economic added value of fenix vpps

Stakeholder Advisory Group Meeting, Prague, 12th June, 2009 1

FENIX Work Package 3Commercial framework for operation and control of

power systems with LSVPPs

Economic added value of FENIX VPPs

Martin Scheepers(ECN)


Outline

• Objectives & approach• FENIX VPP concepts• VPP cases and scenarios• Results cost-benefit analysis for CVPP• Discussion on economic value TVPP• Summary and conclusions


Objective & approach

• Objective– To demonstrate the economic viability of the FENIX VPP

Concepts• Prove the economic value of flexible DG operations• Demonstrate that existing and new business models can

profit from this economic value

• Approach – Concrete VPP cases in Northern (Woking) and Southern

(Alava) scenarios– Demonstration based on simulation of the financial flows

between business actors in the electricity market– Cost-benefit analysis– Focus on incremental changes in recurrent cash-flows


FENIX VPP Concept – Economic value

• Commercial Virtual Power Plant (CVPP)– Introduce flexible DER operations – Responsive to market price signals or (internal) balancing incentives– Economic value: flexible DER is more competitive

• Technical Virtual Power Plant (TVPP)– Reducing network operational expenditures (e.g. energy losses,

reactive power costs) – DER replacing or postponing network reinforcement investments– Flexible operations of DER supporting network congestion management– Economic value: flexible DER operations reduces operational costs

and avoids network investments


Levels and system boundariessociety

• External cost/benefits• Indirect cost/benefits

electricity supply system

fuel costs

environmentalcosts:CO2-creditsor carbonstorage costs

electricity consumers

government(taxes)heat

consumers

system profits

equipmentsuppliers

Electricity GenerationElectricity

Generation TransmissionTransmission DistributionDistribution SupplySupply

value chain

business model

business model

revenues

expenses

profit


Northern Scenario: Case Studies

Energy exchanges between EDF Energy and Woking are based on ex post Day Ahead settlement prices on the power exchange

Case Study 0.2(Reference)

Existing listed tariffs for energy exchanges between EDF Energy and Woking.

Case Study 0.1

CVPP-controlled aggregation for tertiary reserve services (availability and, when called, energy) to TSO. Reducing the total costs of the TSO-operated Balancing Mechanism.

Case Study 4

CVPP-controlled aggregation to have DER providing real time imbalance services to the CVPP (EDF Energy) itself. Optimising (reducing) CVPP’simbalance positions with respect to the TSO-driven Balancing Mechanism.

Cast Study 3

CVPP aggregation for access of DER to real time Balancing Market. financial and remote-controlled physical flexibility services to reduce imbalance of market (ramping up or down on demand services to the TSO Balancing Mechanism)

Case Study 2

CVPP aggregation for access of DER to wholesale market without assuming balancing responsibility. Substitution of expensive energy from large aggregators by cheaper distributed generation.

Case Study 1


Southern scenario: Case Studies

TVPP-controlled aggregation for access of DER to voltage control market. Optimising (reducing) voltage profiles and reduction of losses in transmission and distribution networks.

Case Study 3

CVPP-controlled aggregation for access of DER to real time Balancing Market. Financial and remote-controlled physical flexibility services to reduce imbalance of market.

Cast Study 2

CVPP-controlled aggregation of DER. The CVPP operates DER and installs the required equipment for a more flexible operation of DER, to optimise sales on the wholesale electricity market.

Case Study 1

DER sell electricity through an aggregator. An aggregator adds the electricity generation from the different DER and makes a single offer for all the electricity generated. Imbalance charges are reduced as a result of portfolio effect.

Case Study 0.2(Reference)

DER sell electricity directly in the market. Each DER sells its electricity generation in the market and all the imbalance charges are born individually

Case Study 0.1


Transaction Schemes & CBA Model

9

1213

Balancing market

Balancing market

15

17

14

18

Forward market/

Day-ahead market

Forward market/

Day-ahead market

78

11

10Energy supplierEnergy supplier

Commodity subsystem

1617

9

1213

Balancing market

Balancing market

15

17

14

18

Forward market/

Day-ahead market

Forward market/

Day-ahead market

78

11

10Energy supplierEnergy supplier

Commodity subsystem

1617

ConsumerConsumer

1

5 46

23 DSODSO

22

20 19

Ancillary services market

Ancillary services market

23

21

DER Operator

DER Operator

Physical subsystem

Large power

producer

Large power

producerTSOTSO

Operating Parameters• On/off status• Thermal store

status• ...

Other Inputs• Local Heat

Demand• ...

Prices• Spot Price• SSP• SBP

Operating Parameters• On/off status• Thermal store

status• ...

Other Inputs• Local Heat

Demand• ...

Prices• Spot Price• SSP• SBP

CBA Inputs

Model RunsCalculations for every Settlement Period• Optimization or Pre-determined operating profile• Tr1 = DER_Production * DAPrice• …• Update of operating parameters, etc.• Next settlement period

• Detailed results for every transaction for every settlement period

• Aggregated revenues/costs for every stakeholder- DER

• Revenues from electricity sold• Fuel & Variable Costs, etc.

- …

Output


Scenario approach

Ref 1 2 3 4 Ref 1 2 32006 2007

Northern Scenario Southern Scenario

Fenix concept Fenix conceptInfluence of

changing electricity

market, i.e. higher fuel prices and

more renewable

energy

Changing regulatory and contractual framework

Ref 1 2 3 42015-2024

Ref 1 2 32015-2024

Ref 1 2 3 4 Ref 1 2 3

Base casescenario

FENIXscenario

Base case

FENIXscenario

Fenix concept

Fenix concept

Fenix concept

Fenix concept


Northern Scenario 2006 - Reference Case

• CVPP is operating as an Aggregator– DER operation is not

optimized with respect to Day Ahead market

– Pre-determined production profile

– CVPP (Aggregator) role is limited to aggregating production for market access and proceeding transactions

Day-ahead prices

0 1 4 2 3 5 6 7 8 9 12 10 11 13 14 15 18 17 19 20 21 16 22 23

£/MWh

Day-ahead prices

0 1 4 2 3 5 6 7 8 9 12 10 11 13 14 15 18 17 19 20 21 16 22 23

£/MWh


Northern Scenario 2006

Case 1 - Access to Day Ahead Market

• CVPP optimizes DER operation with respect to wholesale power market

– CVPP forms bids for DA market, regarding operational parameters of DERs, local heat demand, etc.

– If bids lower than observed DA prices, DER deliver power

• CHPs coupled with thermal store to exploit whole range of flexibility

– Effective electric efficiency is used for useful heat production

Day-ahead prices

0 1 4 2 3 5 6 7 8 9 12 10 11 13 14 15 18 17 19 20 21 16 22 23

£/MWh

Day-ahead prices

0 1 4 2 3 5 6 7 8 9 12 10 11 13 14 15 18 17 19 20 21 16 22 23

£/MWh


Northern Scenario 2006 - CBA Results

Access to Day Ahead Market• Intelligent operation of DERs

– Operation responsive to price signals

– Total DER utilization decreases, but profitability increases (by 22.1 £/kW/year or 35%)

– CVVP net revenues increase (2.8 £/kW/year or 14%), as revenues proportional to DER revenues

• Value proposition: substitution of more expensive power producers

0.141.92

22.15

26.61

2.83

-0.42

0

5

10

15

20

25

30

Wok

ing D

G

CVPP

Supp

lier

TSO

Larg

e Sc

ale P

rodu

cer

Syste

m

Inre

men

tal C

han

ge

(£/k

W/y

ear)


• DER benefit from opportunities in Balancing Market

– DER offer both downward and upward balancing services

– DER profitability increase by 20% (or 16 £/kW/year).

– Part of increased revenues is attributed to CVPP (0.8 £/kW/year)

– Overall system efficiency improves

• Value proposition: DER displace more costly balancing service providers

Northern Scenario 2006 - CBA Results

Access to Balancing Market

16.84

0.01

15.99

0.04 0.020.81

0

2

4

6

8

10

12

14

16

18

Wok

ing

DG

CVP

P

Supp

lier

TSO

Larg

e Sc

ale

Prod

ucer

Syste

m

Incr

emen

tal C

han

ge (£

/kW

/yea

r)


Discussion on economic values of TVPP

The economic value of TVPP operations depends on:• Grid topology• Location of DERs on the grid and further DER penetration• Demand pattern and demand growth

Calculating TVPP economic value requires a number of assumptions, e.g.• Network planning methodology• Expected demand growth• Location and type of (new) DERs on the network• Allocation of network investment costs to demand or distributed generation

Hence, the economic value of TVPP operations depends very much on location specific circumstances and expected developments over time.


Impact DG on regulated profit DSOs

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

R U R U R R U U R R U U R U R U

Yes Yes Yes Yes No Yes No Yes No Yes No Yes No No No No

Low Low High High Low Low Low Low High High High High Low Low High High

11% 11% 23% 23% 23% 23% 23% 23% 46% 46% 46% 46% 46% 46% 91% 91%

50 50 100 100 50 100 50 100 100 200 100 200 100 100 200 200

Incr

emen

tal n

et p

rofit

/reg

ulat

ed p

rofit

Net profit Including deferred investment value

Network type

Intermittency

Concentration

DG penetration (%)

DG penetration (MW)

UK network regulation 2006 & passive network managementincluding deferred investment potential ( - )

www.dg-grid.org


Incremental network investment costs

Year

Incrementalcapacity

(kW)

Load

DG

Year

Penetration (% DG /

peak load)

Year

Total incremental

costs (€)

Total incremental

costs (€)

Penetration (% DG / peak load)

1

2

2

A B

DC

1


Increment costs impact

www.improgres.orgDG/RES-E penetration (%DG/peak load)

Incr

emen

tal c

ost i

mpa

ct

Network integration costs Including network innovations

0

- Lower OPEX- Deferred investments

- Reinforcement costs exceeds deferred investments- Energy loss increase

Active network management due to lower reinforcement costs


Summary and conclusions

• Economic added value for CVPP– Quantitative economic simulations and cost-benefit analyses

indicate positive results on system level and for DG owners• Economic added value of TVPP

– Quantitative assessment is more complicated and is strongly influenced by local situations and assumptions

– Qualitative analyses suggests that TVPP operations can reduce network costs

economic added value of fenix vpps

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