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InfoJump: The Electricity Marketplace (Issue 1, Part 2)

UK power is largely traded in 3 markets, the different markets allow traders to hedge, balance and speculate on their positions over different timescales. The three markets work in a consecutive order from Over the Counter (OTC), to Power Exchange, to Balancing Mechanism (BM).

The Over The Counter market is where the majority of hedging volume is transacted and typically allows participants to trade out to 2 years ahead, however deals can be agreed over greater timescales if the buyer and seller agree.

The UK Power Exchanges run the day ahead auctions and generally trades done on the exchange are for timescales for the next day or less.

The Balancing Mechanism is a very different market, participants cannot negotiate prices, National Grid can either accept or ignore the prices that are submitted at gate closure.

Both the Power Exchange and Balancing Mechanism are continuous markets allowing users to balance their position at any time of day or night.

Optimising revenue: the Virtual Power Plant way

If your business is already involved in Demand Side Response schemes, you may believe you’ve exhausted all the options available to you. Alternatively, you may have decided not to take part because you believe your business or asset constraints create too many obstacles or that ROI would be low, rendering participation inviable. Either way, it might be time to look beyond these pre-conceptions and explore the revenue creating options available to you through Limejump’s unique Virtual Power Plant technology.

 

Unparalleled access to market opportunities

 

The Limejump Virtual Power Plant (VPP) uses big data and cloud technology to enable generators, energy storage and businesses to access to the same market opportunities as large power stations. Not only that, but the Limejump VPP unlocks the door to the highest earning opportunities of DSR, even for individual assets without the ability to provide sub-second response. Our portfolio approach allows us to optimise the revenue available to a broad mix of assets with different generation or response capabilities. So, if you are currently only accessing lower value Static Frequency Response revenues, or your volume doesn’t meet the minimum requirements of a traditional response scheme, adding your assets to our Virtual Power Plant could be the key to expanding your opportunity and optimising your revenue.

 

Here’s how it works…

 

Limejump’s Virtual Power Plant is a powerful combination of specially designed hardware and completely unique software that’s capable of handling 155GB of data each day, around 50 times more than the typical energy supplier. It combines and controls the capacity available across a portfolio comprising wind, solar, biogas and batteries alongside the flexibility available from industrial and commercial assets such as compressors, CHP and HVAC systems. Using sophisticated algorithms and real-time data fed in from both the asset portfolio and the energy marketplace, the VPP manages all aspects of energy trading and risk management to optimise the response to grid and, therefore, the revenue available to participants.

 

Together, we’re dynamic

 

Our energy infrastructure is evolving. With the UK’s sustainability agenda and zero-carbon goals as the central focus, we’re moving steadily away from a linear supplier-to-consumer model. The future will see us all as active participants on a decentralised energy grid. The nation’s decreased reliance on fossil fuel and increased dependence on infinite but intermittent renewable energy sources, means that businesses have a vital role to play in keeping the grid balanced and our system cost-effective for everyone. The key to this is flexibility; an ability to respond quickly and dynamically to correct any imbalance.

Thus, Frequency Response becomes both a vital service for our grid and a potential new revenue stream for your business. An event on the grid requires an almost-instant response – a role traditionally fulfilled by fossil fuel plants. Through Frequency Response, businesses are stepping forward to fill this gap, with the rewards for doing so increasing broadly in line with the speed of that response: participation in Enhanced Frequency Response schemes provides much higher earning potential than those in Static (or slower) Frequency Response.

Our Virtual Power Plant  allows us to combine the capabilities of assets which can provide a sub-second response with those that respond slightly more slowly but can hold their response for longer. Going far beyond what a typical aggregator can offer, our combined portfolio means that more businesses are able to meet DFR requirements and therefore benefit from the higher rewards on offer.

 

Your on-site considerations

Joining our Virtual Power Plant causes no disruption to your daily processes and no damage to your assets, also leaving them firmly in your control should you need to override the automatic responses for any reason at all. By installing one of our carefully developed smart boxes we can remotely enable assets to respond to data signals within the parameters dictated by you. The smart box will operate within temperature and availability limits as required and will link up to the VPP, where data from the weather, Grid frequency, wholesale prices, and system supply and demand are monitored in real time; generating over 85,000 automated reactions a day. You’ll have complete oversight of every Grid event, your response performance and the rewards you can expect, all via our online portal.

The Limejump Virtual Power Plant offers your business a simple, low cost, risk-free way to access untapped revenue streams whilst providing a greener, more sustainable approach to energy. Sound interesting? Why not get in touch today to find out more…

 

Batteries – Understanding the opportunity for your business

As business energy costs continue to rise, future-facing organisations are seeking new ways to reduce or mitigate the extra strain on their annual budget. For some such businesses, installation of a commercial battery ‘behind the meter’ could provide the answer – bringing value to the business not only by helping to reduce energy costs, but also by creating the always welcome financial boost of a new revenue stream. If you’ve always thought that commercial batteries are beyond your business budget, it may be time to re-evaluate; the cost of lithium ion batteries has halved since 2014, and the revenue potential continues to grow – all adding up to a solid business case for investment in commercial battery storage.

Unlocking your revenue potential

The UK’s reliance on ‘green’ and therefore intermittent energy sources is growing – pushing batteries and their capabilities to centre stage. As a fast, flexible source of low-carbon power, the potential for batteries to play a vital role in keeping our energy system balanced and the nation’s lights on has only just begun to unfold.

Stand-alone plants connected directly to the National Grid (‘Grid-scale’ projects) are already becoming an established part of our energy mix, but the number of businesses realising the benefit of housing a ‘behind the meter’ battery is now also growing fast – and with good reason: a correctly optimised 1MW battery has the potential to earn a business up to £240K each year. The size of such a battery is comparable to a shipping container and will not therefore be a feasible addition to every business, but could be suitable for a wide range of commercial properties, from commercial refrigeration and distribution units, to utilities providers and manufacturers.

Earning revenue from batteries: how it works

When it comes to getting the maximum benefit from your battery, it can help to enlist an expert partner; as knowledge and timing is everything when it comes to energising your battery, optimising its performance, and securing the right agreement. Once set up however, earning revenue should need minimum or no intervention and cause no disruption to daily, business-critical processes. Keeping this in mind, two primary revenue earning mechanisms for behind the meter batteries are summarised below:

  1. The Capacity Market: From winter 2017/18, businesses can receive payments through the Capacity Market by making themselves available to reduce consumption or switch to on-site sources during potential Grid Blackouts. Whilst most organisations secure ‘unproven demand side response’ contracts, batteries enable businesses to secure a different class of long-term agreement and a more solid financial return. T-4 Capacity Market agreements secured for this type of contract to date have been between £18-£22.50/MW. To make this an even more appealing prospect to business considering batteries: switching from import to battery should take only seconds, making it a far simpler process than reducing consumption or shifting load, and far faster than switching to on-site generation from a diesel generator.
  2. Dynamic Frequency Response: The fast response times of batteries also means businesses can participate in Dynamic Frequency Response – by far the most lucrative type of frequency response contract. Batteries can be automated to instantly respond to fluctuations in Grid frequency – enabling businesses to reduce their import load when demand is high. Those who participate can expect to receive in excess of £160K pa for doing so.

A word on export metering: Those organisations with the appropriate metering connections can also take advantage of peak pricing in the market by switching to export, although the differential between import costs for businesses (ca.£110/MWh) compared to average market export prices (ca. £50/MWh) means that using a battery’s charge to avoid peak pricing and reduce import load can be far more profitable.

 

Batteries and energy cost savings

Alongside the benefits of an additional revenue stream, businesses with half hourly metering who introduce battery storage are also able to improve their financial outlook by avoiding the penalties that accompany energy consumption during peak times*. By switching to battery power during DUoS red band periods, in response to Triad warnings, and through Capacity Market season, a business can avoid the need to shift load or interrupt business processes to protect themselves from the increased non-commodity costs that could otherwise have a heavy impact on their bottom line.

*Savings earned will be reliant on a supply agreement with pass-through terms for relevant non-commodity costs. Checking volume tolerance is also advisable.

Balancing the risk of early adoption

Batteries offer businesses a sound investment option but, like any other commercial venture, success will depend on carefully planned and well timed action. Early adoption will allow businesses to secure lucrative contracts while competition is low and will reduce capex repayment periods, but it’s vital to choose a battery developer with proven capability as well as a supply contract with the right level of flexibility. For batteries under 1MW, working with an aggregator enables access to schemes otherwise out of reach. Again, choosing a proven expert with the right skills and technology to help you get the most out of your asset and quickly recover your investment will be key to making sure your battery helps to empower your business to face a competitive commercial future.

InfoJump: The Evolution of the Electricity Market (Issue 1, Part 1)

It is interesting to understand how the UK energy market landscape changed to form what we know today as the ‘Big Six’ companies. The timeline below gives an insight of the energy market transition from 1881 to 1998.

 

As a result of the privatisation in 1989, energy companies raced to take up market share and to reduce their exposure by becoming vertically integrated (i.e. owning both generation and supply). After a series of mergers and acquisitions, the ‘big six’ were formed.

 

The Energy Market Today

The UK electricity market changed profoundly in 2001 with the introduction of NETA (New Electricity Trading Agreements), this helped to align electricity with other commodity markets and allowed generators to compete based on their marginal cost (i.e. running cost). In today’s market, we are now experiencing a transition from a centralised generation system (large-scale power plants) to a de-centralised system (smaller distributed generation) with greater reliance on renewable generation such as wind and solar.

Three core drivers for this transition are the government’s commitments to de-carbonisation, a focus on distribution and a requirement for digitisation. In order to continue balancing the UK system securely and efficiently, companies such as Limejump provide aggregated services that enables control of distributed generation and demand.

 

 

We can now see the energy market landscape moving away from larger power stations to higher numbers of smaller scale generations such as solar, wind, hydro, landfill gas etc. Limejump provides an aggregation service for these small scale generations through our Virtual Power Plant (VPP) to help balance the system.

 

 

 

Written by Patricia Noble

Limejump portfolio to play vital role in keeping system balanced this summer

National Grid has published its Summer Outlook Report, providing the market with its forecasts for supply and demand for the coming summer and how it believes the system will cope (you can read the full report here). Demand for this summer is predicted to fall, while inflexible renewable sources will provide more power onto the system than in previous years. System balancing measures will be crucial: alongside curtailing some wind and fossil fuel plants to avoid generation output exceeding demand, maintaining Grid’s voltage frequency will also be a challenge.

Limejump’s Virtual Power Plant portfolio of energy storage projects, embedded generators and industrial/commercial assets will be playing a crucial role this summer to keep the Grid balanced. As a provider of dynamic frequency response, Limejump will be providing real time response to any fluctuation in Grid frequency, automatically commanding assets to turn up or down through our cloud-based optimisation technology, using the latest big data tools and machine learning algorithms. We are the only aggregator to hold both high and low service dynamic frequency response contracts, meaning our assets earn money from both turning up and down at short notice.

The Summer Outlook Report demonstrates that the low carbon transformation the UK energy system is now fully underway and finding flexibility is crucial to maintaining a balanced system during the summer months. Batteries, businesses and smaller generators are now able to support National Grid thanks to their ability to flexibly adjust output – which is why the Virtual Power Plant is so important because it automatically enables this.

Providing Grid with flexibility through a portfolio of batteries, generators and business assets is a cost-effective and low carbon way to balance the system and Limejump is ready to respond to any fluctuations between supply and demand this summer.

Limejump uses real time algorithms that monitor the system and provide sub-second response to fluctuations in Grid frequency. By combining fast responding assets such as batteries with large industrial assets and embedded generator flexibility, Limejump can respond swiftly and maintain a reduction or increase in output for the duration required by National Grid to help maintain frequency. Whilst Limejump is currently providing such a service alongside large scale fossil fuel power plants, we’ll continue to grow our portfolio to flexibility is being provided through low carbon sources rather than legacy polluting assets.

You can find out more about how Limejump’s approach is enabling more generators and assets to earn more revenue by participating in dynamic frequency response here.

Demand Side Response: maximising your earning potential

Static Frequency Response contracts have dropped by up to 70% in recent months – but this doesn’t mean your revenues need to suffer.

Changing mix means changing requirements

A changing generation mix and the corresponding intermittency of supply in the UK is evolving the way Grid works with businesses and generators to maintain a balanced and stable power supply.

To date, Frequency Response schemes have involved businesses and generators powering down (or up) when required, releasing the pressure on the Grid and providing valuable capacity support. This has come with a significant financial reward for its participants, with businesses increasingly benefiting from their participation in demand side response schemes, as both the ability to participate and the understanding of how to do so has grown.

However, as the changes in UK generation have altered the demands from the Grid, the schemes have changed too, and the decisions you make on how to take part can have a significant impact on what you could earn.

 

Speed is the name of the game

The majority of businesses and generators involved in frequency response schemes have been providing Static Frequency Response – turning consumption up or down within 30 seconds and holding at that level for 30 minutes with annual contracts of around £10/MWh available until recently.  However, as the requirements of Grid evolve, speed and time of response is the critical (and most lucrative) factor of balancing the system.

Assets that can respond instantaneously to fluctuations through the Dynamic Frequency Response (DFR) scheme are in demand, and as a result, Static contract values have dropped off significantly, falling to as low as £3MW/h. As this price falls, the incentives paid for faster responding assets is growing, making DFR by far the most lucrative type of contract.

Such instant response capability is mainly held within batteries and utilities, meaning many embedded generators and businesses miss out on the highest earning contracts – despite having fast-responding assets that can still respond within a matter of seconds.

 

The Limejump model: inside a Virtual Power Plant

There is an opportunity to be involved in the highest earning opportunities of DSR, even for individual assets without the ability to provide sub-second response.

At Limejump we provide the technology and platforms that enable you to automatically act on market opportunities to help balance the energy system and get paid to operate flexibly, regardless of your size or asset type.

By combining the flexible capacity of slightly slower assets to those that can respond instantly in our virtual portfolio, speed of response can be combined with the ability to hold a reduction or increase in consumption for differing periods of time, providing a vital service to National Grid and meeting Dynamic Frequency Response requirements.

This “Virtual Power Plant” approach automates response to Frequency Response events and removes the traditional constraints around taking part in DFR, enabling all to participate in the most valuable schemes and maximise earnings.

 

Whilst the market may seem complex, Limejump’s Virtual Power Plant approach removes barriers to demand response and makes it easy to participate in Grid’s DSR schemes, giving you open access to the most lucrative opportunities regardless of your asset mix.

To find out more about how to get involved, give one of the team a call on 020 8396 6848 or send us a message here.

Transitional Auction: a strong price secured for businesses

The second Transitional Capacity Market Auction has delivered a price of £45k/MW for businesses participating this coming winter – significantly higher than £7k/MW secured in the recent EA auction which was also for this Delivery Year beginning October 2017.

The auction was limited to turndown Demand Side Response (DSR) to encourage its participation in the Capacity Market. Over 300MW of volume was secured through the auction, confirming the importance that business flexibility will play in the Capacity Market and hopefully encouraging businesses to consider future participation to secure an attractive revenue stream.

Asking businesses to reduce consumption during peak demand is a far more cost-effective and cleaner solution than paying older fossil fuel plant to switch on or generate more – so the message that this auction result sends to the market about the value placed on the role of businesses in keeping the system balanced can only be a good thing.

 

Limejump had eight Capacity Market Units in the auction and secured volume for each to meet its customers’ needs. Alongside participation in Dynamic Frequency Response schemes and accessing wider market opportunities through our Virtual Power Plant, we’re helping businesses to unlock their flexibility and maximise their revenues. To find out more, click here or contact our business development team either via the Contact page or by giving us a call on 020 8396 6848.

 

Coal vs Wind

Coal vs Wind

For centuries humans have harnessed the power of wind to assist them in their daily lives. Wind was used to grind grain into flour and pump water for irrigation. In the Netherlands wind-powered pumps drained the water from the polders; in America and Australia, wind pumps provided water for livestock and steam engines. The first windmill to generate electricity was made by Charles Brush in 1888. Today there are 314,000 wind turbines providing a generation capacity of over 433GW worldwide.

(First Wind Turbine – Charles Brush 1888)

The 1880s, when Thomas Edison built the first power station in the world, saw the rise of the coal industry. To this date, coal is classed as one of the most reliable means of power generation, producing a baseload all year round without being affected by external forces, such as temperature or weather. Although coal earned respect because of this, the emissions burning it produced a problem and coal has been gradually replaced by environmentally friendly power machines – such as wind-turbines.

(First Coal Power Station – Thomas Edison 1882)

Although a decade ago no one would have thought that renewables would play such an important role in our current power market, today we can proudly say that 2016 was the year wind generated more electricity than coal power stations in the UK.

Three major power stations closed in the UK in 2015, reducing the coal fuelled electricity generation from 22.6% in 2015 to 9.2% 2016. Wind blew everyone away in 2016 with 11.5% of a total provided power generation. Coal fuelled electricity output was at its lowest in the last 80 years, environmentalists and green groups were fast to label it as a ‘milestone’ of the century, describing it as ‘fantastic news’.

(Graph showing Coal vs Wind electricity generation. )

Current environmental policies make coal powered stations extremely uneconomic, painting a bleak future for the once ‘cheapest’ labelled power fuel. Ministers aimed to shut down all coal power stations to meet carbon targets by 2025, however at the current rate the last plant should be shutting within the next 5 years.

Indeed it is a great achievement, however we must not forget that renewables are very intermittent and unless we make our cities smarter and adopt smart balancing we will always be dependent on the coal producing giants waiting on standby to fill in the gaps.

Nevertheless 2016 is a year to remember. First, solar power energy production overtaking coal for 6 months straight over the spring and summer period, then wind leading the game in winter! Further government support and investment into renewables, the growth of smart energy companies and development of smart homes will soon make sustainable power generation that was once classed as ‘unreliable’ and ‘too expensive’ our main source of energy, ensuring sustainable living for our future generations.

Energy Storage – the New American Dream for the Brits. What’s in it for me?

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.

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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.

See us at Europython!

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Limejump is off to Europython 2016!
We are proudly sponsoring one of the biggest Python events in the world, and will be front and centre with our stand. Please come by and say hi to us, we really want to meet some great python people. We’re all about the python in our tech so you’ll be in good company.

Come by for a chat about this and that, we cant wait to meet you all at this fantastic event!