem-o.com/Pages/default.aspx

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For the day ahead market, bids have to be submitted until 12:00 CET and the hourly

prices are typically announced at 12:42 CET. Regarding the intraday market, it embraces

not only the Nordic and Baltic countries, but also the UK and German markets.

2.3.2.4 Apennine Peninsula (Italy)

Figure 19 - Monthly traded day-ahead volumes and prices in Italy. Source: Market obser-

vatory for Energy of the European Commission

In the last three years, the monthly average wholesale price ranged between 35 to 70

€/MWh. Typically, the price is higher during winter periods due to lower penetration of

renewables and hydro generation, thus the external dependence is magnified. January

2017 recorded a new daily price peak of 102€/MWh (the last one occurred in July 2015)

due to higher electricity demand since the temperatures were almost 3 degrees Celsius

lower than the January monthly average since 1975.

For the day-ahead market in Italy, bids have to be submitted until 12:00 of the day before

and the results are announced at 12:55. The intraday comprises five sections. The first

one open after the closing of the Day ahead at 12:55 of the day before and closes at

3pm of the same day, being the results made available at 3:30 pm. The last one closes

at 11h45 pm of the day of the delivery. In addition, the Daily Products Market for the

trading of daily products with the obligation of energy delivery takes place in a continuous

mode.

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2.3.2.5 Iberian Peninsula (Spain and Portugal)

Figure 20 - Monthly electricity exchange traded volumes and average day-ahead prices in

the Iberian Peninsula. Source: Market observatory for Energy of the European Commis-

sion

Over the last three years, the monthly average wholesale electricity prices were usually

around between 40 and 60 €/MWh, with the exception of the two periods well stressed

in Figure 20 in 2014 and 2016, where the prices drop significantly. During the first months

of 2016, the prices started to shrink due to the rainy season which potentiated the hydro-

power generation. In addition, in the beginning of 2017 the prices rose above 60€/MWh

and reached the 75€/MWh due to higher domestic generation costs and less imports

from the CWE region.

OMIE7 manages the spot market on the Iberian Peninsula 365 days a year. Electricity

cannot be sold at negative values and the cap price is 180€/MWh, much lower than the

highest price allowed in the other European markets. OMIE encompasses the Day-

ahead and the intraday markets, although around 90% of energy is traded within the DA.

Bids have to be submitted until 12:00 for the day-ahead while the intraday market com-

prises six sessions closing at 18:45 (D-1), 21:45 (D-1), 01:45, 04:45, 08:45 and 12:45.

7 http://www.omie.es/en/inicio

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2.3.2.6 Central Eastern Europe (Czech Republic, Hungary, Poland, Romania, Slo-

vakia, Slovenia)

Figure 21 - Monthly traded day-ahead volumes and prices in Central Eastern Europe.

Source: Market observatory for Energy of the European Commission

The monthly average baseload price in Central and Eastern Europe (CEE) over the last

three years is being quite stable, ranging mainly between 30 to 40€/MWh. The prices in

January 2017 were higher than usual due to higher pressure on the electric system be-

cause of lower temperatures (10 degrees Celsius lower compared to the normal long-

term average).

The day-ahead markets between the Czech Republic, Slovakia and Hungary are cou-pled since 2012, which improved the price stability in the region and the price conver-gence towards regional markets (it increased from 11% to 82% after market coupling in September 2012). In 2014, the Romanian DA started functioning in coupling mode as well.

The TGE (Polish power Exchanger) operates the market on Poland and the BSP Re-

gional Energy Exchange operates the wholesale market in Slovenia.

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2.3.2.7 South Eastern Europe (Greece and Bulgaria)

Figure 22 - Monthly traded day-ahead volumes and prices in Greece and Bulgaria. Source:

Market observatory for Energy of the European Commission

Over the last months, the monthly day-ahead price in Greece was around 50€/MWh,

although in the first quarter of 2015 the prices rose up to about 60€/MWh and in the first

quarter of 2016 the prices shrunk to 40€/MWh. The weather conditions, similarly to the

other countries in Central Europe, were responsible for the higher prices in January

2017. The price in Bulgaria follow the same trend, however it is roughly 10€/MWh

cheaper.

The Hellenic Electricity Market Operator, LAGIE8, is the Day-Ahead Mandatory Pool in

which energy and ancillary services are simultaneously traded and are dispatched on

the available units. The price cap for the energy offers is €150/MWh. Regarding IBEX9,

the Independent Bulgarian Energy Exchange, it was established January 2014, as a

fully-owned subsidiary of the Bulgarian Energy Holding EAD.

8 http://www.lagie.gr/nc/en/home/

9 http://www.ibex.bg/en/

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3 Business model framework overview

3.1 Framework overview

In D5.1 Storage enabled energy business model framework for demonstration separate

business models were prepared for each project use case. The business models were

prepared based on the Business Model Canvas approach, which consist of nine key

components that are crucial in every business model. These components have been

described below in the Figure 23.

Figure 23 Business model framework template

The SENSIBLE project includes 11 use cases, which are distributed among the three

demonstrators. Therefore, also the business model framework includes 11 separate

business models which are analyzed based on their unique value propositions and re-

quirements. The main goal for the business model framework was to identify all the key

customer segments and stakeholders but also to define the key value propositions for

each demonstrator. Below in Table 6 are described the main scopes or value proposi-

tions of the business models. As it can be seen, balancing demand and supply is a sig-

nificant topic for majority of the use cases. This affects also how the business model

interaction with the energy markets is analyzed in this deliverable.

Table 6 Scopes of the SENSIBLE business models

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Balancing demand and supply

Grid manage-ment

Energy efficiency

NU

REM

BER

G Managing building energy flexibility X X

Increased percentage of self-con-sumption

X

Optimized energy procurement X X

NO

TTIN

G-

HA

M

Microgrid PV management X X

Enabling an independent energy community

X X

Microgrid energy market X

EVO

RA

Flexibility and demand side manage-ment in retail market

X X

Optimizing the MV Distribution Net-work

X

Optimizing the operation of storage devices in the LV network

X X

Islanding Operation of Low Voltage Networks

X X

Microgrid Emergency Balance Tool X X

3.2 Overview of the stakeholders

The key customer segments of the business models have been highlighted in Table 7.

The customer segments clearly show the scopes of the demonstrators but also how they

are differentiated from each other. The Évora demonstrator is mainly focused on opti-

mizing grid operations and therefore it’s obvious key customers are DSOs. Nevertheless,

Évora also introduces a novel use case (UC2) for flexibility participation at the energy

markets. This use case addresses the needs of retailers but also DSOs. The demonstra-

tor in Nottingham targets community services and therefore especially prosumers, con-

sumers and other community members are targeted with its business models. The Nu-

remberg demonstrator attracts both DSOs and energy suppliers/retailers since it can of-

fer flexibility through various intermediates. From the overall project point of view, the

mix of different business models provides an interesting opportunity to combine various

elements of the developed services to define and deliver the best possible solution.

Table 7 Business model framework key customer segments

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TSO DSO Sup-plier

BRP Com-

munity Pro-

sumer Con-

sumer

NU

REM

-

BER

G

Managing building energy flexibility X X X X

Increased percentage of self-consumption X X

Optimized energy procurement X X X X

NO

TTIN

G-

HA

M

Microgrid PV management X X X

Enabling an independent energy commu-nity

X X X X

Microgrid energy market X X X X X X

ÉVO

RA

Flexibility and demand side management in retail market

X X X X X X X

Optimizing the MV Distribution Network X X X

Optimizing the operation of storage devices in the LV network

X X

Islanding Operation of Low Voltage Net-works

X X X

Microgrid Emergency Balance Tool X X X X

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4 Enabling new energy market services

4.1 A framework for new electricity market products

In this section, a framework will be introduced for new market products and rules. The

new products will foster small-scale storage integration and explore micro-grid and multi-

micro-grid concepts in the electricity market. This framework will specifically take into

account the Iberian electricity market framework since it is highly linked with the flexibility

management use case in Évora.

4.1.1 Brief overview of the Iberian electricity market

4.1.1.1 Mibel market (day ahead and intraday)

The Iberian Electricity Market, also known as MIBEL, aims to promote an integration of

Portuguese and Spanish electrical systems and comprises two markets: the forward

market managed by OMI-Polo Português, SGMR (OMIP) and the daily and intraday mar-

kets managed by OMIE [24,25,26]. Mibel constitutes a marginal pricing market, where

the equilibrium between supply and demand set the price and the trading volume. Taking

into account the goals of SENSIBLE project, only daily and intraday are detailed.

For the Day Ahead (DA) market, bids for the next day are submitted until 12 am and then

they are processed using the European Algorithm called EUPHEMIA. The time resolu-

tion is one hour. The DA market is responsible to trade 84% - 90% whereas the Intraday

(ID) represents 10% - 16% of the total volume traded within organized markets. Actually,

markets agents typically need ID to correct deviations and make small adjustments. Six

adjustment sections are held according to the sequence depicted in Figure 24.

Figure 24 Intraday market in MIBEL. Time horizon for the six sessions [27]

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It is also important to notice that negative prices are not allowed, i.e., the floor price is 0

€/MWh and the cap price is 180,3 €/MWh. Furthermore, when congestion appears be-

tween Portugal and Spain, market splitting is enforced allowing two price areas. Most of

the time Portuguese price is higher, however during 2015 the price difference was lower

than 1€/MWh for 98,1% of the hours.

4.1.1.2 Ancillary services / Complementary services

In Portugal and Spain, reserves are managed by TSO: REN in Portugal and REE in

Spain [28,29]. In Portugal, reserve markets are specifically designed for hydro and ther-

mal power plants. In Spain, all generators can participate into balancing markets, as long

as they succeed in the test procedures.

Primary reserve

It does not constitute a real market since it is compulsory and not paid. All generators

must allow for a regulation of 5% of its nominal capacity. Generators connected to the

transmission grid who do not have the capacity for primary regulation must contract it

directly to other entities.

Secondary reserve

The secondary reserve is allocated the day before and this complementary service aims

at maintaining the frequency within reference values and balancing between produc-

tions. This market is based on the upwards and downwards regulation band that a power

plant is able to provide. The power plants are remunerated by the offered band, i.e. by

the capacity to increase or decrease the production in €/MW and the supplied energy.

The system manager determines the amount of reserve that should be retained for each

programming period based on predictable temporal evolution of consumption and the

expected probability of failure of connected generators.

Tertiary reserve

The tertiary reserve is triggered whenever it is needed and it aims to recover strong

oscillations/unbalances of the electric system that primary and secondary reserves can’t

restore. The minimum reserve of tertiary regulation in each programming period will be

established by the system manager, with reference to the maximum loss of production

caused directly by the simple failure of an electrical system component, increased by 2%

in consumption in each period programming.

Interruptibility services

Apart from reserves, TSO can also resort to interruptibility services. In accordance with

the provisions of Ministerial Order n.º 592/2010, amended by Ministerial Order n.º

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1308/2010, the interruptibility service is understood to be a complementary service which

consists of the voluntary reduction by consumers in their consumption of electricity to a

value less than or equal to the residual power value, in reply to a power reduction order

given by the Transmission Network Operator. The interruptibility service allows:

Rapid and efficient response to possible emergency situations;

Increase in system operation flexibility;

Improvement in security of supply.

The management of all aspects of this service, in administrative, technical and

operational terms, is granted to REN as the Transmission Network Operator.

According to the REN annual report, in 2015 in Portugal, the total contractual power was

1408 MW, the remuneration for the provision of interruptible service accounted for 109.9

million €. However, the TSO has not triggered any power reduction order [30]. In Portu-

gal, big consumers apply to offer this service and it is a contractual agreement between

consumers and REN. In Spain, it is competitive allocation mechanism managed by REE

and an auction system with face-to-face bidding is used [31].

4.1.2 Microgrids and isolated operation

4.1.2.1 Microgrid concept

Operators of modern distribution systems that include high integration of distributed en-

ergy resources, demand variability and electric energy storage (EES) face a challenging

task to meet current requirements of reliability, security and quality of supply. Decentral-

ized control schemes are being proposed at the distribution level to assure these require-

ments are met with increased system observability and controllability of the grid. The

Smart Grid (SG) developments are in line with these goals, where the Microgrid concept

plays an important role.

A Microgrid can be defined as a “flexible cell” within the electric power system that in-

cludes local generation based on renewable energy sources (RES) and low-carbon tech-

nologies (LCT), EES devices and controllable loads. These resources are coordinated

by a local management and control system that adequately support the operation of the

LV network and control the power flow between the Microgrid and the upstream MV

network.

The deployment of the Microgrid concept can endow the distribution networks with in-

creased reliability, continuity of supply, and resilience. The implementation of this con-

cept requires suitable management and control schemes to ensure a considerable de-

ployment of Microgeneration (MG) and EES. Moreover, the distributed generation and

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the EES can be exploited to guarantee increased continuity of supply and local restora-

tion procedures following a blackout (black start) to ensure the proper operation of these

networks in islanded mode [32].

4.1.2.2 EES role during islanded operation of MG

EES can be seen as flexible resources that contribute to improve Microgrid operating

conditions when connected to the upstream MV grid which can be exploited in the is-

landed operation of the LV networks and in its restoration procedure. The Microgrid is

operated in islanded mode, i.e. autonomously, when major disturbances occur in the

upstream MV grid leading to its disconnection. In order to maintain the quality of supply,

the EES needs to guarantee voltage and frequency regulation capabilities. These control

strategies exploit the coordination between the EES, the MG and the load. In this sense,

the EES can be considered as highly flexible load/generator and the exploitation of this

characteristic can ensure an improved frequency and voltage regulation capabilities and

increased Microgrid resilience during islanded operation by avoiding large frequency and

voltage excursions caused by load disconnection or MG output variations [32]. Hence,

the EES is expected to provide three main services to the operator of the LV grid in the

islanded mode:

a) Multi-temporal optimization of energy balance;

b) Autonomous voltage and frequency control;

c) Microgrid black start.

4.1.2.2.1 Multi-temporal optimization of energy balance

After MG islanding, the power balance between generation and load requires that the

EES are capable of providing fast active and reactive power compensation as required.

Hence, EES devices must enable peak shaving, demand offset, and mitigation of MG

power fluctuations, by charging when there is energy surplus and discharging when there

is energy deficit. In a context of increasing penetration of renewable resources and the

related uncertainty, the integration of EES gives the opportunity to optimize the genera-

tion schedule across several time-horizons, thus requiring the EES devices to adapt their

input and output power as demanded by the Microgrid central controller [33]. Further-

more, this multi-temporal control must take into account load interruptibility contracts and

must be capable of forecasting the power output provided by renewable-based MG.

4.1.2.2.2 Autonomous voltage and frequency control

During the islanded operation, the stability and quality of supply of the Microgrid depends

on the effectiveness of voltage and frequency control schemes, which are coordinated

by the Microgrid central controller and the EES. In the islanded operation, the Microgrid

is more sensitive to voltage unbalance due to uneven connection of single-phase loads

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and MG, and further emphasized by the connection of single-phase storage units charg-

ing interfaces. In pursuance of maintaining adequate voltage quality levels, active volt-

age compensation schemes using the distributed EES units are utilized to remove the

undesirable negative and zero sequence voltage components [32].

EES can be utilized in coordinated voltage control schemes appropriate for distribution

networks with highly uneven distributions of load and generation. This ESS integrated

voltage control scheme can provide effective voltage control solutions and can solve

steady-state voltage imbalances, which can occur in LV nodes due to the presence of

distributed generation. Moreover, the EES can be distributed in strategic parts of the

feeder, which not only improve the voltage control and insure the operation of grid equip-

ment according to manufacturer specifications but also reduce active power losses [34].

The exploitation of load flexibility and distributed storage capacity offered by the MG local

storage devices improve significantly the Microgrid frequency regulation capacity. Using

an active power/frequency droop control scheme after the islanding, both the Microgrid

main storage system (connected to the MV/LV substation) and the distributed EES will

be responsible for the MG frequency control by quickly injecting/absorbing power con-

sidering the capacity and droop characteristics after the occurrence of a disturbance.

When the frequency achieves values out of the droop control frequency range, the EES

injects/absorbs a pre-defined power [32].

4.1.2.2.3 Microgrid black start

The Microgrid restoration procedure following a local blackout comprises a sequence of

actions to be engaged by Microgrid local controllers in a tight coordination with EES to

resupply the load as fast as possible without the help of the upstream MV grid. The

Microgrid black start procedure should be performed automatically and without the inter-

vention of the LV network operator. Besides a highly responsive EES, the implementa-

tion of this service assumes that the Microgrid has:

MS with black start capabilities, capable of communicating the power available

and its operational status;

LV switches to disconnect feeders, loads and MG and suitable protection equip-

ment;

Communication infrastructure powered by dedicated auxiliary units;

In the restoration stages, the EES power output needs to be tightly controlled such that

the load pick-up is made in an optimized way without triggering protective devices that

respond to large frequency/voltage excursions. In addition, the Microgrid central control-

ler needs to have information about the load restoration priorities and be able to con-

nect/disconnect loads and MG in order to supply to most of the local consumers in the

shortest amount of time [32].

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4.1.3 Regulatory framework for storage

The main regulatory barrier for storage in Europe today is actually the absence of regu-

lation both for bulk or small-scale storage. The Electricity Directive does not even men-

tion storage and no clear definition of storage exists in the European regulation. Likewise,

ENTSO-E’s network codes do not clearly define storage and thus storage is most of the

time treated as a generator, without considering its specificities, which limits the possi-

bilities for the participation of storage in the electrical system.

Regarding the balancing activities, the Electricity Directive mentions in Article 15 (7) the

need for rules and tariffs ensuring a transparent, non-discriminatory and cost-reflective

methodology. This is a positive position that shall still be transposed to the national leg-

islation, as storage’s technical characteristics and flexibility shall be valuable for the op-

eration of the future electric systems, with an increasing part of intermittent generation.

The Council of European Energy Regulators (CEER) issued a paper on the role of

DSO’s, where the following recommendation is issued: “In electricity, storage is consid-

ered, in principle, a market activity and therefore the role of DSO in storage should be

limited to the use of specific grid-oriented services [35]. However, energy storage

cannot be used as a substitute for fully available distribution lines, but could be used to

solve network constraints on a temporary basis. DSOs can use storage services, pro-

vided this technical solution is justified as the most cost-efficient option and is sourced in

a non-discriminatory manner. The DSOs‟ role in storage will be considered again, once

a market is properly developed for local, grid related services“. This position has not yet

been transposed to the European regulation, but must be considered as a potential future

barrier for DSO ownership of storage.

4.1.3.1 Storage supporting DSO activities

As seen above, DSOs ownership and operation of storage is not yet clearly regulated.

As DSOs evolve in a regulated environment, there is a risk involved on investing in stor-

age assets considering potential future evolution of regulation. Nevertheless, there are

several benefits of using storage for the DSO’s activities:

Increase the DER penetration

Reduce technical losses in the grid

Delay network investment

Although this potential benefits are very interesting, some DSO’s still don’t invest in stor-

age assets due to one or several of the following reasons:

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Cost of the storage (compared to reinforcing the grid, in some conditions, also

linked to the DSO financing mode) – this shall continue to decrease in the follow-

ing years

Lack of experience using storage assets and need for extremely high reliability

of every grid equipment

Lack of standardisation of storage related (communication, technical tests, secu-

rity, certification, local authorities’ validation, etc.)

4.1.3.2 Storage supporting retailer activities

Retailers usually evolve in a market environment, so the regulation barrier is less sensi-

ble for this stakeholder. Nevertheless, in addition to the use of storage for its own needs,

the retailer may use the storage to supply services to the electrical grid (both for DSO’s

or TSO’s). This shall be subject to the existing legal framework, so it also has a strong

impact on the potential value of the storage for this stakeholder. The above mentioned

example of the balancing areas and the importance of a fair and clear regulation to allow

every asset to participate in this type of services show the importance of this clarification

also for retailers.

As mentioned before, retailers may use the storage assets for both the supply of services

to the grids or for their own needs. Some of the benefits of storage to support retailer’s

activities are:

Imbalance management/reduction

Energy portfolio optimization

These benefits shall be possible if and when retailers have other technical functionalities

available, such as close to real time metering data and ICT tools to treat and support the

decision making.

4.1.3.3 Demonstration and validation of concepts through Évora demonstrator

In the Évora demonstrator, the use cases will allow to demonstrate and validate the ben-

efits of the use of storage for the DSO and the retailer.

The UC 2 (Flexibility and DSM in the market participation) will test the services of storage

for the retailer and the DSO through an intermediary entity (an energy service provider)

belonging to the retailer. In this UC, the small scale storage, both in the grid and behind

the meter will provide flexibility to the grid and to the retailer. To achieve this, the partic-

ipation of volunteer clients is crucial, supplying their flexibility to the retailer (from water

heaters, electrical batteries or other flexible loads).

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Several services for the DSO will be tested in UC 8 to 11: UC 8 (Optimizing the MV

Distribution Network), UC 9 (Optimizing the operation of storage devices in the LV net-

work), UC 10 (Islanding Operation of Low Voltage Networks) and UC 11 (Microgrid

Emergency Balance Tool). These UC will demonstrate technical functionalities supplied

by the storage (considered as owned by the DSO) to the distribution grid (such as LV or

MV operation optimization or islanding) through the use of specific ICT tools.

The results from these UC will be most valuable for the improvement of the developed

tools and the control algorithms, the validation of the value of the storage for the grid

(both technical and financial) and will also provide valuable feedback on the future reg-

ulation needs to increase the use of storage in the grid.

4.2 Automatic market decision system

Over the last decades, climate change, awareness of energy efficiency, new trends in

electricity markets, and the gradual conversion of consumers towards more active agents

are promoting not only the use of Renewable Energy Resources (RES), but also the

Distributed Generation (DG) and Distributed Storage (DS), which urge a dramatic evolu-

tion of the actual electricity model. Evolution towards an electricity grid model able to

manage numerous generation and storage devices in an efficient and decentralized

manner determines the core of the Smart Grid (SG) concept [36]. In this new scenario,

flexible grid system operations and demand response enable variable renewables and

reduce need for new infrastructure [37]. Nowadays, the most of the power systems are

designed with some level of flexibility to accommodate variable and uncertain load and

contingencies related to network and conventional power plant outages. Flexibility is the

ability of a resource, whether it is a component or a collection of components of the power

system, to respond to the scheduled or unscheduled changes of power system condi-

tions at various operational timescales (see Figure 25 for the timescale of different grid

operations and planning functions).

Figure 25 Transmission Operation and Planning Functions Shown by Timescale [36]

Energy storage has the potential to provide flexibility to what is now a relatively inflexible

grid. It operates as both generation and load, and may provide fast and accurate re-

sponse to second-to-second changes in supply and demand for electricity [38].

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The Minimum Technical Requirements (MTRs) to be met by the energy plants, in order

to ensure that these plants will help to achieve the whole grid stability, can be categorised

as [39]:

Voltage Requirements

Frequency Requirements

Reactive Power Requirements

To achieve these MTRs the use of energy storage elements as well as elements of re-

active power are needed. These elements have to be developed in accordance with the

needs of active and reactive power injection; in addition, they have to define a suitable

communication architecture between the different elements in order to ensure suitable

response times. Main devices to meet MTRs are:

PPC: Power Plant Controller. The PPC is the main control system responsible

of generating control references in order to manage the power flow at the point

of interconnection (POI). This device performs different types of control of both

active and reactive power and commands the devices of the plant.

The PPC communicates with other devices through two independent network in-

terfaces, control and supervision, according to the needs of the plant.

STATCOM: Static Synchronous Compensator. Its function is to inject capacitive,

inductive or reactive power in order to meet voltage, power factor or reactive

power references according to the PPC control.

Capacitors Bank. A group of several identical capacitors interconnected in par-

allel or in series. They act as a source of capacitive reactive power.

PPS: Plug and Play Storage System. It works in energy hybrid generation sys-tems to inject or absorb active power.

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Figure 26 Main devices to meet the MTRs by power plants, in order to ensure grid stability

Deployment of additional storage facilities would significantly enhance the integration of

renewables. New storage technology can provide some of the fast ramping and addi-

tional regulation resources that will be required. They can also provide reactive power

for voltage support and, depending on their location, they can mitigate transmission con-

gestion and line overloads. Large storage facilities can absorb off-peak energy produc-

tion from wind generation resources and deliver the energy during peak load hours. Stor-

age facilities have the added advantage of being “green” resources, as they do not di-

rectly contribute any greenhouse gases. [40]

As noted above, price signals are already being communicated to users by utilities or

service providers with media ranging from advanced metering infrastructure (AMI) to the

Internet. Here, too, control-relevant issues arise, and on both the supply and demand

sides. Thus, a utility needs to generate control signals (a simple example is time-of-use

prices, which impose different consumption costs at different times of the day according

to a fixed and broadcast schedule) that, based on models of expected consumer behav-

ior, will maximize the utility’s objective—incorporating profitability, renewable energy use,

stability/loadability requirements, and other criteria. Conversely, consumers must deter-

mine how to schedule their load and, where available, how and when to operate distrib-

uted generation and storage resources to best satisfy their objectives. Furthermore, large

consumers and utilities will sometimes negotiate together for load profiles and prices,

thereby combining two already large optimization problems into a multi-objective prob-

lem. [41]

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4.3 Definition and design of new ancillary grid services

On an individual level, flexibility is the modification of generation injection and/or con-

sumption patterns in reaction to an external signal (price signal or activation) in order to

provide a service within the energy system. The parameters used to characterize flexi-

bility in electricity include: the amount of power modulation, the duration, the rate of

change, the response time, the location etc. [42].

Flexibility can be provided by both supply and demand on a large scale, for example by

CCGT plants, industrial and commercial consumers, aggregated smaller household

load, distributed generation, and energy storage. The approach should be holistic, and

look at how flexibility in the energy system as a whole can be harnessed to achieve the

objectives of balancing supply/demand at the least cost, meeting the varied interests in

the value chain and preserving customer’s rights to choice in the energy market. Flexi-

bility is intrinsically linked to a number of key terms or concepts and encompasses, De-

mand Side Response, Demand Management, Flexible Generation and Energy Storage

on the supply and demand side.

Storage services for the grid can be acquired through several business models, as

shown in Figure 27. These business models range from contracting for services only

without owning the storage system to outright purchase. The specific option chosen de-

pends on the varying needs and preferences of the owner. [43,44]

Figure 27 Business Models for Storage Systems [44]

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Many studies have been conducted on the different values and services that energy

storage can provide to the electricity grid over the past decade. The number of services

storage can provide and the definitions of those services vary across reports. We offer a

set of thirteen fundamental services that energy storage can provide to the grid [45].

These thirteen services have been divided according to the stakeholder group that re-

ceives the lion’s share of the benefit from delivery of each service. The stakeholder

groups are: independent system operators (ISOs) and regional transmission organiza-

tions (RTOs), utilities, and customers. Although some services benefit more than one

group, segmenting services by which group receives or monetizes the majority of value

helps to better define the services themselves.

Figure 28 Energy storage enabled services to the grid from ISO/RTO perspective [45]

Figure 29 Energy storage enabled services to the grid from utility perspective [45]

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Figure 30 Energy storage enabled services to the grid from customer perspective [45]

Energy storage can be sited at three different levels: behind the meter, at the distribution

level, or at the transmission level. Energy storage deployed at all levels on the electricity

system can add value to the grid. However, customer-sited, behind-the-meter energy

storage can technically provide the largest number of services to the electricity grid at

large (as shown in Figure 31) even if storage deployed behind the meter is not always

the least-cost option. Furthermore, customer-sited storage is optimally located to provide

perhaps the most important energy storage service of all: backup power. Accordingly,

regulators, utilities, and developers should look as far downstream in the electricity sys-

tem as possible when examining the economics of energy storage and analyze how

those economics change depending on where energy storage is deployed on the grid.

Figure 31 An overview of energy storage enabled services to three main stakeholders [45]

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5 Energy market connectivity of the business models

5.1 Connected energy market processes

The goal of this section is to describe the energy market processes that will have an

impact in the storage enabled business models. When introducing new business models,

one has to consider the following topics: 1. balance management; 2. energy measure-

ment; 3. balance settlement; 4. customer information management and billing; 5. and in

some cases also trading. For the retail markets, it is important to notice that many of

these processes will be covered by datahubs in the future. Datahubs are centralised data

exchange solutions for the electricity retail markets, which have or will be implemented

for example in Denmark, Netherlands, Estonia, Norway, Sweden and Finland. The pur-

pose of datahubs is to facilitate retail market processes and enable new types of ser-

vices/business models. In that sense, they are highly associated to storage enabled busi-

ness models. [46]

Figure 32 Datahub facilitated energy retail market processes in Finland [46]

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5.1.1 Balance management

As a participant in the electricity market you need to prepare for changes in your power

balance. Any unexpected events in the market or transmission network may require bal-

ance management measures on your part. The volatility of electricity prices can have

significant unforeseeable effects on your costs.

This balance risk can be reduced through the active monitoring of the procurement and

consumption/production of electricity, updating forecasts and taking other corrective ac-

tions. Closely monitoring and acting upon the development of the power balance as de-

livery time approaches will reduce risks and secure the best business outcome.

Balance management is especially important in storage enabled energy business mod-

els, since they may cause imbalance that is not foreseeable by the BRPs. Also, the DSOs

are affected by balance management actions since the control of capacity can cause

unexpected congestion in the grid. Therefore, for the evolving energy business models

it is vital that the market structures support a transparent information exchange between

all the relevant stakeholders. An initial market structure to support transparent use of

DER is provided below in Figure 33.

Figure 33 Market solutions to enable transparent use of DER

5.1.2 Energy measurement

Large share of energy business models require some sort of energy measurement solu-

tion. This is either due to validation requirements (like in demand response services) or

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pure legislation issues (like in DSO operated metering). If storage or other DER is in-

stalled into an existing delivery point and energy is not injected into the grid, then a basic

smart metering infrastructure is typically sufficient to meet the measurement require-

ments. On the other hand, if energy is injected to the grid, the metering equipment should

be capable of measuring the injected amount. Third scenario is when the storage/renew-

ables resources create a new delivery point, in which case an additional metering system

is required.

These above mentioned processes are the responsibility of DSOs. A typical DSOs ICT

system setup is shown in Figure 34 that explains how measurement data is collected,

processed and send forwards to the energy markets.

Figure 34 A typical ICT structure to collect official DSO measurement data [47]

The measurement data related to storage resources must also be shared with other mar-

ket parties if the resources form their own delivery point or they inject energy into the

grid. In these cases, DSOs are responsible for the actions and different European coun-

tries have various requirements and procedures to run the process. Like it was men-

tioned in section 5.1, the European Commission is pushing towards a common retail

market in Europe that would also include common technical solutions. Datahubs are one

possible solution that can facilitate also measurement data management processes. Fig-

ure 35 highlights one example of how DSO’s measurement data is delivered and vali-

dated through datahubs.

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Figure 35 An example of delivering measurement data in datahub environments [46]

5.1.3 Balance settlement

Electricity market participants’ electricity use/sales have to be equal to their genera-

tion/purchase at every instant. In practice, market participants demand and supply rarely

match as demand cannot be forecasted perfectly and generation plans do not fully ma-

terialize e.g due to changes in weather. At the system level, the balance between de-

mand and supply has to be maintained every instant. Market participants’ imbalances

are settled financially afterwards. However, it is not feasible to settle each market partic-

ipants’ financial imbalances at every instant. Instead, the imbalance settlement periods

used in Europe vary between 15 and 60 minutes [48]. There are, however, plans to har-

monize this and to use 15 minutes as the imbalance settlement period in all Member

States [49].

Currently there are some inaccuracies in the balance settlement as in most European

countries, much of the load is profiled because the smart meter roll out is not yet com-

pleted. However, for example in Finland, over 90 % of end users are already equipped

with smart meters and hourly smart meter data are also used in the balance settlement

[50].

While the smart meters facilitate accurate and efficient balance settlement, the develop-

ment of metering and control opportunities needs to be addressed carefully in the busi-

ness models. For example, the handling of imbalances caused by control actions made

by non-balance responsible parties is one of these issues [51].

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Figure 36 Balance settlement at the DSO level

Balance settlement can be divided into DSO, BRP and TSO levels. DSOs report the

measured amounts from all the delivery points to the TSO according to the process

shown in Figure 36. BRPs use this information and complement that with additional data

shown in Figure 37. Finally, TSOs complete and calculate the overall national energy

balance that determines the imbalances in BRPs’ positions and between different con-

nected TSO areas.

Figure 37 Balance settlement at the BRP level

5.1.4 Customer information management and billing

The storage enabled energy business models need to address customer information

management and billing issues, when connecting to the energy markets. The business

models should not restrict customers’ freedom for example to change suppliers. This is

a relevant topic when the business models are delivered to DSOs official delivery points.

An example process of how the supplier change should be enabled is highlighted in

Figure 38.

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Figure 38 An example process of changing a supplier in the energy markets [46]

Customer information management requires special attention in new energy community

related business models. The communities are typically represented at the markets as a

one entity and they may have a service provider taking care of the market procedures.

Even though the community is one entity at the markets, every community member

should be allowed to choose their supplier and other market related services. Also, the

community’s participation at the markets should be spread across the community mem-

bers based on their contributions in the market actions. This requires new approaches

to both customer information management and billing.

5.1.5 Trading

5.1.5.1 Power exchange

Large share of the business models introduced in D5.1 and D5.2a include some sort of

energy trading. This is either on the power exchange or the TSO operated reserve mar-

kets. For these two markets there are different kinds of interfaces in the European coun-

tries depending on the operators of the power exchange and the transmission system.

Figure 39 highlights the main spot markets in Europe and their traded volumes in 2007

[52].

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Figure 39 Volumes traded in GWh for the main electricity spot exchanges in 2007 [52]

The trading interfaces at the power exchange are typically established through the inter-

net via specific websites or APIs. For example the IPEX electricity market (managed by

GME) can be accessed through an information system by connecting to GME’s website

[53]. EEX market, on the other hand, uses software applications that are proprietary so-

lutions such as Xetra and Eurex [54]. Both of those platforms are the official trading in-

strument of the German stock exchange too. Xetra and Eurex platforms provide a set of

VALUES APIs (Virtual Access Link Using Exchange Services) to allow the communica-

tion with third party applications [54]. Another application that can be used on EEX is

called ComTrader [54]. The application has a web-based interface that together with fill-

in direct interaction supports the import/export of files related to transactions that can be

exported e.g. to a comma separated values (CSV) format [54]. Below in Figure 40 an

example of submission forms for day-ahead auction in the EPEX spot market.

Figure 40 EPEX SPOT auction hourly bid form for Germany [55]

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Also Nord Pool provides an API for market participants and third parties to connect with

the power exchange. The key features of the API are described below: [56]

- Seamless integration with internal trading systems, back office systems and op-

erating tools

- Automated trading to maximise market opportunities

- Customized and automated reporting

- Consolidated, web-based IT solutions

The Nord Pool API can be used both for day-ahead and intraday trading. It also provides

the stakeholders necessary information regarding the wholesale energy market integrity

and transparency (REMIT) requirements. Some of the API supported use cases are

shown below: [56]

- Day Ahead: Integrated order submission and results request to/from internal

trading systems

- Intraday: Order submission via manual or algorithmic logic

- Clearing: Trade capture API from the clearing and settlement platform

5.1.5.2 TSO reserve markets

The reserve/ancillary markets are operated by TSOs in order to acquire capacity for real-

time and near future balancing. The TSOs have different mechanisms and interfaces to

procure the capacity, which may vary from email procedures to specific trading applica-

tions. After the bidding process, awarded balancing capacity and the request to execute

that capacity may be communicated to the parties either electronically or for example by

phone. Figure 41 below shows one example of how the regulating power bids can be

delivered to the TSO. The screenshot is from Fingrid’s (the Finnish TSO) Vaksi system

that manages the balancing power trading.

Figure 41 Entering regulation bids in the Finnish regulating power market

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5.2 Market interfaces

The objective of this chapter is to show the need for an ICT tool as a necessary instru-

ment for the development of business models relative to the management of storage

type as available real time market services.

5.2.1 Energy storage as a market service

The Energy storage is going to provide a possible source of flexibility, absorbing or re-

leasing energy to smooth intermittent generation patterns traditionally related with power

generators with a high component of unpredictability and variability (wind and solar) and

an increasing demand variability due to a socially changing lifestyles and the introduction

of the electrical vehicle.

Currently energy storage is mostly provided by large scale, centralized pumped storage

assets. However, increasingly also small-scale energy storage, either by distributed un-

der microgrids, customers’ control or directly integrated in the grid, provides very valua-

ble tool for balancing the energy system. Storage is especially important for an efficient

use of generation and grid resources providing the sufficient flexibility.

Developing future deployment of storage projects requires viable business models that

allow investors to earn sufficient revenue to cover investment costs and make a return

on that investment. That a storage device can be used for multiple applications increase

its potential source of value. However, it also means that the business case is multi-

layered and so relies upon being able to access multiple revenue streams. All this intro-

duce more complexity from a practical and operational perspective and may require the

involvement of multiple stakeholders across whom value must be shared. Challenges

may also be faced within the regulatory framework [57].

Future business models for grid-scale projects rely on capturing revenues from multiple

values streams, including capturing revenues from wholesale and balancing services

markets. This means that the assets (energy storage devices) will need to interface with

the market in order to make business models work. The most likely route for inclusion of

such projects within the settlement arrangement is within a market participant´s energy

account, either their own or that of a third party.

5.2.2 Enabling energy storage resource competing in the market

Potential storage owners are reluctant to consider the deployment of resources until they

can be assured and have clear evidence that barriers no longer exist, enabling market

access and a predictable revenue stream. Other regulatory issues that present barriers

to the deployment of energy storage include complexity and lack of clarity surrounding

the functional classification of energy storage and its use to provide simultaneous ser-

vices across different accounting classifications of production (generation), transmission

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and distribution and discrepancies in market rules and regulations across the large num-

ber of markets in the country.

Energy storage technologies have the potential to significantly impact the electric grid,

especially as the current system will require considerable infrastructure investment to

maintain reliability, as assets get older and demands on the system increase because of

more variable loads and generation. As these modernization efforts continue, there is an

opportunity for energy storage technologies to provide a number of different services.

With the deployment of distributed generation resources, deployment of electric vehicles,

increasing demand response programs, increased energy efficiency programs and de-

ployment of microgrid systems creating a smarter grid while continuing to blur traditional

classification lines, energy storage technologies can help ensure that reliability needs

are met. Though an opportunity certainly exists for energy storage in building a more

resilient and reliable grid, there are, however, a number of barriers restricting further

deployment of these technologies.

Though there are a number of regulatory and market barriers preventing the increased

deployment of energy storage technologies, the primary barrier to deployment is high

capital costs due to the fact that ESS are dominated by CAPEX not by OPEX. Despite

other barriers that exist, in most situations, this prevents a potential owner from creating

a business case and further research is needed to decrease costs. These barriers restrict

market access, prevent compensation for all services rendered and create difficulty in

the evaluation of storage technologies by potential developers, market operators and

regulators.

Energy storage could have a key role to play in the future grid, but market and regulatory

issues have to be addressed to allow storage resources open market access and com-

pensation for the services they are capable of providing. Progress has been made in this

effort, but much remains to be done and will require continued engagement from regula-

tors, policy makers, market operators, utilities, developers and manufacturers [58].

We are seeing that, on the one hand the market needs change, on the other hand we

have the storage and new business models around it. The question is how energy stor-

age can spread out and be a reality worldwide through a new market model and thus

facilitate the deployment of distributed generation.

Under the current system, it is difficult for energy storage to have a clear business case.

With a new market model, such as the concept of Transactive Energy [59], customer

devices and grid systems (e.g. storage) can barter the proper way to solve their mutual

problems. At the same time, they can settle on a proper price for services, in close to

real time. This will significantly enhance the opportunities to leverage storage resources

for new business models. [59]

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It is through integration between different markets (removing regulatory barriers which

together prevent their deployment once the capital cost is affordable) where the storage

will provide very valuable tools for balancing the energy of the system for an efficient use

of the generation and grid resources and becoming a business reality.

The old model in which a central agent controls and monitors all system parameters will

be replaced by millions of decision points, one for each agent. Each point will have an

"energy manager". The system will therefore require software tools to manage all de-

vices, generation, storage and consumption, using pricing information and the net bal-

ance to maximize the benefits of agent.

For that, a new ICT tool will be necessary too. A platform capable of a real time integrated

data acquisition and processing, with the ability to handle large volumes of data from the

network nodes, each of the agents, in a secured, distributed and loosely coupled way.

5.2.3 ICT tools to make possible the development of business model

To make the new business models that enable the development of energy storage a

reality, it is necessary for all (new and existing) agents to have an access to all system

information in real time. This requires having an integration platform in real time that can

handle all available information in a much more efficient way.

Thanks to ICT, the grid of the future will become smarter to improve reliability, security,

and efficiency of the electric system through information exchange, distributed genera-

tion, storage sources, and the active participation of the end consumer. The development

of smart grids exemplifies the increasing dependency of European economy and society

on Information and Communication Technologies [60].

ICT opens new scenarios and possibilities such as prosumer based energy markets.

Users can interact by using software application that work in their interest and automat-

ically trade energy to achieve profits (in the prosumer case) or lower the energy bill (in

the consumer case). These new ICT services have the aim of improving energy effi-

ciency and increment the penetration of renewable sources and distributed storage. In

addition, by using ICT in the energy domain provides new possibilities and scenarios for

the end users, which can raise energy awareness and provide automation for energy

efficiency.

As a conclusion, robust, open and secure ICT is at the core of a successful smart grid

implementation. All processes across the whole value chain (i.e. energy generation,

transmission, distribution, consumption, marketing, retailing, etc.) are heavily based on

ICT infrastructures.

MARKET STRUCTURE DEVELOPMENT TO ENABLE NEW

BUSINESS MODELS

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6 Market structure development to enable new business models

In the future, the energy mix will be increasingly based on renewables and the resource

portfolio will be distributed. Due to these factors, the energy system has to evolve to

accommodate generation following behaviours instead of the currently applied load fol-

lowing. In addition, the resulting higher demand for flexibility will have to be managed on

a local level. New market mechanisms are required to enable the integration of distrib-

uted resources and enable their effective use [37, 61]. Current market mechanisms will

have to be adjusted and augmented to allow for new resource participation and en-

hanced flexibility [51].

There are multiple domains for which the developed business cases provide benefits,

ranging from smart buildings to microgrids and communities, and to distribution grid ser-

vices. However, all the domains have connections to the existing market structures that

are potentially changing.

6.1 Smart Building services

The business models that are mostly related to the domain of smart building services

feature properties such as maximizing (off-grid) self-consumption, demand-side man-

agement capacity allocation for suppliers, and increasing day-ahead and intra-day mar-

ket accessibility. The business models consist of

Managing building energy flexibility

Flexibility and DSM in the market participation

Increased percentage of self-consumption

Optimized energy procurement

The key stakeholders involved in these use cases include

Building End Users/Operator

Energy Provider/Grid Operator

Forecast Service Providers and Aggregators

Building End Users can benefit from Building Operator installed energy management

systems that can help in saving energy costs. The savings can come from increased

local consumption, reducing the need for buying energy. Furthermore, consumers in

apartment complexes could share energy within the building through trading. However,

if the metering is done on a consumer-by-consumer basis within their premises, all en-

ergy transmitted within the building could get metered and potentially be subject to dis-

tribution fees. The regulations and procedures for such cases should be updated in order

to avoid “…discriminatory charges for self-consumption projects”, as per European Com-

mission guidelines [62].

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Alternatively, the savings can come directly from minimizing varying energy tariffs sup-

plied by the Energy Provider and/or Grid Operator, such as the ones presented in the

demonstrators in the use case “Flexibility and DSM in the market participation”. The flex-

ibility can be exploited by the Energy Provider through aggregating the responses within

buildings and making bids into wholesale markets, such as

day-ahead market

intra-day market

regulating (balancing) market

However, the Energy Provider, Grid Operator and a potential Aggregator have to ensure

that the balance responsibility is obeyed. I.e. in case an independent operator trades

flexibility, balance management of the current balance responsible party in the particular

metering area should not be disrupted [63, 51]. The market regulations will have to take

into account the new requirements when trading with flexibility becomes more prevalent.

6.2 Microgrids and community services

The use cases that support microgrids and community services consist of

Microgrid PV management

Enabling and independent energy community

Microgrid energy market

The key business features of these models relate to an even higher priority on self-con-

sumption and the use of grid supply only as a backup. In an islanding mode, peer-to-

peer trading of energy is enabled.

The proposed business models enable consumers to communally distribute the invest-

ment and operating costs related to distributed storage solutions. In addition, environ-

mental factors could motivate local communities to enhance their own self-image and

strengthen the community.

Furthermore, the microgrid and local community market services can enable maximizing

the potential of the deployed storages. However, in practice the connection to external

wholesale markets and/or other local community solutions is required for efficient oper-

ation. The practical aspects of the regulatory and market barriers are still partly open

regarding microgrid deployment [64]. Especially the particularities of each member state

in the European Union has been noted as a barrier, as well as some ambiguities in inte-

gration of renewable generation [64].

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For local market operation, in practice balance management, trading, invoicing and re-

porting services are required. Furthermore, the benefits of a single community should

not increase the costs of other parties through e.g. increased grid payments.

6.3 Distribution grid services

The use cases

Optimizing the MV distribution network

Optimizing the operation of storage devices in the LV network

Islanding operation of low voltage networks

Microgrid emergency balance tool

especially target the domain of distribution grid services. The aim is to use the distributed

storages for managing MV and LV operation, integration to new markets (ancillary ser-

vices), and enhancing the power quality and continuity of service. The distribution grid

can provide income to participating flexible loads and alternatively the local areas can

split into islanding mode and provide their own energy for decreased costs or increased

resilience if the main grid is facing an emergency situation.

Currently, the costs connecting of grid resources have not been derived with market

mechanisms but more or less fixed costs [65]. Methods for the distribution of grid costs

should be reconsidered such that they encourage investments into renewable generation

but simultaneously consider the investment costs resulting from real-time power demand

requirements, as the main cost component is related to the maximum instantaneous

power demand.

Power-based tariffs for small customers, where a major part of the bill would come from

the peak power demand of the connection point, are currently considered in order to

better manage peak demand and ensure fairer revenue for the Grid Operator [66]. A

pure power tariff is however not the most optimal solution as it does not directly or opti-

mally limit the total peak demand [65]. Storages can be utilized in a community to reduce

the needed peak power and thus reduce power tariff –based costs.

Aggregating consumers from different spatial areas into combined flexible resources is

not the most cost-effective solution as it does not reduce the need for transferring energy.

Thus, especially local communities can also be a driver in aggregating individual loads

in an optimal fashion to help in balancing the distribution grid. Relevant market mecha-

nisms for this are however required.

CONCLUSIONS

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7 Conclusions

The storage enabled energy business models utilize broadly the wholesale, ancillary and

retail markets. The main value of the business model is delivered through balancing

functionalities. In addition to pure market participation, the business models also contrib-

ute to active grid management. Key stakeholders to leverage the value of the business

models are DSOs and prosumers/consumers.

To enable the energy market interaction of the introduced business models/stakehold-

ers, you need to consider variety of different requirements. In this document the connec-

tivity requirements were divided into five categories: 1. Balance management; 2. Energy

measurement; 3. Balance settlement; 4. Customer information management and billing;

5. Trading. The evolving business models require new type of approach in all the cate-

gories due to more dynamic and distributed nature of the business models. For example,

energy measurement data needs to be gathered from smaller units than before, trading

of energy will have to be made more transactive and local, which at the end requires

special attention in customer information management. Transparent balance manage-

ment is also crucial in order to provide a framework where BRPs together with the DSOs

and TSOs can ensure an efficient and secure energy system.

The scope of this deliverable was to analyze the different requirements in order to con-

nect the business models, introduced in D5.1 and D5.2a, to the energy markets. In ad-

dition, the demonstrators and the specific business models were evaluated to identify

special market connectivity needs that require attention. New energy market structures

to help market connection were also analyzed.