The e-harbours report “Strategies and Business Cases for Smart Energy Networks“ identifies six different ways to make flexibility profitable. For individual households and small business, normally the only options available are shifting energy consumption to cheaper off-peak tariff hours or reduction of the peak power. Large consumers and producers of energy have more options, like buying electricity on the wholesale market or selling flexibility to parties that are responsible for keeping the power grid stable.
Six universal business cases
1. Contract optimization: The present flexibility can be used in order to reduce the energy cost within the margins of the existing energy contract. Examples are shifting energy consumption to cheaper off-peak tariff hours or reduction of the peak power. This is currently the main business case for individual consumers and small business. However, as aggregators are emerging, a broader range of business cases comes within their reach.
2. Trade on the wholesale market: Significant amounts of energy are traded on energy exchange markets. Due to the variable price on these markets, the presence of flexibility can be exploited to reduce energy cost. This option is available to customers that consume or produce a lot of energy (like large industries).
3. Balancing group settlement: Balancing responsible parties (BRP’s) are responsible for balancing the electricity production and consumption in their portfolio. Flexible consumers can help a BRP to maintain the balance of his portfolio. An option for large users and producers, that have a firm grip on their power requirements and can deliver some flexibility on request.
4. Offer reserve capacity: In case BRP’s are not able to maintain the system balance, the transmission system operator (TSO) has to use reserve capacity (fossil fuel power plants, waiting to be called into action) in order to restore the balance. Customers can offer their flexibility directly to the TSO for balancing purposes of the total system control area. An option for large and smart users that can adapt to precise needs of the system.
5. Local system management: The local distribution grid has a limited capacity and some combinations of local power injection and consumption may result in congestion. Flexibility can be used to operate the local grid in an optimal way within its constraints. The management of constraints requires very short reaction times.
6. Offer further grid stabilization services: Large scale producers and consumers can offer flexibility for reactive power balancing or preventing congestion of the transmission grid.