THE ENERGY INDUSTRY TIMES - DECEMBER 2019
13
Industry Perspective
R
eecting upon what could be
seen as a simple change, from
high-carbon centralised gen-
eration assets to low-carbon distrib-
uted assets, the energy transition
brings many technical and deep eco-
nomical and socio-cultural challeng-
es. From a eld mostly dominated
by incumbents, the energy sector
now nds other industries knocking
at its door. In Europe it is becoming
the scene of many innovative busi-
ness models and, at last, we see indi-
viduals, small organisations and
players from other sectors forming
energy communities to accelerate the
pace of change, wanting to own part
of the transition and to locally retain
benets from this revolution.
The increase of distributed energy
resources (DERs) – such as in the
Nordics where installed capacity in-
creased by approximately 46 per
cent between 2005 and 2017 – is
changing the nature of interactions
between buildings, districts, cities,
and the overarching energy system.
The impact and control level of dis-
tributed assets on the grid varies de-
pending on their nature and connec-
tion type. On the medium-voltage,
assets such as CHP and wind tur-
bines can be seen, whereas at low-
voltage levels, there is the emer-
gence of residential assets such as
heat pumps, solar PV and electric
vehicles (EVs).
While the higher penetration of
DERs may have positive impacts on
the grid with energy loss reduction
and possible reduction of voltage
uctuations, it can also create new
congestion problems. We have seen
such an issue in the Netherlands,
when after a successful campaign to
incentivise the uptake of solar PV,
the grid did not have enough capac-
ity to cope with the extra electricity
generation. Now, while Dutch oper-
ators struggle to connect new gener-
ation assets, grid reinforcement
deferral (copper in the ground) is
seen as a temporary solution. By us-
ing the platform GOPACS, exibili-
ty providers can place orders on an
energy trading platform.
The platform GOPACS was found-
ed by the Dutch network operators
including the Transmission System
Operator (TSO) Tennet, all the
Dutch Distribution System Opera-
tors (DSOs), and the spot market ex-
change ETPA in order to provide
exibility for DSOs. This gives
DSOs a way of managing congestion
whilst maintaining TSO system re-
quirements, and gives providers an
additional revenue stream option. By
including their location data,
GOPACS checks if an order can
solve DSO congestion requirements.
The platform uses existing intraday
energy markets, and coordinates
with the TSO to reduce congestion
problems.
The pace of change to solve the de-
carbonisation of Europe creates new
problems of network management
for system operators. As we saw
with the example of the GOPACS
platform, amongst proactive solu-
tions is the development of new
ways of using demand-response with
a trend toward a bottom-up approach
of procuring exibility. We see the
emergence of three levels of de-
mand-side exibility (DSF) – turn-
ing down demand loads, using bat-
teries for example to provide
short-term power boosts, dispatching
local generators, etc. – to manage the
grid; at the transmission level with
voltage and frequency management,
at the distribution level with conges-
tion management, and at the local
level with local grid management
and support to the distribution net-
work. Indeed, we see a trend towards
DERs becoming increasingly man-
aged within local energy systems
(LES). The use of DSF at these three
levels will necessitate better TSO-
DSO coordination and better DSO-
LES coordination. This clearly puts
DSOs at a central pivotal point, us-
ing DSF as a strategy to decrease
network management costs, invest-
ment costs, and working in coordina-
tion with LES to minimise the cre-
ation of new congestions, ideally
using them as one exible asset.
At Delta-EE, whilst exploring the
uptake of DSOs procuring commer-
cial solutions for DSF across differ-
ent countries in Europe, it became
clear that the competitive dynamics
of exibility markets are being re-
drawn. The new EU ‘Clean Energy
for All Europeans’ legislative pack-
age sets new rules for DSOs, encour-
aging them to procure exibility as
one of the cost-effective solutions to
solving grid issues. The Member
States must translate this into a regu-
latory framework.
The nal national regulation and
the pace of implementation are key
drivers, which can provide commer-
cial advantages and opportunities.
DSOs and other exibility stake-
holders such as aggregators and
suppliers, by being ahead of the
learning curve in their home mar-
ket, could seize interesting market
shares from this new value stream
and be ready to penetrate other mar-
ket with the strong advantage of be-
ing established. Meanwhile, smaller
and less innovative DSOs may not
rest on their laurels operating busi-
ness-as-usual.
On the one hand, there are already
many lessons to be learnt from early
movers. On the other hand, DSOs
may be accountable to new stake-
holder types who could threaten con-
cession renewals for those like in
Germany who are typically granted
concession contracts to operate the
grids, while local authorities keep
the grid’s ownership. We have seen
such a case when back in 2013 in
Berlin, the cooperative BuergerEner-
gie Berlin (Citizen Energy Berlin),
unsatised with the Vattenfall sub-
sidiary Stromnetz Berlin and criti-
cised for not embracing the transi-
tion fast enough, decided to compete
against the DSO for control of the
grid. Finally, in 2019, Stromnetz lost
the grid concession rights to the Ger-
man city of Berlin for a period of 20
years.
From our study on DSO exibility,
it seems clear that DSOs are on
board to embark on the innovative
journey of delivering DSF solutions
commercially, and have unique op-
portunities to develop new exibility
markets, ensure better margins, and
secure concession renewals.
Coming back to LES, it is a term
that encompasses many types of lo-
cal systems, including, for example,
systems with energy generation
owned and managed by energy com-
munities, systems functioning under
specic models such as the Collec-
tive Self-Consumption model in
France, Belgium or Spain, the Miet-
erstrom model in Germany, but as
well including some smart-grids sys-
tems, local energy market systems,
and microgrids with islanding capac-
ity, to name some of the varied local
systems developing in Europe.
The soaring number of DERs con-
nected on networks is accompanied
by a growth in LES creation with
several drivers: lower capex with im-
proved performance and falling costs
of assets; innovative platforms for
balancing and optimising LES; inno-
vating trading platforms; multiplica-
tion of investment sources such as
crowdfunding platforms; the ‘Clean
Energy Package’ providing a posi-
tive legal framework for energy
communities, which is being trans-
lated into national regulation.
Depending on the nature of the
projects, other factors may inuence
the creation of a LES. For instance,
some industrial players may struggle
with high electricity grid connection
costs and mitigate it by requesting a
lower capacity grid connection and
integrate DERs onsite, and some de-
velopers may mitigate the time it
takes to get grid connection approval
by creating a microgrid.
The term ‘local energy systems’
covers a wide diversity of local sys-
tems in terms of architectures, own-
ership and business models, at both
local and national levels. This holis-
tic approach allows us to draw com-
parisons and provide analysis on
market dynamics. From our research
across different types of LES, we see
three general trends in Europe:
n a rise in energy communities and
their inuence as European
stakeholders;
n a race amongst industry
stakeholders to nd protable and
replicable LES business models.
This comes after the withdrawal of
support mechanisms in Europe such
as the Feed-in-Tariffs;
n and a rise of industry stakeholders
seeking to shift their business
models to new paradigms involving
energy communities.
Navigating and succeeding in the
complex world of LES requires an
understanding of the many challeng-
es and opportunities paving the way.
These include the relationship with
network operators, the legal aspects,
such as in France with the overly
complex creation of an entity (Per-
sonne Morale Organisatrice – PMO)
to create a Collective Self-Consump-
tion project, but also the different
stakeholders’ motivations.
Regarding the latter, industry
stakeholders should not underesti-
mate the importance of grasping and
adapting new driver types, not nec-
essarily based on what might seem
like ‘logical thinking’. Energy com-
munities can be composed of indi-
viduals, SMEs and local authorities
including municipalities. Within one
community, conicting motivations
may be found. While the point of
one participant could be to inter-
nalise environmental and climate
change costs, for another the motive
would be to source their energy lo-
cally and hence retain the benets
locally.
The fragmented nature of LES and
their stakeholders explains why nd-
ing replicable and protable business
models proves to be such a difcult
task. However, this represents a fan-
tastic eld of opportunities, for ex-
ample energy communities procur-
ing exibility at the DSO level, but
moreover for all stakeholders includ-
ing DSOs, utilities, aggregators and
communities to create un-siloed ap-
proaches for effective and fair busi-
ness models.
Rita Desmyter is Research Analyst,
Local Energy Systems at Delta-EE.
There is a trend towards distributed energy resources becoming increasingly managed within local energy systems.
This clearly puts Distribution System Operators at a central pivotal point, using demand side exibility as a strategy
to decrease network management costs, investment costs, and working in coordination with local energy systems to
minimise the creation of new congestion, ideally using them as one exible asset, says Delta-EE’s
Rita Desmyter.
Desmyter: the competitive dynamics of exibility markets are
being re-drawn
Energy communities and DSOs:
the next innovation disruptors?