The need for demand-side management of electricity increases – piloted marketplace would enhance the use of demand-side resources

Continuous energy availability is necessary for all Finns and the Finnish industry. However, it is impossible to store energy in a large scale, so, to ensure availability, there must always be a balance between the production and consumption of electricity. Reaching a balance is more difficult than it used to be, as production is increasingly based on renewable modes of production susceptible to fluctuations in weather, such as wind and solar power. The need for flexibility is increasing while the load-following capacity is decreasing.

The VTT-coordinated Fleximar is a Business Finland funded co-innovation project. The project seeks a solution to the dilemma from demand-side management of electricity, or momentary reduction of consumption. For example, the building stock provides a significant resource for demand-side management, since up to 40% of all energy consumption is related to buildings. However, the factor limiting the use of demand-side resources is the inability of the present marketplaces to enable trading in small quantities of load-following capacity. The Fleximar project will create a new marketplace for using small demand-side resources.

"The existing systems intended for demand-side management of electricity have been created on the large operators' terms, and it is too expensive to join them for small operators, such as individual consumers. We are now developing a cost-efficient marketplace welcoming also small operators. The intention is to collect small demand-side components from various operators and to combine them for sale," says Principal Scientist Klaus Känsälä from VTT.

The new marketplace would balance the load-following capacity markets and strengthen the consumers' role on these markets. "So far, the consumers have held the passive role of bystanders and payers – industrial facilities pay far less for their electricity than consumers, who cannot influence the markets. Our solution would give the consumers a role as active operators. They could be coupled as load-following capacity producers without middlemen and sell, for example, the solar power they have produced themselves on the same market where the wholesalers operate.

The research project also develops new management principles, and business and market models supporting the use of the small-scale, flexible demand-side resources connected to the electricity distribution networks.

"By means of active and intelligent use of flexible resources, it is possible to significantly improve the overall efficiency and reliability of electrical power systems and to maximise the integration of renewable energy sources," says Professor of Electrical Engineering Hannu Laaksonen, who leads the project in the University of Vaasa.

In the future, the utilisation of flexible energy resources will increase not only in the transmission network, but also in the distribution networks. Therefore, to maximise the potential overall benefits of flexible energy resources, the transparency of data transfer between operators of transmission and distribution networks and the development of rules related to flexible resources utilisation should be improved. Hannu Laaksonen points out that there should be real-time information on potential restrictions for the use of flexible resources. When the restrictions deriving, for example, from technical limitations of distribution networks or different customer needs are known, only then the real-time utilisation capacity of flexible resources available can be estimated.

The pilot version of the new marketplace is up and running, and its architecture, operation and real-time steering is being tested with partner companies. The marketplace will apply stock exchange trading mechanisms and use intelligent bots and real-time pricing in trading. Location data will also be integrated into the solution, enabling local steering of loading even by city district. Local flexibility could be implemented by means of small demand-side resources, and larger load-following capacity would be reserved for exceptional situations.