3. The ADDRESS aggregator and consumers’ flexibility
3.1. Main functions of an aggregator
In the ADDRESS architecture, the aggregators are deregulated participants whose main role is to be the mediators between the consumers who provide (sell) their demand flexibilities (= modifications in consumption) and the markets where the aggregators offer (sell) these flexibilities for the use of the other electricity system players. In other words, it may be said that the aggregator purchases consumers’ flexibility, packages it into tradable AD products and sell these products on the markets to electricity system participants.
This implies that:
- The aggregators are the gateway to consumers for managing their flexibility.
- They will need a very good knowledge of consumers at all levels.
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price and to quantity.
Being deregulated players, the aggregators will probably have varying objectives, business models and marketing strategies. For example, some of them may give preference in their portfolio to consumers with specific load characteristics or consumption behaviour, or some aggregators may specialize in the provision of a given type of products, or they may propose their products only on certain types of markets. Aggregators may also buy AD products from other aggregators to have access to added flexibility for managing their own portfolios (of consumers or of AD clients15). In all cases, a competitive market must be ensured (complying with local regulations).
Starting from the aggregator’s role the following main functions may be derived for the ADDRESS aggregator:
- Gather the flexibilities of domestic and small commercial consumers to build the AD products that it will resell on the markets. For this purpose the aggregator is expected to have a high expertise of consumer demand flexibilities. It must probably also develop an active role on advising and proposing technical and commercial solutions to consumers, so that the maximum flexibility capabilities are made available to the system.
- Be aware of the AD requests and opportunities. The aggregator should have an active role looking for opportunities to sell AD services in the appropriate markets and proposing its AD products to regulated and deregulated players. Therefore the aggregators will collect the requests and signals coming from the different electricity system participants via the markets16 in order to build offers that meet the needs of these participants. In particular, the aggregators’ knowledge or awareness of the geographical location of its consumers and of the regulated (DSOs/TSOs) and deregulated participants requiring the service could be important in order to match the right request (e.g. need for load reduction in a certain part of the distribution network) with the right service (e.g. increase of production by starting up DG in certain consumers’ premises or decrease of consumption by switching off or reducing consumption devices on the right part of the network). The aggregator should also be able to properly manage its portfolio of requests, identifying synergies, overlaps and maybe even inconsistencies between the different requests.
- Maximise the value of consumers’ flexibility: maximise the value from gathering and packaging consumers’ flexibility to its final sale to the electricity system participants. This will probably lead aggregators to search on the markets for the AD requests with the highest potential added value in order to optimise the flexibility of their consumers. The value created by the aggregator could be derived from four main sources:
o commercial return (economic added value for consumers, for regulated and deregulated players and for the aggregator itself),
o environmental return (for “environmentally concerned” consumers, support of RES development, reduction of CO2 emission),
o social return (a step towards the “sustainable society”), and
o technical return (infrastructures, facilitating introduction of Smart Grids and Smart Meters).
- Manage risks associated with the uncertainties in the markets (market price risks) and the responsiveness of their consumer base (risk of non-delivery of forward purchased demand-side flexibility). Different schemes for allocation of such risks may be adopted, but the aggregator
15
Clients or “customers” of the AD product that is to say the electricity system players to which aggregators sell their AD products.
16
Markets in the most general sense and therefore including organised open markets, call for tenders, OTC negotiation, direct bilateral agreements, …
ADDRESS Technical and Commercial Conceptual Architectures - Core document ADD-WP1-T1.5-DEL-EDF-D1.1-Technical_and_Commercial_Architectures
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should in any case deal with a large part of them. In some cases, the aggregator might negotiate transferring these risks to other participants which might have a better control of them.
These functions will probably involve competing against other aggregators for the “highest-value” consumers providing flexibility services for the “highest-value” end markets (for instance consumers with certain desirable flexibility characteristics or consumers located in strategic areas known for their tight network margins).
This leads to a first diagram of the internal functionalities of aggregators needed to perform their functions and implying:
- relationship with consumers and their Energy boxes,
- relationships with other (regulated and deregulated) players and participation in markets,
- the aggregator’s strategy:
o building of portfolios for purchases (consumers) and sales (AD clients),
o operative decisions,
o risk management at all levels,
- performance assessment of consumers response.
They are described in the following Subsections (3.2 and 3.3) and further detailed in Appendix F.
Economic business plan
(Risk management, etc.)
Aggregator
Building a consumer flexibility portfolio Building an AD purchasers portfolio Markets OTC (bilateral) & Organized Markets Performance Assessment Operative decisions Energy boxes Consumers TSO/DSOs Deregulated playersFigure 11. Overview of aggregators internal functionalities