A1 : Aggregation scenarios and their commercial value
Distributed energy resources (DER) can bring more to the electrical system than merely their energy content: they bring value as “network replacement” and may deliver system services. The DER network value is not explicitly allowed within existing regulatory frameworks: it requires upgrading metering functionalities. DER may also supply new energy services, enabled by integration schemes linking individual load and generation units. Small energy consumers and producers can thus be given indirect access to energy markets. This is a stepping stone towards the SmartGrid era, where every energy producer and consumer is interactively connected to the electric system.
Aggregation, a concept to support DER integration into the electrical system
Aggregation is the process of linking small groups of industrial, commercial or residential customers into a larger power unit to make them visible from the electric system point of view. Aggregation can involve demand (demand response, DR) and/or generation (distributed generation, DG). Thus, load or generation profiles of individual consumers and/or small generators appear as a single unit to the electric system. Building up a large and flexible portfolio enables aggregators (the entity who aggregates) to operate distributed energy resources and to provide services to the power system, e.g. system balancing. An aggregator is a facility portfolio manager designing and offering energy-related services to energy consumers, producers and other key players (system operators, electricity traders, etc). Aggregation helps implementing smart grids concepts by reaping some of its benefits to integrate DER units more efficiently.
Aggregation reduces the “gap to profitability” of DER units integrated into the power system
Aggregation will grow thanks to four main drivers:
- Aggregation lowers market entry barriers: in the short/medium term, it is only through aggregation that small energy consumers and DG owners can have access to the electricity market. It brings additional economic benefits to consumers and DG owners, thus increasing the value of DER and enhancing its market penetration.
- Aggregation will benefit from the rollout of smart metering, an enabler of aggregation businesses.
- Aggregation allows optimizing generation and consumption through the controlled operation of a large number of DER units.
- Aggregation can combine with other energy-related services to lower their overall operating costs (ESCO, retailing).
It is by combining these features (more flexibility, lower operating costs) that aggregation will reduce the “gap to profitability” of DER units, and therefore the needs for subsidies to favour their integration into the power system.
Various aggregation businesses according to the built-in business options
Most probably, the first aggregation businesses will extend present day energy services based on energy performance or retailing. Aggregators may focus on a single core function by contractually managing:
- Ancillary / balancing services;
- Trading operations on energy markets taking advantage of economies of scale;
- Operations of flexible DER units to provide heat/electricity to final consumers.
Aggregators may cover several functions:
Profile of the aggregator
Aggregation may be a business per se or a business unit of a larger company, for instance a utility. Under current EU energy regulation, Network Operators cannot act as commercial aggregators because of the unbundling rules.
The legal and contractual frameworks become a central issue for this multi-player energy game
Well-defined contracts linking all the business partners are expected, including liability management. Multiple business configurations emerge since an aggregated party can be an energy consumer or a producer, owning or not the distributed energy resource, having a full, partial or no control at all of its operation. The players involved in contractual and physical interactions are shown opposite.
Commercial aggregation creates value that goes beyond the commercial value merely exchanged through the services
The value brought by commercial aggregation includes direct incomes and profits from commercial services to be shared between the key players involved in aggregation contracts, as well as side benefits or avoided costs valued by the whole society, including system operators (see Glossary).
Results based on
T1 : power system design is a key parameter for the introduction of DER
E4 : As a first step to profitability, the energy value of a single DER unit must be optimised
Test 1 : Testing the integration of a composite CHP system for market interaction, “office buildings” segment, Grenoble France
Test 2 : Testing the integration of a composite tri-generation system for market interaction, “educational buildings” segment, Athens Greece
Test 3 : Testing the technical feasibility of aggregating 10 kW to 1.5 MW scale DER in the UK commercial market segments
Test 4 : Testing the technical feasibility of aggregating Micro-CHPs in the German residential sector
Test 5 : Testing the technical feasibility of a decentralised control architecture for aggregation of load and generation