Estonia to turn electricity consumption control into a business opportunity

Electricity pylons in Estonia.
Electricity pylons in Estonia. Source: Ken Mürk/ERR

The Ministry of Economic Affairs and Communications intends to draft law revisions this year that will provide the competition authority with a foundation for developing a business model that encourages electricity consumption at specific times when there is a greater supply of electricity on the market at a lower price.

"Consumption management is a resource that can be used to add much-needed market capacity in Estonia, a country with a limited energy framework. Our market is small, import-dependent, and thus volatile, with an immediate risk of price hikes when production equipment or connection problems arise," Karin Maria Lehtmets, head of the Ministry of Education and Research's energy market department, told ERR. Controlling usage, she said, will help in lowering rates and preventing price spikes.

The price of electricity in the day-ahead market climbed to €4,000 per megawatt-hour on August 17, she gave an example. "The market's consumption and production curves did not cross at the time, resulting in only a minor production deficit. Despite this, 2.14 megawatts were missing and if there had been proper consumption management on the market at the time, prices would have been significantly lower," she said.

Lehtmets explained that, whereas previously, consumers would delay their electricity use until it was cheaper for them and profit from the savings, the proposed new market model would allow consumers to earn money by informing the market ahead of time of their willingness to limit consumption.

"The development of a day-ahead/day-ahead market model for stand-alone aggregators, which allows consumers to bid into the market on an equal footing with producers and thus pay for their resource, allows for better integration of consumption management resources, as consumers can earn on their unconsumed or flexibly consumed electricity. This would provide them with even more incentive to limit their consumption," Lehtmets said.

If consumption management were more widely available, according to Lehtmets, it would reduce the need to operate gas power plants during peak hours. She said that clients could have access to this market once the necessary regulations are in place.

"If this market flourished, the average customer would also be able to participate. For instance, there are aggregators suited domestic users; for example, electric boilers could be effectively managed so that the user is not inconvenienced when the boiler is turned off for a prolonged period of time. And even heating that could be managed remotely would not cause the user a great deal of trouble, but at specific hours, if adjusted, it can gather a substantial amount of resource to sell on the market," she said.

Study: Consumption management could account for more than a quarter of total consumption

Lehtmets cited a 2014 study commissioned by Elering and completed by Tallinn University of Technology (TalTech) that suggested the total volume of consumption management in Estonia could range between 200 and 400 megawatts (MW).

Estonia consumes between 1,000 and 1,500 megawatts of electricity in the winter and only about 500 megawatts in the summer.

Homeowners have the most control over their electricity consumption, according to the same study. Thus, the conclusion of the research was that seasonal usage patterns and the requirement to combine very large quantities of equipment impede consumption control.

Building automation technologies should thus encouraged housing organizations and individual residences to participate. According to the study, the primary and most feasible strategy for promoting consumption control implementation would be the development of multiple real-time mobile applications that depict user behavior and power pricing.

The article concludes that the second phase of deploying consumption management should be to enable individual residences and apartment complexes equipped with building automation to participate in capacity aggregation applications such as virtual power plants, etc.

For instance, in the commercial and public service sectors, consumption management is heavily reliant on whether employees work eight hours per day or continuously. The most promising buildings are those that are in use five days a week for eight hours per day.

According to 2014 data, the controllable capacity of the industrial sector would be around 65 MW, with the wood and paper industries accounting for roughly one-third. These industries have the advantage of using typically large-scale equipment, which has an advantage in terms of managing consumption.

According to the study's authors, the high level of automation in the business also allows for relatively inexpensive aggregation.

Clarification of the legislation will facilitate the implementation of this market model

In the European Union, an examination of the design of the power market is underway, but the proposals have paid too little attention to consumption management.

Lehtmets said, however, that a market model for the day-ahead and day-after marketplaces that explicitly outlines how power aggregators who mediate consumption management would be compensated is what is now needed most.

"A pan-European model, or strategy, would be more effective than allowing individual member states to develop their own. This is exactly what we hoped to see in the new market design," she said.

Lehtmets said that while the European Commission's plans indeed address consumption management, it is not done in the way that Estonia had envisioned it. "We have to work very hard to build this model and amend our laws, so that the competition authority, Estonia's market regulator, could start putting it in practice," she said.

"We expect the law to be modified and a competitive market model to be established by the end of 2023," she added.

Elering: Consumption management gives flexibility to the market

Elo Ellermaa, a spokesperson for Elering, Estonia's power system operator, said that the company considers consumption control as a crucial source of future electricity system flexibility.

She added that there is a growing number of intelligent devices that manage electricity use without causing the consumer any inconvenience. "An electric car's charging cycle, for example: the charging load can be adjusted while the battery remains fully charged. Many aggregators are already participating in Elering's power market, offering to reduce or increase usage in regulating the electricity grid. This trend, we believe, will continue," she said.

Lehtmets said that both society and market participants are becoming more aware of the potential that consumption control provides.


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Editor: Mait Ots, Kristina Kersa

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