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Melanie Degel – IZT presented by Stefano Faberi – ISIS Brussels, 12 April 2012 Smart grid energy business.

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Presentation on theme: "Melanie Degel – IZT presented by Stefano Faberi – ISIS Brussels, 12 April 2012 Smart grid energy business."— Presentation transcript:

1 Melanie Degel – IZT presented by Stefano Faberi – ISIS Brussels, 12 April 2012 Smart grid energy business

2 Content Change of the electricity value chain Development of business models Existing and new business models Pilot business cases Future challenges Conclusion

3 New value chain Core innovation is the Integration of DR, that entails: – Power system changes from: one way street to two-way communicating smart system – New business opportunities – New market participants – To remain competitive existing companies renew traditional business models – Utility challenge: identify necessary changes in existing business cases

4 business model development Actors and roles Products and services Contract relations Trans- actions Enabling technology Values and benefits Drivers and barriers Sustainable business models Benefits smart grid technologies / applications to whom? How is the benefit produced and at which costs? Who is paying? Incentives of benefit generation? Is the business model compatible with current market model? Smart grid business models

5 Business model development T he future development of the smart grid should be primarily market-driven, with system operators as the main investors and beneficiaries Business models that do not allow for the sharing of short-term investment costs and of long-term benefits are bound to fail Incentives from the regulatory framework should encourage the actors to seek benefits from efficiency increases rather than additional sales Only in this way the transition from the volume-based to the efficiency-based business model can take place (IEA 2011)

6 Business models Traditional Utilities identify DR and develop DR plans non restructured markets Aggregator via aggregation intermediary Aggregator benefits from DR programs restructured markets Customer- provisioned Large customers purchase demand response technology enabling to decrease operation costs benefits from national DR programs ESCO Savings by installation of efficient equipment Cost sharing between customers and installers Existing business models

7 Business models Smart Home Minimize costs: technologies with many functions Maximize benefits: functions with a high willingness to pay Benefits: house owners, EU-Member States and third party companies CSP or aggregator model Dynamic efficient building operation From reduction of overall consumption to optimized time of energy usage Solutions that maximize available granularity of real-time communication and control New business models

8 Business cases Overall key elements System integration of single technologies Equally shared costs among all stakeholders Complete consumer engagement by tangible tariffs Education and trust building Examples EU-DEEP and FENIX Aggregation models DER integration through aggregation operation by an independent market participant (aggregator or retailer)

9 Aggregation business Aggregators are intermediaries between consumers and markets They group customer demand or generation into diversified portfolios of DER Aggregation business drivers – Lower market entry barriers – Rollout of smart meters as enabler for aggregation – Optimization of generation and consumption – Lower overall operating costs Aggregators finally require a stable legal and contractual framework The aggregator needs to transform complex electricity market mechanisms into simple transaction mechanisms for customers

10 EU DEEP business models I: Aggregating commercial and industrial demand response to balance intermittent generation II: Integrating residential scale flexible Micro-CHP into electricity markets Result: low level of risk, application short-term perspective III: Leveraging on the flexibility of aggregated CHP units and demand response to extend the conventional ESCO business Result: extension of the existing ESCO model for new emerging services Result: higher risks, application medium- and long term

11 A possible remuneration system A conceivable remuneration system between aggregators and customers based on payments for the offered flexibility and provision on request in electricity markets (EU-DEEP Project)

12 Future challenges Change of customers role from passive to active – Customers expect real-time price signals – Relation between price signals and personal consumption, price of resources, system security and environmental concerns Radical utility change in data collection, storage and processing Smart metering – Utilities expect their customers to respond to price signals by modifying their electricity usage – full benefits requires advanced technology in the homes of customers Policy makers, entrepreneurs, manufacturers must support economic convenient solutions to transmit price signals to the customer beyond the meter effective technologies and models for customer engagement the profitability of new models for small residential customers Further Development beyond the meter DR more than a capacity resource in peak times Integration of residential customers Direct and non direct customer feedback technologies Declining costs and the lack of granular energy data, Improvement of dynamic pricing and interconnection standards

13 Implementation of residential demand response business Further ability to integrate increasing DER Operation and management rules Supply – Demand matching concepts 1. Advanced distribution infrastructure Reduced grid expansion investment Efficient capacity utilization Lower grid usage fees 2. Dynamic pricing models Customer feedback technologies Direct: In Home Display, web-based services Non-direct: Smart thermostats, Smart household appliances 3. Smart technologies Communication gateway Development of interconnection standards Energy data services 4. Advanced metering infrastructure Efficient implementation and usage Investment support 5. Smart meter New active customer as main utiltiy concern High levels on communication, privacy and transparency Education programs 6. Profitable customer-utility partnership

14 Conclusions Today Daily energy efficiency Demand response plans Demand response programs for companies Aggregation models to integrate DER Intermediate Time-of-use energy and daily peak load managed Market platforms with clear interaction rules Peak management Future Day ahead demand response and real-time-business Smart Meter with AMI Integration of residential customers beyond the meter Smart appliances, Active customer relation, Dynamic pricing, High granular energy data From traditional to real-time energy business Equally shared costs and benefits between all stakeholders High levels of transparency, privacy and user friendliness Systemic benefits from the entire smart architecture Less regulation more market competition

15 Thank you for your attention!

16 FENIX business model Framework – Virtual power plant concepts – Two models : Access to the market, in absence / presence of strong pressure to integrate DER – Participants: DER-owner, CVPP operator – CVPP responding to market price signals Results – Market-entry for small participants – Improves their integration – Minimize investment costs and market fees, – Maximize benefits – Optimize real-time market operation, – Strong pressure model II – Provide fast start-up power capacity – Higher grid reliability due to ancillary services – Postponed grid investments are reduced – Costs: network expenditures – Needs: stable commercial, regulatory framework and ICT standards

17 Market platforms Market platforms for: – communication in smart grids – Interconnection of market actors – Data provision for system operation Status Quo: – DER integration on supply side is well advanced – much more demonstration is required on the demand side Benefits – Access provision to applications and supply / demand data – Increase with the number of participants – Fundamental transaction rules – Clear coordination mechanisms between market actors and platform operator – Surrounding platform architecture influences long-term benefits Further development needs – Tight linkage of IT-infrastructure between DSO and TSO – Ensuring compatibility of energy services and physical constraints with geographical area mapping – Success depends on high levels of transparency, privacy issues and user friendliness

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