A1 : Aggregation scenarios and their commercial value

Context

Distributed energy resources (DER) can bring more to the electrical system than merely their energy content: they bring value as “network replacement” and may deliver system services. The DER network value is not explicitly allowed within existing regulatory frameworks: it requires upgrading metering functionalities. DER may also supply new energy services, enabled by integration schemes linking individual load and generation units. Small energy consumers and producers can thus be given indirect access to energy markets. This is a stepping stone towards the SmartGrid era, where every energy producer and consumer is interactively connected to the electric system.

Challenges

What are the underlying principles of aggregation and possible implementation schemes?

Results

Aggregation, a concept to support DER integration into the electrical system

Aggregation is the process of linking small groups of industrial, commercial or residential customers into a larger power unit to make them visible from the electric system point of view. Aggregation can involve demand (demand response, DR) and/or generation (distributed generation, DG). Thus, load or generation profiles of individual consumers and/or small generators appear as a single unit to the electric system. Building up a large and flexible portfolio enables aggregators (the entity who aggregates) to operate distributed energy resources and to provide services to the power system, e.g. system balancing. An aggregator is a facility portfolio manager designing and offering energy-related services to energy consumers, producers and other key players (system operators, electricity traders, etc). Aggregation helps implementing smart grids concepts by reaping some of its benefits to integrate DER units more efficiently.

Aggregation reduces the “gap to profitability” of DER units integrated into the power system

Aggregation will grow thanks to four main drivers:

 

  • Aggregation lowers market entry barriers: in the short/medium term, it is only through aggregation that small energy consumers and DG owners can have access to the electricity market. It brings additional economic benefits to consumers and DG owners, thus increasing the value of DER and enhancing its market penetration.
  • Aggregation will benefit from the rollout of smart metering, an enabler of aggregation businesses.
  • Aggregation allows optimizing generation and consumption through the controlled operation of a large number of DER units.
  • Aggregation can combine with other energy-related services to lower their overall operating costs (ESCO, retailing).

It is by combining these features (more flexibility, lower operating costs) that aggregation will reduce the “gap to profitability” of DER units, and therefore the needs for subsidies to favour their integration into the power system.

Various aggregation businesses according to the built-in business options

Most probably, the first aggregation businesses will extend present day energy services based on energy performance or retailing. Aggregators may focus on a single core function by contractually managing:

  • Ancillary / balancing services;
  • Trading operations on energy markets taking advantage of economies of scale;
  • Operations of flexible DER units to provide heat/electricity to final consumers.

Aggregators may cover several functions:


Service offer

Profile of the aggregator

Energy (kWh sold / purchased)

Purchaser from DR and DG owners
Retailer to end users
Trader on power exchange

Ancillary and
balancing services

Ensures balancing of the units under his control and provides services to the system (TSOs and DSOs) and/or to other suppliers

Other energy related services

Supplier of heat, fuel, operation and maintenance services to DER owners

Internal services that could be valorized

Provider of forecasting, control, optimisation
to be sold to other businesses

 

 

Aggregation may be a business per se or a business unit of a larger company, for instance a utility. Under current EU energy regulation, Network Operators cannot act as commercial aggregators because of the unbundling rules.

The legal and contractual frameworks become a central issue for this multi-player energy game

Well-defined contracts linking all the business partners are expected, including liability management. Multiple business configurations emerge since an aggregated party can be an energy consumer or a producer, owning or not the distributed energy resource, having a full, partial or no control at all of its operation. The players involved in contractual and physical interactions are shown opposite.

Figure 1: Gap to profitability of DER units when aggregated

Commercial aggregation creates value that goes beyond the commercial value merely exchanged through the services

The value brought by commercial aggregation includes direct incomes and profits from commercial services to be shared between the key players involved in aggregation contracts, as well as side benefits or avoided costs valued by the whole society, including system operators (see Glossary).

Figure 2: Aggregator, a facility portfolio manager in a multi player energy game

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