Electricity market disruption_working group summary_160517

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Electricity markets in disruption Seminar 11.5.2016
Summary of working group notes

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Electricity market disruption_working group summary_160517

  1. 1. Lappeenrannan teknillinen yliopisto Lappeenranta University of Technology www.lut.fi PL 20/P.O. Box 20 FI-53851 Lappeenranta tel +358 5 62 111 fax +358 5 621 2350 Y-tunnus 0245904-2 ALV/VAT FI 02459042 Otto Koskinen 17.5.2016 otto.koskinen@lut.fi Electricity markets in disruption Research Seminar 11.5.2016 Syke auditorium, Mechelininkatu 34 a, Helsinki Smart Energy Transition project in cooperation with EL-TRAN, BCDC Energy and Neo-Carbon En- ergy research projects Working group synthesis Disclaimer: The author was not personally present at all the discussions, and this summary repre- sents his interpretation of the workshop notes made available at: http://www.smartenergytransi- tion.fi/en/electricity-market-in-disruption-research-workshop/?lang=en Group 1: How present electricity market design should be modified, to support the competitiveness of the smart energy technology providers and efficient operation of domestic energy markets? Challenges Political challenge of developing (EU-wide) interconnected and efficient market designs. How to direct investments in the best re- source sites for renewables (dependencies on grid condition, legislation, national subsi- dies, taxation)? Who invests (and who benefits) in cross-bor- der transmission capacity? Congestion hampering the functioning of a market (for example, Finland often has its own price area on the current Nordic mar- kets). Lack of solidarity and trust on neighbors (strong emphasis on national energy secu- rity). How and where demand response (DR) ag- gregators participate in the market? How to overcome social resistance from con- sumers? Solutions Introduce new pricing mechanism, such as nodal pricing. Shorten the time period of trading. (However, an economic analysis implied that changing currently hourly based metering to intra-hour smart metering for consumers in Finland might not deliver net benefits due to cost in- crease). Trade in ramps (“ramp up” or “ramp down”) instead of current hourly blocks, and add “an insurance for electricity deliverance” –product to be traded. Remove barriers for participating to ancillary services of the market. Increase consumer activity (educate, make DR options available for consumers). If there is demand for peak capacity, intro- duce tenders for them. Capacity mechanism (and need for them) should be preferably assessed EU-wide, not country-wide. Electricity market could be a combination of free market design and central planning; use markets to get rid of overcapacity and ineffi- ciencies, regulation to ensure reserves and security.
  2. 2. Lappeenrannan teknillinen yliopisto Lappeenranta University of Technology www.lut.fi PL 20/P.O. Box 20 FI-53851 Lappeenranta tel +358 5 62 111 fax +358 5 621 2350 Y-tunnus 0245904-2 ALV/VAT FI 02459042 Group 2: Competitiveness and new business models for smart energy providers. Challenges Energy pricing and market mechanisms diffi- cult to understand. Wide variety of technological choices, motiva- tions, pricing strategies, business models and policies complicates decision-making. End user (consumer) does not always per- ceive the added value of “smart energy ser- vice” – difficulty of communicating the bene- fits How existing energy infrastructure is used in the future? Challenge of political decision-making: favor- ing one energy stakeholder makes another a loser. Solutions Find out what kind of energy service the con- sumer actually wants (instead of technology push). Energy villages, where resources are shared and used effectively. Find use for existing infrastructure in the fu- ture energy system, use drop-in technologies. Develop new business models on the go: ex- plore early adopter experiences, (government funded & supported) demonstration projects, make use of open innovation and crowdsourcing. Researchers: increase industry understand- ing on pros & cons of different solutions. Identify the added value on the ecosystem level (not only on company level), who is competing with the respective energy ser- vice? Identify system innovation from other compa- nies and do research on new business mod- els and processes, empirical research on prosumer experiences.
  3. 3. Lappeenrannan teknillinen yliopisto Lappeenranta University of Technology www.lut.fi PL 20/P.O. Box 20 FI-53851 Lappeenranta tel +358 5 62 111 fax +358 5 621 2350 Y-tunnus 0245904-2 ALV/VAT FI 02459042 Group 3: Possibilities and costs for large scale implementation of renewables. Challenges Intermittency of variable renewables (VRES). Cost of transition (destructive to the incum- bent producers). Societal impacts. Challenge of keeping a systemic view (not creating a new problem by solving an old one). How to share benefits and costs? Transition from traditional technologies (how to ensure energy security during the transi- tion? Can energy-only markets handle the transition?). Solutions More accurate weather forecasts for power generation. Reactive demand loads (smart grids, smart households). Flexible generation. Market integration (better transmission inter- connections). Energy storage technologies. Put value (create market products) for flexibil- ity. Activate consumers, include civil society and involve new stakeholders. Transition could be aided with a “transition tax”, like in Germany. For researchers: Assess energy sectors as a whole: mobility, heat and electricity, and un- lock the inherent flexibility in these sectors, not only in power sector. Study radically new scenarios and policy tools. Team up with other researchers, create policy briefs together.
  4. 4. Lappeenrannan teknillinen yliopisto Lappeenranta University of Technology www.lut.fi PL 20/P.O. Box 20 FI-53851 Lappeenranta tel +358 5 62 111 fax +358 5 621 2350 Y-tunnus 0245904-2 ALV/VAT FI 02459042 Group 4: What policy changes are needed to foster new business models and energy markets re- lated to renewables and demand response? Challenges Wind and solar power still not taken seriously in Finnish energy policies. Opaqueness of energy decision-making. Vested interested of current major stakehold- ers and their lobbying power. Making people aware of the scale of the prob- lem AND getting them to action. Challenge of making long-term energy poli- cies in a democratic society (in which election cycles affect the contemporary policies). Communicating the vision for new energy system (and new business models) and acti- vating stakeholders at all levels: individual, communities, municipalities, companies, na- tional. Solutions Add high wind/solar scenario to the currently planned official energy/climate plan. Not only provide documents from meetings, invite people in (students, researchers, NGOs, SMEs) and let them design and pro- pose policies/ market rules. Transparently provide all the assumptions to scenarios. For researchers: discuss about your research publicly (newspapers, social media), attend to public events, and raise awareness of the problems and possible solutions, propose new business models to companies. Share international policy best practices, shared long-term target (as COP 21) is a start. Ensure continuing counter lobby against unsustainable energy services (pro smart en- ergy transition). Join researchers from all disciplines, build up a community of RE stakeholders who drive the transition (with the support and inclusion of citizens)

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