How to Procure Flexibility Services within the Electricity Distribution System: Lessons from an International Review of Innovation Projects

Karim L Anaya,Michael G Pollitt

doi:10.3390/en14154475

Abstract

The aim of this paper is to analyse and evaluate the deployment of smart platforms (operated by distribution system operators—DSOs—or by independent parties) in key jurisdictions that facilitate the trading of flexibility services—primarily by DSOs. We look at key innovation projects/initiatives from seven jurisdictions, including Australia, France, Germany, Great Britain, Japan, The Netherlands and Norway. We have deliberately selected 13 use cases that operate under different regulatory frameworks and market rules, and have been recently implemented (from 2017 onwards). With the selection of key use cases this study seeks to discuss the different smart architecture solutions and main capabilities across different demonstrators and their relationship to business as usual. It also analyses flexibility market designs, identifies main characteristics, and compares different price formation schemes and procurement methods. The value of flexibility for DSOs is also discussed.

Highlights

The decentralisation, decarbonisation and digitalisation of the energy system is creating new business opportunities for all the participants in the electricity value chain, such as suppliers, demand customers, traders, aggregators and network operators
We go on to evaluate the use cases on a number of dimensions. We do this by considering what recent developments there are in the system architecture behind smart flexibility solutions; what market designs are being used to procure flexibility; how they are recognising the need to support new business models; how the value of flexibility is calculated by the DSO; what are the common and unusual trends in the development of flexibility procurement mechanisms and what is still missing; and we discuss the role of the regulator in promoting flexibility markets
In each case we offer some general reflections on what this means for flexibility procurement by the DSO

Summary

Introduction

The decentralisation, decarbonisation and digitalisation of the energy system is creating new business opportunities for all the participants in the electricity value chain, such as suppliers, demand customers, traders, aggregators and network operators (e.g., distribution system operators—DSOs—and transmission system operators—TSOs). The democratisation of smart technologies (e.g., smart meters, artificial intelligence, active network management, blockchain) in the different components of the electricity supply chain is facilitating the management and trading of different flexibility services provided by distributed energy resources (DER) including demand customers. DSOs are deploying new capabilities in order to deal with the increase of DER and to take advantage of the services that these can provide to alleviate grid constraints. Those capabilities can be in different forms, such as new platforms for planning and energy trading, in order to manage and operate more efficiently the networks in line with the increasing number of DER connected to the distribution grid. A DERMS solution helps utilities to manage, aggregate and dispatch

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