Introduction: Energy Principles
There are two existing principles when balancing the Grid:
Production follows consumption – a principle based on the assumption that energy demand will not exceed the supply and that the production side is always controllable. Therefore, consumers are barely regulated, whilst suppliers are heavily coordinated and structured to satisfy the fluctuation in demand.
Consumption follows production – This principle assumes that electricity can only be consumed if it is available and the supply side is unregulated, meaning that quotas would need to be placed on the consumers’ side.
Germany is a great example of the first principle. One quiet lunchtime in 2010 Germany experienced 7 GW of surplus in their system and to avoid blackout, 2.8 GW was exported abroad while 4.3 GW was absorbed nationally. This event highlighted the increasing urgency for smart balancing in Germany.
UK Energy Market Transformation
Before we get onto the subject of smart balancing, lets first understand how the UK system has come to this in the first place. For the last 10 years, we’ve seen heavy investment go into renewables, not only investment into building them, but also great government support through subsidies to encourage more and more environmentally friendly means of energy production. Currently, the UK can proudly say that around 15% of energy comes from natural sources. However, at what cost? The intermittent nature of renewables puts the Grid under a lot of pressure, meaning that a lot of the country’s functionality depends on weather. What do we do? Kindly ask ‘Father Thunder’ to continue blowing the wind to keep the turbines spinning?
Although a lot of attention is being paid to the intermittency of renewable technology, consumption is becoming just as volatile. Growing popularity of battery technology and electric vehicles is one of the main examples of growing unpredictability in customer demand and is only set to increase over the next few years. Thus in order to keep the lights on in the UK there is a growing need to concentrate on both supply and demand side to achieve perfect balancing – ‘complimentary flow’.
UK Energy Market Volatility
In the meantime, as well as Grid balancing issues, we have seen in the past two months the UK’s energy market volatility, reaching levels that have not been seen before. Power price spikes (through System prices) touched £1500 per MWh on 08/11/16, even though the average baseload in the months September – November 2016 was £53 per MWh. Even spot prices in the UK have hit £999 per MWh when average baseload spot price this Autumn have been £55 per MWh. In fact, the price spikes are the highest ever recorded in the UK market. These events clearly indicate the pressure the Grid is put under and the need for reliable technology to keep UK homes and businesses powered.
Here at Limejump we are helping to provide stability to the system using intelligent technology. An internally developed smart box and software platform created the concept of Virtual Power Plant (VPP). This is where all different types of assets and generators are pooled together to create single- balancing tool. But the brilliance is not just in the ability to turn things off and on, but to do it in the way that helps balance Grids operations without impacting Customer operations. To put it in perspective, let’s take an example of the first abnormal price spike that occurred in the UK this September.
September’s Invisible Blackout Explained
Most of the power suppliers in the UK faced an ‘invisible blackout’ on the 13th of September 2016. We’ve called it an ‘invisible blackout’ because although the lights in the country stayed on, very little was said to explain the record spikes in the spot prices or little warning was given to those closely involved in the energy industry.
Little was said because the aggregators and suppliers in the UK are not familiar with such market movements, while most struggled to get their heads around it, Limejump put batteries into operation in the arbitrage market to take advantage of the price spikes and therefore also helping to keep the system balanced.
The evening spikes meant that Limejump had a sudden opportunity because of the intraday price profile. Using Limejump’s smart technology allowed us to forecast the price spike in advance giving us time to charge our portfolio of batteries in advance at low price and discharge at the top of the peak. The price spike was the highest spike recorded in the last 20 years.
The Graph bellow shows the events of the day and what actions were taken to balance the grid and at the same time take advantage of the spike. At the point of charge, there was a £999 price arbitrage in the market and Limejump traded out to achieve very close to these levels.
The Future of the Energy Market
After analysing historic data it is clear that the energy market has moved onto a different level of complexity with increased price volatility. Average spot market price in Autumn 2015 was around £40 per MWh when this year it’s above £53 per MWh. The interesting factor is that day to day prices stayed on the same level, however, the average increased mainly due to the occurrence of abnormal price spikes. Calculations show that in the last 2 months 1 MW of battery could have earnt around £5000 extra profit just from entering the arbitrage market. Approaching the winter period is expected to increase market volatility, opening new doors to opportunities that were not considered before.
This is a historic time in the Energy industry where no one truly knows how to handle it or how to move forward, but companies that can minimise the risk it creates, capitalise on any opportunities it makes and are the best placed in the industry to manage it, will be the ones dominating the future energy industry.
Although the current events are unfamiliar to the nation, Limejump has been inspired by in-depth market analysis and created to directly address and support the energy system. We expect the market to start moving towards a more volatile system in the future and for prices to become much more unpredictable meaning that only continuous innovation and smart technology will be able to balance the Grid and keep UK’s lights on.