Story originally published August 2018 in APPrO magazine here.
A new boundary-crossing industry is emerging in the energy sector, potentially both a harbinger of, and a catalyst for, powerful new dynamics and lasting change. Although aggregators have been active in energy markets for decades, new technology and regulatory decisions appear to be unleashing a wave of leading edge activity that could have far-reaching consequences. In one example of this rising trend, the designers of the new capacity market in Alberta recently announced that their system will soon be ready to accept bids directly from aggregators who combine multiple types of electricity resources. Aggregation is the pooling of capabilities from multiple market participants to produce an electricity service that’s more valuable or reliable than the individual services would be separately. It is a central component of Demand Response services used by electric system operators around the world.
What makes demand response aggregators interesting to energy markets is this: Aggregators operate with particularly powerful economic motivators to rapidly devise and deploy new options for consumers. This means that aggregators are likely to be extremely proactive in developing and marketing the latest technology, with fewer ties to existing infrastructure and conventional ways of doing business. “We get a commercial edge by finding new ways of deriving, packaging and delivering benefits to consumers,” says Sarah Griffiths of EnerNOC, part of the Enel group of companies, and one of the leading examples of aggregators operating in Ontario.
Changing market conditions are enabling if not spurring this kind of innovation. For example, technology that integrates industrial control with market monitoring is offering increasing numbers of market participants easy access to real time purchasing and optimization opportunities. At the same time, regulators around the globe are seeking out options that will enable active participation by a wider range of resources, including Demand Response, storage, and more categories of generation, than ever before. Considering the proliferation of resources in the distributed energy resource (DER) sector, it’s not surprising that new players would be coming forward with services designed to package previously unavailable options, or that they would be continually trying to line up new types of deals with consumers.
New categories of market players
A notable example of companies active in the aggregation sector is Itron. Although it’s well-known in the energy industry for its metering and control equipment, its initiatives in aggregation may be eye-opening for some. Itron Inc. has a broad portfolio of solutions focused on the grid edge. While supplying large amounts of hardware downstream, it may be alleviating needs for more expensive hardware upstream. The opportunities get more interesting when the hardware is deployed to enable further high value services. With 2000 MW of curtailable demand in its own portfolio, Itron describes itself as “one of the leading Demand Response companies in North America.” Its customers are no doubt coming up with more ideas to improve efficiency and productivity in the power system.
At its base, the Itron “Distributed Energy Management” business solves problems for power customers who have congestion issues, often allowing them to defer investments in feeders and substations. However the range of solutions on offer is extremely broad, and growing. They can assist customers with micro-grids and non-wires solutions for example. Matt McCaffree, Itron’s Senior Director of Regulatory Strategy, explains that the company is focused on supplying “Hardware, software and services for programs that provide local benefits”.
As an example, Itron recently announced a partnership with SonnenBatterie to integrate storage services with other types of infrastructure. In the process, the two companies have integrated their two products, SonnenBatterie eco and Itron IntelliSOURCE Enterprise, and enabled DER operators to ‘share resources behind the meter.’
Itron maintains business units focused on retail consumers and Commercial/Industrial consumers. Although they are currently operating across the US, Itron is closely watching policy and market developments in Ontario and Alberta that could enable further expansion.
As a Market Participant, EnerNOC offers a range of services to consumers in Ontario, including bidding their load into the IESO administered market as part of an aggregated portfolio to the Demand Response Auction. EnerNOC builds a portfolio of consumers designed to exceed the MW commitment it has received through the Auction. The portfolio approach allows the risk of dispatch to be spread out among the loads in the portfolio. If one consumer is unable to curtail, the portfolio is dispatched and managed to ensure enough MW have been activated to meet the commitment. EnerNOC also offers a range of other electricity market services, some of which are used by generators. Services include an auction procurement platform that is used by generators to sell their capacity, peak prediction services for large consumers, and the deployment and operation of behind-the-meter storage systems that can be optimized within the DR portfolio.
In capacity markets throughout the globe and in numerous utility programs, EnerNOC offers services to loads, enabling them to earn revenue from DR. In Ontario, it notes that it “helps hundreds of businesses and organizations across the Province earn money, save on energy costs, and mitigate carbon emissions with demand response (DR).”
CPower and ECS follow similar models to EnerNOC. Having identified an opportunity to service a large customer base operating in Ontario and to expand its North American presence, CPower recently announced its plans to move into the market starting in the 2019 season. These plans include opening an operating office in Ontario in July 2018 and hiring veteran utility industry expert, Brad Widdup, as General Manager of the Ontario Market. CPower plans to offer its IESO Demand Response Auction and Global Adjustment Programs, but is also looking into utility-level opportunities.
Glenn Bogarde, CPower’s Senior Vice President of Sales, explains that, “Our customer base is significant in Ontario. The market is growing, and distributed energy resources are becoming a core component of many commercial and industrial energy strategies across North America. As an organization that can help monetize DER assets and our significant experience in demand side energy management, we believe the Ontario expansion and Canadian utility markets are an excellent opportunity for our customers and CPower.”
The growth of aggregators, some would say, represents the introduction of a force for change, the creation of institutions whose primary purpose is making sure the ability to participate in energy markets is made available to consumers and new resources. Their participation in energy markets can be seen as the institutionalization of continuing change.
Market implications
Most electricity markets around the world have recognized the need and constructed some kind of function for DR and aggregation. In the PJM market for example, Demand Response, referred to as curtailment, represents 10% of supply and is the most active market for capacity. In Alberta’s market, the concept of aggregation has existed for some time. Aggregated load resources are able to participate in Ancillary Services, such as Operating Reserve (OR). As mentioned above, the AESO recently introduced new options for various types of similar resources, beyond demand response, to participate in their recently-designed capacity market in an aggregated form. ISO New England and the New York ISO also allow for aggregated demand response to participate in their markets. ISO-NE optimizes capacity with OR. Korea and Japan, in their new capacity market constructs, have provided for third party independent aggregators. ERCOT, MISO and other Regional Transmission Operators each have their own kind of DR market.
Representing the full range of DER service providers and consumers in the sector, the Advanced Energy Management Alliance (AEMA) has seen rapid growth in the participation of aggregators both in the commercial and residential sector in recent years. In fact, AEMA recently launched a Canada committee, focused in large part on Ontario. Household names like Nest and EcoBee are members of AEMA, as are the traditional aggregators EnerNOC and ECS/NRG who have participated in the Ontario demand response market for almost a decade.
“Our goal is to give consumers choice in how they use energy; advancing competition and opening markets are key components to enabling consumer access to cost-effective demand response and DER resources,” says Katherine Hamilton, Executive Director of AEMA. No doubt that message will resonate with other types of players in the energy sector.
Encapsulating a key point, Griffiths puts it this way: “You define the service that you need, and we will innovate and meet the need on a competitive basis. Get us into the market and we’ll prove our value to you.”
What’s ahead
The presence of active aggregators in a power market creates sustained pressure on all parts of the power system not just to be alert to the potential of new technologies, but to respond in practical ways as opportunities to innovate emerge, quickly taking advantage of new technologies. Market participants of all types have to be increasingly proactive in monitoring the opportunities, or run the risk of being undercut by smart new competitors.
Aggregators as a group could serve as a font of new ideas on how to improve the market, and act as a stimulus to all market participants to stay on top of their game, while constantly looking for new ways to improve the deals that are ultimately offered to consumers.
Although it could make some people nervous, no doubt there are some consumers who are eagerly awaiting the advent of aggregation.
— Jake Brooks
For more information, see:
https://cpowerenergymanagement.com
What is aggregation?
Aggregation is the ability of participants, an aggregator intermediary, to pool their capability. For example, if one participant cannot perform as required during all or part of an event, another participant or participants can step in to fill the gap with additional performance of their own. Aggregation is important because different resources, on the demand and supply side, use and produce energy differently, with capabilities for some participants affected by the time of day or time of year. A group of different resources, managed as part of a diversified portfolio, can make a firm commitment to deliver a load reduction or inject energy from the portfolio of resources, and can do so more dependably than any individual resource. The “portfolio effect” allows a group of aggregated participants to provide and market many of the firm resource commitments needed by system operators. Aggregation is a central component of Demand Response, and is the foundation of the ability for Demand Response to provide highly reliable capacity to system operators around the globe.