Enova’s new large-scale competition enables network companies and other market players to pilot solutions to exploit local flexibility. But what makes a successful pilot design? THEMA has analysed this issue for Enova.
Enova went public with their plans to pilot local flexibility markets at the Enova conference 2018. The competition is aimed at network companies and various market players and has three main objectives:
- Demonstrate innovative models for the effective use of resources, the integration of different energy carriers (such as electricity and heat), and the integration of storage (batteries and thermal storage).
- Test smart solutions that increase the utilisation of existing infrastructure and local generation capacity.
- Test new market models that stimulate the increased use of flexibility, including flexibility markets.
There are plans for substantial investments in the Norwegian electricity grid, a sizeable proportion of which are related to congestion management. It is hoped that local flexibility markets, supported by aggregators gathering the flexibility offered by a group of consumers, can reduce peak electricity consumption and thereby allow a share of the planned investment to be postponed or even avoided. Aggregating the flexibility of groups of consumers increases the likelihood that they can offer the flexibility needed to postpone or avoid grid investments.
Today, the establishment of local flexibility markets is hampered by various barriers. In a report for Enova, THEMA argue that suitably designed large-scale pilots may help overcome important barriers, thus enabling the implementation of local flexibility markets.
The key to success in the Enova competition will be to see the different parts of the value chain together, to connect market players and develop proposals that address the most important barriers.
The most important issue that large-scale pilots can help shed light is the extent to which local flexibility markets can help reduce investment needs and facilitate network operations. The value of flexibility depends on how well potential sources of supply match the specific requirements of sources of demand. The pilots will facilitate interaction and the exchange of experience among stakeholders. It would be challenging for one or a few players to establish a local market solution on their own, due both to the complexity of the detailed market design process and the minimum viable scale of aggregators.
Enova manages other support mechanisms and policy instruments that could support the development of local flexibility markets. The potential value of local flexibility markets will increase with the volume of flexibility available, and this volume can be increased both by improving consumers’ knowledge of and control over their own energy use.
A suitably designed pilot will include a well-designed announcement and selection process. A good selection process can be ensured through dialogue with the key players in advance of any formal announcement. Overall project risk should be reduced by dividing the pilots into phases. This makes it possible to terminate projects that are going in a wrong direction early, at the completion of each phase and limits the risk for both Enova and the pilot participants.
Download the report her (in Norwegian):
THEMA Rapport 2017 >> Aggregatorrollen, fleksibilitetsmarkeder og forretningsmodeller i energisystemet