Electricity Value Chain Research Articles

Quantifying distribution-system operators' economic incentives to promote residential demand response

Demand response (DR) from end-users is widely investigated as a power-system flexibility resource in a European smart-grid environment. Limited knowledge exists on the added value such flexibility can bring to actors in the electricity value chain. This work investigates the economic effect of consumption flexibility under current regulatory remuneration on distribution-system operators with a Swedish case study. Results indicate DR leads to savings for the distribution-system operator, which might be used towards smart-grid investments. Peak demand is and will continue to be a main driver for grid costs and therefore should be a focal point in tariff design.

Energy Management and Smart Grids

The paper outlines energy management concepts and the smart grid evolution. The necessity of considering energy management as a crucial innovation in load supplying to permit a more powerful penetration of renewable energy usage at the building and city level and to perform energy savings and CO2 emissions reduction is pointed out. The driving factors to enhance the current power distribution are presented, and the benefits concerning smart grids are underlined. In the paper, a specific energy management analysis is reported by considering all the electric value chain, and the demand-side management and distributed on site control actions are described. To verify the benefit of energy management control actions, a house simulator and a grid simulator are here presented and the results discussed in three different scenarios. Moreover, in the paper, the evaluation of ecological benefits are reported, and a cost benefit analysis of the energy management system is performed. Results pointed out that with the standard control actions, the system is not economic for the end user, and only by using energy management systems with renewable energy, in site production remunerative energy savings can be reached. Finally the evolution of smart grids is presented, focusing on potential benefits and technical problems. The active grids, microgrids and virtual utility are described, and final consideration on hypothetical scenarios is presented in the conclusion.

Unbundling in the Telecommunications and the Electricity Sectors: How Far should it Go?

1. Introduction During the last 25 years, both on developed and developing countries, there has been a sound experience of restructuring, deregulation and privatization of sectors that were previously regulated monopolies and most of the times also state-owned. Reasons behind this trend were manifold: technology changes, poor performance of regulated firms and a general ideological shift towards markets are among the most important. A central feature in debate for network sectors concerns unbundling. The most common argument in favor of integration was basically twofold: it would be a solution to overcome, at least partially, double marginalization and it would give incentives to upstream investments (Hoffler and Kranz, 2008). Since the 90's and for most European network industries, the main political question--Should vertical integration be allowed?--has been replaced by two others: * How far that separation should go? * Should the same policy principles apply to all network industries, namely public utilities? In the communications sector most of the European countries already implemented accounting separation and the present debate is about functional separation. UK introduced it in 2006. Sweden and Italy followed this policy aiming to encourage retail competition. However, in other European countries (Netherlands, for instance) regulators decided to maintain vertical integration, mainly arguing that the incumbent firms face competition from alternative networks. Based upon the evidence of unbalanced cost allocation by electricity firms between regulated and non-regulated operations, the European Commission introduced the 96/92 EC Directive which required the accounting unbundling of both generation and retail stages of the electricity value chain from the network business (transmission and distribution). Later on, the 2003/54/CE Directive went further requiring legal unbundling as there were serious grid access problems by non-integrated firms. Through their transmission business, integrated companies acted as barriers to market competition either favouring their own generators or through under investments on the transmission grid. Finally, in 2007, the Third Energy Package was proposed by EC in order to solve, among others, this problem which EU Energy Sector Enquiries proved to be major barriers to liberalisation. As it will be explained in section 4, the final outcome of this recent EC regulatory initiative was a compromise that still can give place to under investment on the grids. Therefore, at the moment, communications and electricity face the same question: how far should the unbundling process go? The main goal of this paper is to analyse the arguments under discussion, namely: 1. Which were the main reasons for different regulatory approaches in the past? 2. Presently is it possible to draw some lessons from one sector to the other concerning the effects of different regulatory approaches on competition and investment? Overall, we conclude that ownership separation is fairly influenced by the economic nature of each utility infrastructure. Vickers (1995) recognizes that the most significant contribution of ownership unbundling to competition in network industries is that it reduces the incentive to discrimination by a network operator which belongs to the same holding group of other generators and/or retail firms. There is empirical evidence on the increasing congestion of transmission networks with the development of wholesale markets and its negative impact on competition (Joskow, 2005a, 2005b and 2006). Also, Hirst (2004) refers that the dynamics of investment in transmission capacity is far from that of trading patterns. Ownership unbundling achieves competition in electricity wholesale markets, although it may eventually lead to a concentration increase of generation through mergers. As presented by Balmert and Brunekreeft (2009) the EC final political compromise on the unbundling issue of the transmission business may raise some complicated, unexpected problems on investments, one of the chief arguments which the 3rd Package proposal aimed to solve. …

Energy storage – the electric value chain disruptor

Electric energy storage is not new. Every one of the authors’ will remember the batteries they used (and still do) for flashlights and the batteries used to get cars started. However, much is changing and storage is poised to become the major disruptor power engineers have been waiting for. This study starts with a definition of energy storage and what makes it unique followed by a section that defines some of the terms which are unique to the storage industry. It then moves to focus on types of energy storage starting with mature ones and then following it up with those that are still in an R&D pipeline and could make a difference soon. The next section discusses applications of storage on the grid (either T or D), an important aspect driven by the differing characteristics of storage. This study then moves onto define the business case for storage looking at it from the perspective of the utility, investor, customer finally ending with the regulator. The conclusion comes last in which the author presents a view of how storage will drive news levels of transformation in the grid and the utility.

Governing Infrastructure Networks for a Low Carbon Economy: Co-Evolution of Technologies and Institutions in UK Electricity Distribution Networks

This paper analyses efforts to promote innovation in the UK energy networks sector. Using a case study approach, we chart the co-evolution between technologies and institutions in electricity distribution networks since the introduction of privatization and market liberalization over twenty years ago. It is observed that as a result of macro level institutional dynamics, innovation has become an increasingly important policy and regulatory goal. However, efforts to promote radical and architectural innovation, such as the transition to a smart grid, face significant barriers at the firm and sector levels. It is argued that changes are required to the formal and informal institutions which govern the sector in order to promote a more coherent relationship between technological and institutional change, leading to a productive innovation system which allows firms to collaborate across the electricity value chain and develop inter-firm/cross sector innovation partnerships.

A novel business model for aggregating the values of electricity storage

Electricity storage is considered as a valuable source of flexibility with applications covering the whole electricity value chain. Most of the existing evaluation methods for electricity storage are conceived for one specific use of the storage, which often leads to the conclusion that the investment on storage does not pay off. However, the value of storage cannot be properly estimated without taking into account the possibility of aggregating the services that storage can offer to different actors. This paper proposes a new business model that allows aggregating multiple revenue streams of electricity storage in a systematic way. The model consists in coordinating a series of auctions in which the right to utilize the storage unit is auctioned upon different time horizons. In the mean time, non-conflicting usage of storage by the actors in these different auctions is ensured. The functioning of the model is demonstrated by a case study. The results show that a storage unit can achieve higher return on investment in the manner proposed in the business model.

Construction d'une offre de services du stockage pour les réseaux de distribution dans un contexte réglementaire dérégulé

This paper deals with the new services that can be provided by distributed energy storage systems to enhance distribution planning and operation, such as intentional islanding. Although energy storage technologies offer interesting features, they still remain capital-intensive and raise cost-competitiveness issues: they usually cannot be made profitable considering only a single revenue stream. That is why it seems necessary to contemplate the possible services of energy storage not only for distribution system operators, but for some other stakeholders of the electricity value chain as well. In the last part, a new approach to the combination of storage benefits is introduced and its use within the framework of this project is briefly discussed.

Setting the Program of Change at the Central Operator

Whether a centralized or decentralized structure is followed, orchestrating the formation of the “Central Operator” that is at the heart of the electricity value chain is essential to making deregulation work. Four stages of development are crucial to this process.

Lise Meitner: A life in physics

This chapter aims to redress traditional conceptions of the electricity value chain which have focused heavily on costs on the grid side of the meter. DER is now driving a great rebalancing, rattling the value chain and refocusing the sector on costs and benefits behind the meter. Most assets are behind the meter and the consumer surplus from energy services is almost certainly the largest segment of the value chain. This raises questions about the relevance of the meter as the key dividing line in the industry value chain. The chapter then considers the implications of this great rebalancing for cost reflective pricing and regulation.