Framework Conditions for Flex Flexibility Options

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Framework conditions for the
integration of flexibilitiy options
Dr. Dierk Bauknecht, Moritz Vogel
Leonardo Energy Webinar
31st March 2015

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Overview
Webinar two weeks ago: Modelling of flexibility demand and
options in the German power system
Complementary work on framework for flexibility options.
General principles, no detailed legal analysis
1. General conclusion from modelling work for framework design
2. Reduction of flexibility demand
3. Coordination between network and market
4. Level playing field – Removing barriers
5. Sector coupling
6. RES-E support schemes
7. Support mechanisms for flexibility options
Framework Conditions for Flexibility Options | Webinar | 31.03.2015

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Development of flexibility demand: deficit and surplus,
Existing flexibility; no import and export
-80
-60
-40
-20
-
20
40
60
1 1001 2001 3001 4001 5001 6001 7001 8001
GW
Hours
ca. 40% RES-E ca. 61% RES-E ca. 75% RES-E40 % RES-E 60 % RES-E 75 % RES-E

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Scenario 2030 for Germany, ca. 60% RES-E
748
7.275
1.464
8.394 4.308 1.210 2.869 2.004
-1.0022.170 1.327 0
- -
-
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
20.000
MW
Reduction of flexibility demand
Used potentials
Not used for deficit reduction

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Flexibility Roadmap
Phase 1 Phase 2 Phase 3
Scenario year /
RES-E share
2020
ca. 40%
2030
ca. 61%
2050
ca. 75%
Flexibility
demand and
options
No deficits,
Very low surpluses
New flexibility
competes against
existing options
Relevant surpluses
and especially deficits
Sufficient flexibility
options available
Longer deficit periods
 long-term storage

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General conclusion from modelling work for framework
design
New flexibility still has a low system value
(competition with existing options, value
mainly through higher efficiencies).
Development of flexibility options not only
hampered by framework conditions,
but also by low system value of flexibility
Flexibility options need to be developed in
time.
Many options are available in principle, but
still need to be brought to the market.
Are price signals sufficient?

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Reduction of flexibility demand in the system
Before introducing additional flexibility to the system, flexibility
demand should be reduced to a minimum.
Efficient use of already present options
Market design for demand reduction
Efficient use of European
interconnectors
Linking different markets
Optimization of the overall
system
Interconnectors not always
used according to their full
capacity
 Flow-based trading
Make available flexibility that
has been offered to the
balancing market but is no
longer needed there to other
markets
(e.g. intraday market)
Demand for flexibility
increases when used in a
smaller balancing area (e.g.
self consumption)
From a flexibility perspective,
market design should enable
large balancing areas.

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Grid operator as a storage operator?
• Grid operator can make use of grid information.
But:
• Grid operator only as a storage operator…
• Level Playing Field?
• …or as well as an operator of power plants and flexible
consumers.
 Do not weaken unbundling, but establish a mechanism for
coordinating between market and grid

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Coordination of Flexibility Options in the Context of the
Unbundling
Grid oriented Market oriented
Grid operator is
flexibility operator
Only under special
circumstances.
Otherwise, the efficient
development of
fleixibilities is harder to
achieve.
Removal of unbundling:
Why should the grid
operator become a
flexibility operator?
Flexibility operator is
separate from the grid
operator
Only grid oriented
corrections via
coordination
mechanisms (e.g. traffic
light approach)
Unbundling: Flexibility
options are mainly
dispatched market-
based

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Different Approaches for the Development of Flexibility
Options
Price
signals
Reduction
of barriers
R&D
Specific
support

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Level-playing-field for Flexibility Options
1: https://australianclimatemadness.files.wordpress.com/2011/11/sloping_field1.jpg
1

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Barriers for flexibility mechanisms
Flexibility demand only increases step-by-step.
 Remove barriers before considering additional support mechanisms.
Barrier Affected flexibility options
Storage treated as consumers?
• Levies and taxes
• Network charges
Storage technologies
Power-to-x options
Balancing market design – offer
sizes/duration
Smaller flexibiliy mechanisms
Standardised load profiles for small
consumers
Private households
Network charging structure Consumers with a high capacity element
Capacity mechanisms If capacity mechanisms are introduced, different
flexibility options should be taken into account.

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Barriers for flexibility mechanisms
Flexibility demand only increases step-by-step.
 Remove barriers before considering additional support mechanisms.
Barrier Affected flexibility options
Storage treated as consumers?
• Levies and taxes
• Network charges
Storage technologies
Power-to-x options
Balancing market design – offer
sizes/duration
Smaller flexibiliy mechanisms
Standardised load profiles for small
consumers
Private households
Network charging structure Consumers with a high capacity element
Capacity mechanisms If capacity mechanisms are introduced, different
flexibility options should be taken into account.
Level Playing Field:
What if storage does
not pay network
charges?

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Framework conditions and sector coupling
With sector coupling the use of electricity in other sectors is possible
and RES-E can be introduced to substitute conventional energies.
Create
Electricity demand
Inflexibility
New electricity
consumers
● Power-to-Heat
● Power-to-Gas
● E-mobility
● …
Need
RES-E capacities
Flexibilities
Every new consumer creates a new demand which is
partly inflexible. Overall demand increases.
New consumer have to be provided with renewable
electricity, so that conventional electricity is not increased.
Flexibilities are necessary to integrate new consumer.

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Framework conditions and sector coupling
With sector coupling the use of electricity in other sectors is possible
and RES-E can be introduced to substitute conventional energies.
Create
Electricity demand
Inflexibility
New electricity
consumers
● Power-to-Heat
● Power-to-Gas
● E-mobility
● …
Need
RES-E capacities
Flexibilities
Every new consumer creates a new demand which is
partly inflexible. Overall demand increases.
New consumer have to be provided with renewable
electricity, so that conventional electricity is not increased.
Flexibilities are necessary to integrate new consumer.
This implies for the development of framework
conditions:
1. Only renewable electricity should be used in other
sectors. For example, night storage heaters cannot
currently be considered as renewable heat.
2. Future consumers and increasing RES-E demand
have to be taken into account when defining RES-E
targets and instruments.

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RES-E flexibility and framework conditions
17 GW
47 GW
66 TWh
0,5 TWh
17 TWh
6001 7001 8001
Hours of the year [h]
Scenario 2020a Scenario 2030 Scenario 2050a

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RES-E flexibility and framework conditions
17 GW
47 GW
66 TWh
0,5 TWh
17 TWh
6001 7001 8001
Hours of the year [h]
Scenario 2020a Scenario 2030 Scenario 2050a
Operational flexibility of RES-E generation
relevant mainly in times of surplus generation.
For the time being, this occurs only in a few
hours of the year.
Does a complete market integration of RES-E
with full price and balancing risk make sense in
this context?
Or are other mechanisms possible, which can
give market incentives whithout a complete
market integration?
• Feed-in-tariffs depending on the market
price
• Feed-in-tariffs taking into account negative
prices

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Support Schemes for Flexibility Options?
• Emphasis should be on the reduction of barriers.
• Support schemes should focus on R&D, rather than market
introduction.
• Mechanisms for certain technologies should not be introduced:
• e.g. support programm for decentralised battery storage in Germany:
Storages not yet needed in the electricity system
• Support should not be implemented on the basis of the amount of
electricity generated. Otherwise an incentive for maximizing the use
of flexibilities is set.
• At this stage, from an electricity sector perspective no support for
long-term storage (power-to-gas) is needed.
• Relevant only at RES-E shares above 75%

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Contact
Dr. Dierk Bauknecht
Senior Researcher
Öko-Institut e.V.
Postfach 17 71
79017 Freiburg
Telefon: +49 761 45295-230
E-Mail: d.bauknecht@oeko.de

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