Demand response development

Background

With an increasing proportion of variable generation in our network in the form of wind and solar, the need for a varying load also increases. At all times, there must be a balance between production and consumption.

Historically, we have handled this with part of the generation being used as balancing power, typically we have used hydropower and gas power as balancing power, in parallel with having nuclear power and coal power as base load. With a future generation that is largely variable, a new way of thinking is required where we also need to make the load variable.

To date, a certain form of variable load has been applied in the form of certain energy-intensive industrial activities in very special power shortage situations undertaking to shut down. For normal and smaller consumers, there has been neither a need nor a market for trade.

The major change in geographical location of generation, (shut down of coal and nuclear power and new construction of solar and wind) coupled with the need for efficient balancing, also leads to a sharp increase in the load on existing transmission and distribution networks. This can be remedied from two directions; Build more lines and a better utilization of existing lines. Building new lines will give a major contribution, though it will take time due to permit restrictions and bottle necks in the industry.Better utilization of existing lines is sometimes a faster and more cost-effective way of solving problems with increased load. Good markets for flexibility and variable load therefore not only serve as a balance for unplanned generation but can also reduce the need for investment in new transmission and distribution.

New Markets

In order to achieve an efficient variable load that can respond to the market’s needs, it is required that there is a market where flexibility can be traded. This flexibility can consist of two different components:

• A customer can undertake a load limitation for a certain period of time

• A customer can add power to the network that is not normally available. It can either consist of starting a local production unit, or alternatively discharging a pre-charged battery for a certain period of time

Historically, the market for balancing power has been adapted to the characteristics of hydropower and gas power. Among other things, they have made the balancing power traded in larger MW quantities, etc. To enable trade with flexibility for normal and smaller consumers, quantities traded must be reduced and specifications for trade adjusted. In parallel with this, we see how a new group of companies is beginning to emerge that clusters smaller customers into groups of customers, large enough to participate in the trading venue. This makes it possible for even the smaller consumer (<10 kW) to participate with their flexibility support.

Increased network tariffs push the end customer towards improved  power management

Electricity is purchased by the customer in two parts, one part for the electricity itself and one part for the grid owner for the actual transport of electricity. In most European countries, electricity has been the larger part and the grid part the smaller. With the introduction of new energy sources with “free” fuel, the situation has quickly been reversed. In the same way that we now only have a subscription fee for telephones and only pay for a maximum home charging capacity for internet connections, we see a strong trend towards the majority of our electricity fee in the future being power-based. For the end customer, this means that it becomes more difficult to minimize their electricity bill; it is not enough to just turn off the light, now we must also make sure that we consume at the right time and not all at once. With AI and digitalization, it has now become possible to control the effect of buildings in a way that is most economical.

Demand response meets more efficient buildings

The emergence of smarter local power management fits well into emerging markets for demand flexibility. In several markets, we already see how local batteries are collected by cluster companies to participate in the flex market. In the same way, we see, albeit on a smaller scale, how markets for local flexibility via load reduction for a certain period of time, begin to be established.

If you look at the future power requirement for car charging, you get a good picture of the potential for flexibility services: A typical EV can charge with 10 kW. There are currently 4 million cars in Sweden. If all these were electric cars, and if they were charged at the same time, the total power requirement will be 32 GW, which exceeds Sweden’s total peak power in 2020 by 20%. Now it will be a while before all cars are electric cars and not all will be charged at the same time. However, the estimate gives a sense of what possibilities there are, both to temporarily shut down the charge but also to let a charged car battery deliver power to the system in the future.

How will this affect the future

Looking at the whole, we believe that we will see strong growth in a number of areas;

• We believe that markets will emerge that enable more efficient utilization of a possible demand flexibility

• We believe that companies will emerge that integrate local property owners into markets for flexibility. These companies will also cluster smaller consumers to enable them to participate in the market as well

• We will see strong growth among companies that introduce smart solutions in real estate. With digitalization and the AI ​​revolution, it is now also possible to realize this

• There will be a major expansion of transmission and distribution networks. The speed with which this expansion can take place will be set by permit processes in combination with the industry’s capacity. We intend to dive deeper into this issue in a future article.