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

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
Sustainable business models
Actors and roles
Products and services
Contract relations
Trans-actions
Enabling technology
Values and benefits
Drivers and barriers
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
The 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. Customer-provisioned
Business models
Existing 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
market restructuring involved the divestiture of generation from utilities, the formation of organized wholesale spot energy markets with non-discriminatory economic mechanisms for the rationing of scarce transmission resources, the introduction of retail choice programs, and the establishment of new forms of market oversight and coordination.

7. Dynamic efficient building operation
Business models
New 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

8. Business cases EU-DEEP and FENIX Aggregation models
Overall key elements
Examples
System integration of single technologies
Equally shared costs among all stakeholders
Complete consumer engagement by tangible tariffs
Education and trust building
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
Result: higher risks,
application medium- and long term
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 

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

14. From traditional to real-time energy business
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
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
From traditional to real-time energy business

15. Thank you for your attention!

16. FENIX business model Framework Results
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
market-entry for small participants: improves their integration

17. Market platforms Market platforms for: Status Quo: Benefits
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
Open question: who is the platform operator