4. Process for the calculation of price and volume signals
4.1. General approach
Each player in the electricity system has his own stakes (or “fundamental needs” or “critical factors of success”). It gives relative importance to each one; in other words it gives them value. In order to meet the needs generated by its stakes, it is willing to spend effort and money. But the player generally has different alternatives: for instance it may invest in new assets, or change its operating procedures, or buy services, or do nothing and be willing to pay the associated fines for non-fulfilment of an obligation.
In ADDRESS, we are supposing that active demand (AD) can meet some of the players’ needs, and that if a player (or group of players) has given to its need a value that is superior to the cost of an AD solution, it may be willing to implement it (or buy the corresponding service). But it is not certain that AD will be the best solution to answer a given need. In fact, the AD solution will be “in competition” with all other possible solutions and the choice will result from a comparison of both efficiency to meet the need and the cost of the different solutions.
For each of the services or expectations/needs, evaluating:
- the cost of the other solutions that the player has at its hand and
- the expected economic gains or savings that the use of AD can bring
will help to determine the price that the player is willing to pay for an AD service and therefore the price signals that will be exchanged.
Of course the AD solution valuation process also has to take into account the technical characteristics (power, energy, time) as well as non-technical characteristics (communication, predictability, contracts, tariffs) of the needs because these cannot generally be dissociated from the economic aspects, since at least they have a direct or indirect impact on the cost of the solutions.
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4.1.1.
Process for regulated players
DSO or TSO Player
Need A
Needs and technical requirements generated by Need A (MW, MWh, kV, Hz, sec, …) Active demand solution (s) meeting technical requirements for Need A Other alternative solutions meeting technical requirements for Need A AD solution Cost Other solution Cost
AD solution Cost < Other Solution Cost
Go / Not Go
Organized Markets
Figure 19. DSO/TSO Process
Figure 19 shows the basic process considered for regulated players. It involves the following main steps:
1. Identification of a need or of a problem by the DSO or TSO. 2. Characterisation of the need/problem and
- Determination of the technical requirements to meet the need or solve the problem, e.g. the volume of power needed which will be calculated using the tools of the DSO or TSO.
- Identification of possible solutions which could be:
o Network solution, e.g. modification of topology.
o Active Demand Solution.
o Other alternative solutions provided by the market, e.g. change of DER set point.
- Calculation of the price the DSO/TSO will be willing to pay. The price will be calculated using an approach like the one proposed in Section 4.2.
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of “markets”:
- Through organised markets, such as tertiary reserve markets managed by the TSO or others new markets that will be created.
- Through calls for tenders designed to provide the network operators (TSO and/or/together with DSO) with the services they need at required conditions (area, size,..).
These requests could be made according to different time horizons or negotiation gate closures (annual, day-ahead, hour-ahead, …) with also different activation and duration times of the services.
4. The DSO/TSO will probably receive at least two different answers from the market, AD solution and generation solution.
5. The DSO and the TSO check the technical feasibility of the received solutions. 6. Comparison of the cost of these solutions.
7. Make a decision.
4.1.2.
Process for deregulated players
Figure 20 shows a schematic representation of the optimisation process for the deregulated players. It is similar to the previous one, except that in the case of the deregulated players, economic profits are the main objectives of their activities. Therefore the decision that they will take will depend not only on the comparison of the costs of the different solutions but also on the consideration of the expected profits that these solutions can bring them.
Player 1
Needs and technical requirements generated by Stake A (MW, MWh, kV, Hz, sec, …) Active Demand range of solutions
Value given by Player 1 to Stake A (avoided cost/added revenue)
Stake A
Cost of AD solution(s) Active Demand solution(s) meeting technical requirements for Stake AGo / No go
Value > cost ?
Other alternative solutions Other solution(s) meeting technical requirements for Stake A Cost of other solution(s)ADDRESS Technical and Commercial Conceptual Architectures - Core document ADD-WP1-T1.5-DEL-EDF-D1.1-Technical_and_Commercial_Architectures
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Basically, the process involves the following main steps: 1. Characterisation of the stake of the player
2. Determination of the specific needs along with the corresponding technical requirements (e.g. power volume, energy, duration, etc.)
3. Search for solutions that can meet the technical requirements among the whole set of possible solutions; AD being one type probably in competition with other possible solutions (e.g. DG-based solution).
4. Assess the costs of the retained solutions.
5. Assess the expected value or profit that the use of the solutions can bring with respect to the considered stake
6. Compare the cost with the expected value/profit for the retained solutions 7. Take a decision.
This process is further detailed and expressed in terms of AD products (SRP and CRP) in Sections 4.2, 4.3 and 4.4.