The fight for prosumer assets in the reorganization of grid management
The joint pilot project “equigy” by the three TSOs TenneT, SwissGrid and Terna is a “declaration of war” to DSOs, other TSOs and new market entrants in the struggle for prosumer assets for ancillary services and demand side flexibility. The TSOs want to secure direct access to and/or information on prosumer assets connected to distribution grids, which are also used by DSOs, in particular for local congestion management. And they want to win the race for a European platform standard. This is not necessarily bad news for prosumers, but “equigy” will not be a sure-fire success neither for the TSOs nor for prosumers. And the operation of platforms by market infrastructure monopolists naturally entails major risks.
Grid management in transition
“equigy” takes place in an environment of fundamental change in grid management, especially in ancillary services (AS) and the interaction of market players (e.g. TSOs – DSOs – aggregator – prosumers). Until now, TSOs and prosumers have had little or no contact. Their “natural” contacts were DSOs. This is changing: small-scale flexibility from electric cars, battery storage and dispatchable devices are to be brought to the balancing energy markets.
Above all, the structural changes brought about by the energy transition make the reorganisation of grid management indispensable. The number of large mostly fossil-fueled power plants connected to the transmission grid that were previously used by the TSOs for ancillary services (AS) is decreasing. Decentralized renewable energies are taking over their role. As the new lead-technology, they are mostly connected to the distribution grid. Flexibility from the distribution grid is therefore becoming increasingly important for AS by TSOs.
The discussion is being accelerated by the enormous costs of the non-market grid measures redispatch and feed-in management. These costs are an indication that the cooperation and communication between TSOs and DSO, but also between TSOs themselves is insufficient. It is obvious that the interface between TSOs and DSOs must be improved. TSOs are under enormous pressure because DSOs have powerful arguments for an increase in power.
Check: What is “equigy”? Spoiler: So far, only a pilot project
One should not be too blinded by the “who’s who” of energy transition buzzwords: “prosumer”, “blockchain”, “aggregator”, “consumer-Centric”, “platform”. Once the smoke of the marketing fireworks has cleared, it becomes obvious that “equigy” is, so far, only a common communication umbrella for various pilot projects in the control areas of the three TSOs. Some of these are still running, some have not even started yet. And only one single pilot project was about blockchain. The pilot projects focus on the “usual suspects” among the prosumer flexibilities for DSF: electric cars, battery storage as well as dispatchable devices such as heat pump, CHP, washing machine, dryer, air conditioning. Aggregators bundling large numbers of these small-scale distributed energy resources (DERs) to a virtual power plant (VPP) are to use “equigy” to access the balancing markets. The TSOs underline that they do not take over the role of aggregators themselves – which is not a surprise as TSOs acting as aggregator would not be compliant with EU regulation anyway.
It is unclear whether the “equigy” platform will make it to the real world. Allegedly, negotiations are currently underway with national regulatory authorities in Germany and the Netherlands. According to the TSOs, “equigy” is feasible under the current regulatory conditions, no adaptation of the regulatory framework is required.
The energy policy landscape: tough lobbying at all levels
TSOs are and will remain for the time being masters of balancing energy. So, everything easy? No, there are other “dimensions”. In particular, it is about new role allocation and distribution and new/improved cooperation between TSOs and DSOs but also TSOs and TSOs. There is only agreement that TSOs and DSOs must cooperate much more and better. It is unclear, however, what that means. Not surprisingly, the understanding of roles differs a lot between TSOs and DSOs. In view of the enormous “stakes”, an intensive and opaque lobbying battle is raging at national and EU level. TSOs and DSOs are fighting against each other, in some cases they also team up against other emerging market entrants, e.g. in the context of market-based redispatch and local flexibility markets. Joint papers by the involved associations (ENTSO-E, E.DSO, BDEW, VKU) are quite instructive.
Of course, the EU Commission is also involved, especially as guardian of the European energy markets. It is kind of “proxy war” between EU institutions (DG Comp, ACER) on the one hand and the member states (ministries and regulatory authorities) on the other.
Focus on balancing energy
Balancing energy as a market-based AS is of particular importance. The access of small-scale prosumer flexibilities, bundled by aggregators in virtual power plants, to the energy markets is high on the EU agenda in the Clean Energy Package (CEP). The problem for TSOs: so far, they are blind to small prosumer assets. Solution: either they get access themselves or they better cooperate with DSOs. “equigy” obviously follows the first approach. Since prosumer assets also serve DSOs for local congestion management, the risk of conflicts in the provision and/or supply of balancing power and local congestion management increases.
Improvements in TSO-DSO cooperation so far
The first innovations for a TSO-TSO cooperation have been made:
- With the Clean Energy Package, local flexibility markets for congestion management for carrier network operators were initiated (not balancing energy!).
- For the EU Commission, the Network Code Demand Side Flexibility is one of two that it has identified as a future priority.
- Various EU-funded projects play an important role in the discussion on the reorganisation of network management. At present, this is primarily the “SmartNet” project, which identifies 5 options for TSO-TSO cooperation based on a cost-benefit analysis. The follow-up projects CoordiNet and Interrface have just started and will run until 2022.
These projects make clear that major decisions on the reorganisation of grid management are not yet foreseeable.
“Declaration of War” to other TSOs, DSOs, new market entrants?
Much more interesting than the PR fireworks are the political implications of the “equigy” project. For TSOs, there is a lot at stake: the ever more urgent reorganisation of grid management threatens them with a loss of competence and power to DSOs, who – not without good reason – see their chance because “the energy transition is taking place in the distribution grid”. All AS increasingly use assets from the distribution grids.
So, is “equigy” a coordinated approach with DSOs? It doesn´t look like. It rather ruthlessly create facts. Is “equigy” a coordinated approach with other TSOs? It doesn´t look like, either. It is no secret that there is competition also among TSOs, especially in the development of standards for platforms for AS and data exchange. It is very likely that “equigy” is rather a solo run than team playing with DSOs and TSOs. And “equigy” is also a signal to the new market entrants – start-ups or IT-giants like Apple, Google, Tesla & Co – who want to conquer the energy markets.
Infrastructure monopolists as platform operators: threat to competition?
A risk that is certainly not unfounded: as infrastructure monopolists, TSOs could hinder competition with operating their own IT-platforms even though “equigy” claims that “The system is not exclusive and can operate in synergy with other balancing schemes and tools. The technology and software will be provided free of charge and will be open source to encourage the development of secondary applications across the energy value chain.”. Many (new) market players, TSOs and DSOs are working on platforms for trading and flexibility procurement.
Prequalification criteria for balancing energy is an instructive example in this regard. Every TSO in Europe has its own rules. Prosumers or aggregators of prosumer assets must dance to each TSOs criteria. There is no standardized uniform, let alone transparent, criteria. This certainly does not boost markets nor competition.
The blockchain technology has its own risks. Unfortunately, the “equigy” partners provide almost no information on this. It is probably the IBM block chain. In contrast to other blockchains like the Energy Web Foundation, this is a “huis clos”.
Prosumer perspective: Positive signal – but not a sure-fire success
“equigy” takes up the political call of the CEP to bring the prosumers´ portfolio of flexibilities to the (balancing) energy markets. Even though the appreciation of prosumers is pure strategy, “equigy” is a positive signal: TSOs enter the “Fight for Prosumers”, so things get serious in a positive sense! Does it matter who is operating the platform?
But it is decisive for prosumers that access to the IT-platforms is easy. There must therefore be no technical nor regulatory patchwork. The platforms must be open and participation criteria transparent and uniform. Interoperability is of paramount importance. And participating in energy markets via platforms must not be (too) bureaucratic! A consistent overall concept is needed as prosumer assets are affected by several regulations.
The implementation of the new EU-Internal Market and Renewables Directives will be a key first step for prosumers. The planned Network Code on Demand Side Flexibility will be the crucial step – it it comes it time …