Stakeholders’ Interest in Energy Market Design Innovation; Key Takeaways from the Odyssey Connect Energy Singularity Panel
At the Odyssey Hackathon Energy Singularity Track, on June 19–21, 2020, developers and energy market stakeholders will be brought together to simulate, experiment and advance the thesis of an agent-based, bottom-up energy market. Building upon Grid Singularity’s open source energy exchange engine (d3a.io), which enables users to model, simulate, and deploy peer-to-peer energy marketplaces, teams will compete to streamline communication and coordination among all stakeholders to create a more efficient, secure and inclusive energy market design by:
● designing multiparty market interaction through APIs and intelligent agents
● testing trading strategies and methods to improve local energy community KPIs, such as their energy bill, level of self-sufficiency or grid congestion
● creating new forms of customer communication and interface and
● elaborating further requirements for a deployment of a bottom-up market design in a real energy community.
At Odyssey Connect, held on February 4, 2020, in the Hague in the Netherlands, to elaborate the Odyssey Hackathon 2020 challenges, Ewald Hesse, CEO of Grid Singularity, moderated a panel featuring the Energy Singularity challenge partners, namely Etienne Gehain, Engie’s Digital Innovation Officer, Kerstin Eichmann, Designated VP Partnerships E.ON and Jan Pellis, Innovator at Stedin, also representing other Dutch Distribution System Operators (DSOs) participating in this initiative, Alliander and Enpuls. The key takeaways from the panel are here presented.
- The energy markets are transforming to capture value “behind the meter,” commanding a new interactive market access platform.
Ewald Hesse, CEO of Grid Singularity, started the Odyssey Connect panel discussion with a call to action, “The energy market is transforming. Cheaper production and flexibility from distributed energy assets is pushing the value in the energy market behind the meter, and this transformation is accelerating.” In the current energy market design, there is a clear divide as to who can participate in the market, and how. There is no platform that enables open and equal market access for all, including small asset owners. Instead, “communication among various stakeholders, grid operators and large energy market players happens in sometimes rudimentary forms such as spreadsheets.” This is not sustainable in a grid built on distributed energy assets. “To empower local energy communities and final consumers, they must be enabled by equal access to an open market and engaged with new forms of connecting to energy,” declared Hesse.
Incumbent utilities agree that the role of energy producers and grid operators must adapt to a bottom-up grid design. “Four years ago, Engie sold off many coal and gas fired power stations, writing off approximately 15 billion Euros of centralised assets and investing into service-based activities to manage complexity for clients,” elaborated Etienne Gehain. Energy providers like Engie will evolve from a supplier role to “an energy flow manager,” according to Gehain, who reinforced the importance of energy exchanges to enable local energy: “The management of local complexity can be effective with the concept of energy communities, meaning that groups of people will agree among themselves to exchange energy.”
To lower the barrier to entry, the complexity of energy markets needs to be absorbed away from the end user. To enable collaborative, open-source innovation, in 2017 Grid Singularity co-founded and developed the Energy Web Foundation, a nonprofit industry-led organisation, bringing together large energy corporations, including those featured in the panel, as well as startups. The current focus of Grid Singularity has been to develop an open source simulation framework, the d3a.io, which will serve as a software tool for deployment of bottom-up, inclusive energy markets. According to Hesse, “Some people call the market design a layered energy market, others a fractal grid or cellular systems. The principle is the same. Current regulation and systems have balancing groups in the markets where every trader has to report their forecast, what they plan to trade and what occurred. An agent-based market design has the same principle components, but it is more efficient and provides equal access to the end consumer to participate in the market.”
2. Smart local energy communities present an opportunity to enhance flexibility and alleviate grid congestion management, and should be encouraged to actively participate in the market.
System operators have witnessed an increase in the complexity of managing the grid in recent years. Jan Pellis of Stedin, indicated that, “in the Stedin grid in the Netherlands, which is about one third of the Netherlands, over 40,000 kilometres of cable would need to be replaced in the next 15 years if we don’t do anything smart.” That is the key reason why operators are engaged with other stakeholders in this hackathon, to co-design intelligent methods to resolve this problem and add value to customers. For Pellis, the main challenge question is: “How can we use technology developments and the positive flow of energy from our customers to do things differently?”
Pellis further explained how three years ago, initiatives like Groene Mient and other local energy communities approached DSOs with a question of their own, “We want to create energy jointly, we have a lot of solar panels, how can we do that?” Taking a defensive stance at first, the DSOs fast realised that this challenge in fact presents a chance to incentivise distributed peak reduction and improve congestion management. Pellis perceives the unique cooperation at this hackathon and the simulation environment offered by the D3A as “an opportunity for all stakeholders to brainstorm smart solutions for trading in the market, using grid tariffs for congestion management, and engaging communities to enable the smart grid of the future.”
3. To scale local energy communities to interconnect and support the grid of the future, we should experiment with new technologies and how they impact consumer/prosumer behaviour.
Taking advantage of the flexibility of renewable energy assets in communities will be key to a sustainable deployment of energy. It is not necessary for a house to have solar panels on the roof to add value to an energy community. Flexible energy assets such as batteries or electric cars also create flexibility to absorb energy at the right moments and better align demand to supply, allowing communities to be more self-sufficient. However, the grid remains an important variable in the equation. Etienne Gehain asserted, “We are not trying to draw grid lines between members of communities.” He further explained, “The grid is crucial, and will be paid for by the transfer of energy between communities and supplying energy to communities which are not 100% self-sufficient.” Communities can support the grid with peak smoothing, flexibility services and other congestion management, and that might be the basis of a new way of charging for electricity. This requires experimentation to see the impact of trading mechanisms on the behavior of communities and performance of the grid.
To engage communities and create a decentralised, peer-to-peer energy system, new and neutral information technology protocols are required. “The topic of decentralised protocols is taken very seriously, including investing heavily in blockchain startups since 2016,” revealed Kerstin Eichmann of E.ON. According to Eichmann, it is vital to learn from the ideas and perspectives brought by diverse stakeholders, such as how intelligent trading strategies could influence community and grid performance and what type of attributes and connection points are required for people to change their relationship with energy. “How can we incentivise the local usage of energy? We need to find a way to build local relationships around the consumption of local clean energy,” Eichmann proposed. She noted that transit tariffs and flexibility markets should also be considered to incentivise local consumption, and encouraged people at the hackathon to think in creative modes of how dynamic pricing or emotion-based pricing could work to reward efficient participation by energy communities in a distributed grid. She provided the example of Germany, where the subsidies are nearing their end term, creating a demand for a post feed-in tariff system. For Eichmann, new technologies, such “the Energy Web Chain, the Polkadot network and different interoperability chains offer a different ability to change the technology space, the regulatory framework and the business perspective.”
4. An open source innovation ecosystem must be curated to enable and empower local energy communities.
There are many ways to organise local energy communities and allow for varied configurations based on geography and social preference. Managing the grid in which multiple types of communities compete for grid capacity is an interesting problem, as there are many degrees of freedom in the solutions that can be provided to manage the novel complexity. Current experiments and pilots may be limited by regulatory processes, such as receiving invoicing data. With a simulated environment, more options can be tested and validated. A simulation environment also offers a way to test how intelligent trading agents and human behaviour impact the system. By simulating, the solution can be improved, with any implementation problems discovered before deployment, as explained by Gehain: “I’d like to see success, but also I’d like to see how such systems can be hacked.”
Yet, the existing simulation solutions are based on proprietary software, preventing collaborative, open innovation. The major difference offered by the open source D3A ecosystem is that any researcher, community, organisation or algorithm has access to design, simulate and test energy exchanges. As Hesse stressed, “It is not the invention of proprietary systems, it’s combining different types of open-source platforms in a novel way to create a sustainable ecosystem.” That open source structure is a baseline. Teams and stakeholders at the hackathon will be expected to produce open source ideas and code that contribute to this ecosystem. The Energy Singularity track is a development process, not just one trial. The results of the hackers’ work, stakeholders’ feedback and the development of the D3A platform will be used for deployment in real energy communities, offering a way to interact with energy in new and meaningful ways. It’s not just the monetary team award that is the motivator of this challenge, it is building and taking part in an open source energy ecosystem.
Authored by Colin Andrews. A full video of the presentation and the panel from the Odyssey Connect, and the deck explaining the two challenges in the Energy Singularity Track are publicly available.