What is a data-driven energy market? Reliable data, in particular metering values, have always been central to gas and electricity markets; what’s so special that we have to give it a new name? The difference today is that the volume and complexity of energy market data is exponentially changing. You need more, finer-grained data. As thought experiment try replacing a good old traditional meter at your customer, which is read once per year, with a smart meter collecting consumption data every 15 minutes, for instance: that’s 35040 times the metering values (365*24*4). And that’s nothing compared to the need for up-to-date data in just seconds to have an effective demand-side response capability! The most innovative companies in the energy market have realized that managing data, rather than managing assets, will drive competition in the coming energy markets.
In constructing the basis for energy market liberalization, the EU’s relevant directives place substantial emphasis on data access and data communications. In a two-part series, we will examine data exchange on energy markets. What has been addressed in the past? What type of approaches exist? Are some models more effective than others? In this first part, we’ll take a look at the role data exchange plays in energy markets, and will discuss who is responsible for data communication in a liberalized market. In a later post we’ll explore the various models different countries have developed for data exchange, in order to weigh the advantages and disadvantages.
The changing role of the DSO
The liberalization of the European energy market represents a significant shift in roles and responsibilities among all actors in the energy industry. Unbundling provisions in various EU energy directives require separating the roles of the maintenance of power and gas infrastructure networks and neutral market facilitation (by distribution system operators - DSOs) from the trading of power and natural gas and its supply to consumers.
What does the modern DSO look like? We have to realize that what we thought as one activity – managing distribution networks – is in fact two distinct activities. First, DSOs manage physical assets of network infrastructure. Second, they also manage the data, in particular consumption data of each point of delivery, which has become the cornerstone of data-driven energy markets. Will DSOs rise to the challenge by rebullding their business model on data, not on asset maintenance? Or is it just easier to separate these two activities, allowing an independent entity to manage fundamentals of a data-driven energy market, such as a data hub?
Keeping the energy flowing: data for balancing
Why are DSOs important for the market-based balancing of the transmission system? As a sort of intermediary between producers, consumers and transmission system operators (TSOs) with access to data on inputs and offtakes, the DSO plays a central role in data communications. On the gas markets DSOs provide vital data required for the daily balancing market, while on the power markets the rapid spread of prosumers and the ever smaller granularity of power market products (e.g. 15-minute products and the expected introduction of 5-minute products) raises the importance of DSO-level data management.
One of the main aims of energy market liberalization was to shift balancing responsibility from the TSO to the network users (shippers) by establishing market-based balancing rules. On the power market the TSO still plays a crucial role, but power plants (and investors) receive market signals on reserve price value, while traders are incentivized to have accurate schedules and constantly improving forecasts. On the gas market the TSO acts as a last resort to balance between supply and demand if this is required. Currently most network users in electricity markets need to be balanced every 15 (or in the near future even five!) minutes in most European electricity markets, while on a daily (or hourly!) basis for gas markets. These granularities are expected to decrease as the balancing responsibilities move closer and closer to real-time balancing.
The shift toward real-time balancing relies heavily on timely, accurate data. Balancing data includes both metered (actual) and forecasted inputs and offtakes from network users. While the TSO is responsible for making this data available to network users, on the gas market the DSOs are the ones with access to metered data and thus are responsible to communicate it to the TSO in order to provide accurate information for the balancing market. Meanwhile on the power market, the growth of small-scale, prosumer-type production tied to the distribution grid is expanding the power DSOs’ balancing role is also growing, since at least for the time being the DSOs hold access to this dataand small-scale, prosumer-type production data is only available for them (for the time being).
In some countries the DSOs are also responsible for forecasting, so they must also provide forecast data to the TSO. But even where the DSO is not responsible for daily forecasting, the calculation is still mainly based on data from the DSO.
More than balancing: data for an open market
In almost all EU countries, DSOs are responsible for reading, validation and storage of consumption data, as well as for the registration of the supplier to the point of delivery (end consumer). Thus, DSOs are central to gas market communication well beyond balancing. They are involved in a wide array of business processes related to the exchange of grid, metering and market data.
Third-Party Data Access (TPDA) is a cornerstone of liberalized energy markets in Europe. Access to data is crucial for two key pillars of EU legislation:
- Empowerment of consumers: Convenient and free-of-charge access to up-to-date metering data are key enablers for consumers, especially in facilitating liquid retail markets through supplier switching.
- Third-party access to gas infrastructures on an equal and non-discriminatory basis: Access to data by shippers and other market participants is necessary to ensure fair and equal infrastructure access.
In particular, the energy directives emphasize that access to objective and transparent consumption data is a key aspect of supplying customers. EU member states must ensure that customers are able to receive all relevant consumption data in a non-discriminatory manner in terms of cost, effort and time.
Regulators are also legally obligated to enforce data exchange between participants in the energy markets in order to facilitate customer switching. In particular, consumers own their own consumption data. If a consumer explicitly authorizes release of this data to a third party, for example a prospective new energy supplier, the party responsible for data management is obligated to provide access to the data to the third party at no cost.
In sum, access to data, in particular consumption data, is crucial for efficient energy market functioning and innovation, and is heavily emphasized in EU legislation. The implementation of EU energy regulation on data exchange, in particular the harmonized format and easy access to data, is the responsibility of member states. As a result, several models of data exchange have developed throughout Europe. How are these models implemented? How well do they work? In part 2, we will compare the three main data exchange models in order to identify the best model to enable a truly data-driven energy market.
This article was written by Márton Fabók, Senior Energy Market & Policy Researcher, Navitasoft.
