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Five key actions for activating household demand-side flexibility

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Securing a clean, efficient and affordable power system is a complex undertaking in the best of times. The current energy crisis, however, has compounded the challenge with a cost-of-living crisis, the need to free Europe from its dependency on Russian fossil gas, and the ever-present spectre of climate change. A seemingly insurmountable task begs all available resources. One of the most powerful — and often undervalued — solutions is household demand-side flexibility.

Empowering and rewarding consumers who are able to shift how and when they use electricity is a vital power system resource. Demand-side flexibility contributes to a reliable and decarbonised power system while reducing costs, a critical outcome for low-income and disadvantaged households.

On 28 September, the Electrification Academy was pleased to welcome Sophie Yule-Bennett to unpack the insight and recommendations from RAP’s 2022 study The joy of flex: Embracing household demand-side flexibility as a power system resource for Europe. She explored:

  • The benefits of demand-side flexibility: sustainability, reliability, equity and affordability.
  • Barriers to flexibility as a resource.
  • Five key actions for activating household demand-side flexibility.

Revitalising EU-Ukraine cross-border infrastructure for a secure, clean energy future

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The Russian invasion of Ukraine is having a significant impact on the Ukrainian power sector. In recent years, the sector had started moving towards greater integration with the European Union and was making inroads into the shift to renewable energy sources.

The current situation is very challenging; not only is it slowing the nation’s energy transition, but it is also disrupting past achievements. Burgeoning renewable energy sources are being curtailed or shut down at unprecedented rates. This downturn results from the destructive effects of the war, coupled with inflexible generation sources.

One way to rectify this imbalance would be to maximise the current potential for interconnectivity between Ukraine and the EU. This, in turn, would allow the country to work towards three goals simultaneously. The increases in commercial energy flows can contribute to: increasing energy security, providing funds for continuing operation and reconstruction, and allowing for greater integration of renewables, thus achieving decarbonisation objectives faster.

While there are technical and legal requirements which must be fulfilled in order to expand Ukraine’s connectivity with the EU, decision-makers can maximise the value of the process by:

  • Implementing transparent, market-based instruments for cross-border capacity allocation.
  • Ensuring solutions benefit all customers and do not only serve individual vested interests.
  • Laying out a roadmap for long-term structural reform of the Ukrainian energy system. Ideally, it focuses on ensuring energy security and advancing European and Ukrainian decarbonisation goals.

A Strategic Clean Flexible Load Reserve

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​At a UC Davis Energy and Efficiency Institute meeting, Carl Linvill discussed flexible load as a grid resource and highlighted steps to build an effective strategic flexible load reserve.

Indian power sector has opportunities to create value for the discoms and their consumers by mainstreaming behind-the-meter resources

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The electricity sector in India has experienced an evolution of sorts throughout the years. Since the early the 1990s, the sector has grown from a vertically integrated monopoly with generation, transmission, and distribution all under one roof, to the current structure in accord with the Electricity Act of 2003 where the three have been unbundled and now operate separately. The Bureau of Energy Efficiency (BEE) has made substantial progress towards promoting end-use efficiency with more than 15% savings demonstrated in the appliance-level energy use with its labelling and standards plans. The Indian power sector has created a conducive environment for renewable energy generators: as of 31 January 2022, renewables constituted 26.8% of the nation’s total installed capacity of 370 GW. The politics of subsidised or free electricity to a certain category of consumers, a legacy practice followed by the distribution companies (discoms), puts undue pressure on the entire power sector’s financial health.

The four charts below show Average Billing Rate (ABR),* Aggregated Revenue Requirement (ARR),** revenue gap (difference between the average cost of supply (ACS) and ARR, and Aggregated Technical and Commercial (AT&C) losses for discoms in major states.*** 

The distribution sector in India is also struggling. As of March 2021, the sector owes over INR 85,000 Crores (approx. U.S. $12 billion) to the generation companies. Discoms depend on the commercial and industrial (C&I) consumer base to subsidise the agriculture and the low-volume domestic customer classes, as seen in the difference between energy sales and revenues in the figure below.

Source: PFC, 2019

The C&I consumers will continue to provide the lion’s share of discom revenues, even if they take advantage of “open access” (the freedom to buy power from sources other than the incumbent discoms), because they are nevertheless required to pay high cross-subsidy surcharges and wheeling charges (power distribution charges). It’s important to retain such consumers within the incumbent discoms with key objectives of promoting higher renewable energy shares in the power mix, as well as reducing the electricity use with a deeper portfolio of energy efficient end-use practices. The discoms’ heavy dependence on C&I consumers to generate sufficient revenues creates significant barriers to decarbonisation investment opportunities among these consumers.

C&I consumers have an intrinsic need to reduce their power costs. Open access is a powerful opportunity for these consumers. So too are on-site efficiency and distributed resources, but such behind-the-meter investments are not encouraged by the discoms, given the threat of reduced revenues that they pose. Along those same lines, behind-the-meter generation (rooftop photovoltaic) within the consumer base is not easy to implement without on-site storage options or net metering/renewable energy export opportunities provided by the discoms. In several states, net metering policies do not favour the consumers creating large capacities to be exported to the grid beyond their diurnal requirements. It’s also opportune to deepen the behind-the-meter renewable energy and energy efficiency portfolio, combined with the storage solutions, at the consumer categories that are heavily subsidised.

One key opportunity to be explored in creating a substantive renewable energy, efficiency and storage portfolio on both sides of the meters is the possibility of discoms doubling up to become new energy service providers as much as legally possible. We hypothesise the possibility of developing a stronger efficiency, renewables, demand-responsive, end-use consumption, with adequate thermal and battery storage solutions at the consumer-side of the meter amongst all the customer categories.

Our team is currently exploring the efficacy and benefit-costs of discoms and consumers co-investing in behind-the-meter efficiency, dispersed solar, storage and demand-responsive end-use consumption patterns. We’re also researching in detail the regulatory regime that allows such investments, the benefit-costs of making investments in the behind-the-meter efficiency and renewables assets, and existing enhanced power sales opportunities through the possibility of selling saved energy for newer uses, such as electric vehicles. Other key benefits of enhanced renewable energy assets on the customer side of meter is the possibility of exporting renewable energy sources to other regions through an aggregated sale on the exchanges. More to come.

*ABR is calculated as ABR = Revenue expected from all categories million Rs /Approved sales in MU. The data has been obtained from the latest ARR of the respective utilities.

**This is the approved ARR for the upcoming year for the respective utilities. 

***Discom key:

  • Maharashtra: MSEDCL
  • Punjab: PSCPL
  • Gujarat: UGVCL; PGVCL; MGVCL; DGVCL
  • Karnataka: BESCOM
  • Tamil Nadu: TANGEDCO

Trust, not control: Germany, EVs and the power of consumer choice

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‘How electric vehicles endanger electricity supply’ rang the alarm in a major German newspaper in 2018. The author warned that the local electricity networks would collapse if people returned from work in the evening and all charged their cars at the same time, a fear that kept many network operators up at night.

The government that, eight years prior, had set the target of 1 million electric vehicles on the road by 2020 had to respond.

The policy makers considered various solutions: Would upgrading the network to accommodate simultaneous charging of millions of electric cars be the best solution? Or could charging be controlled in such a way that households do not all charge at once and, if so, how?

What follows is a cautionary tale, demonstrating the importance of consumer choice and long-term power system efficiency in the transition to clean energy and transport.

The initial solution

Faced with the challenge of integrating EVs without jeopardising power system reliability, the federal energy ministry started work with distribution system operators on a new tariff design.

After a process spanning several years, the ministry presented a new draft regulation: the dispatchable appliances law. It contained two fundamental changes to how networks are run – an approach that network operator associations had promoted as early as 2017.

First, household customers were to decide how much ‘uninterruptible’ and ‘interruptible’ network capacity they required. In other words, customers were expected to inform the network operator how much of their electricity consumption was essential and how much could be curtailed, or paused, during times of peak electricity demand.

Consumers would be forced to choose between unpredictable interruptions or much higher network fees.

The higher the uninterruptible share, the higher a household’s required contribution to electricity network costs. Consumers would be forced to choose between unpredictable interruptions or much higher network fees.

The second major change proposed concerned the ‘interruptible’ share of electricity consumption: Consumers would hand over control of their flexible appliances, such as EV chargers and heat pumps, to the network operators during pre-determined hours of the day.

The network companies would then be allowed to curtail electricity demand as needed to manage the network. Consumers who did not relinquish this control would face much higher network fees.

The reactions

Grid operators welcomed this proposal, which gave them full control to curtail consumer demand for electricity.

The leading consumer associations, however, swiftly opposed the proposals due to the onus they placed on consumers to declare the interruptible portion of their network capacity, the limitations to consumer choice, and the price increases if customers did not agree to curtailment.

Moreover, if consumers gave up control over their appliances, they would not be able to reap the financial benefits of other flexibility offerings at these times, such as time-of-use energy prices or demand-response programs. These retail energy services could also help balance the national grid and better integrate renewable energy.

Innovative retailers and the car industry sided with the consumer associations. German automakers, having finally embraced the rising demand for electric cars, opposed the new regulation because they felt it would make EVs less attractive. Following an intervention by the German Association of the Automotive Industry, the government withdrew the draft law.

Germany nearly stymied innovation

If the law had taken effect, Germany would have created a system that would have effectively limited further innovation.

Network operators would have informed consumers of the set blocks of time when they would have curtailed energy use and, if that did not sufficiently lower the system peak, the network companies would have had the green light to invest in more system infrastructure.

If the law had taken effect, Germany would have created a system that would have effectively limited further innovation.

More effective and less costly so-called non-wires solutions, such as time-of-use tariffs and residential demand response, would have no longer been considered and the network operator would have retained full control. This approach reflects a well-known German saying, “trust is good, control is better.”

From a system perspective, the draft law would have failed to incentivise innovation and efficient use of the existing infrastructure, measures effective at lowering costs. Indeed, the regulation would have led to exactly the opposite result – higher costs for all consumers in the long term.

If the general curtailment measures failed, network operators would simply invest in more infrastructure, leading to higher system costs.

Planning for success

So, without the law proposed by the ministry, will the networks collapse as a result of EVs? Field trials in Germany, which simulated a high share of EV home charging, indicate otherwise. Experience shows that actively engaging with stakeholders, especially consumers, delivers a better outcome with a higher chance of success.

There are many useful examples from other regions, including the UK and EU, that demonstrate the need for transparency when designing and implementing network regulations to manage EV charging. Germany, being the only country in the EU where the ministry sets the calculation methods for network tariffs, can learn from these processes.

In September, a new Federal Parliament will be elected, and with it a new government. Will the new lawmakers learn from the past and from other regions and favour efficient solutions for consumers? In other words, will they trust consumers to make the right choices regarding their energy use or will they stick with ‘trust is good, control is better’?

Treating consumers as partners, not controllable assets, can help the network operator grow into a cost-conscious service provider within an energy transition where the consumer can freely decide about their electricity usage and pay only for the costs directly incurred as a result.

‘Trust, not control’ will hopefully now ring beyond Germany and across Europe.

A version of this article originally appeared in Euractiv.

Anatomy of the Texas power outage: Where do the facts lead so far?

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In February 2021, an energy crisis in the U.S. state of Texas dominated the news around the globe. Citizens in homes unequipped for freezing temperatures struggled without power for days. The world watched in dismay as the situation grew more disastrous by the hour. Only in the wake of the event have the enormous financial costs of the failures in both the electricity and fossil gas sectors become clear.

Nearly four months later, debates rage on about the causes of the event and the best ways to prevent similar tragedies for consumers and other power system stakeholders. On 23 June 2021, the Electrification Academy welcomed power system reliability expert Michael Hogan of the Regulatory Assistance Project to peel back the layers of speculation and disinformation about the fateful event. He shed light on little-known facts and shared the best of the learnings so far.