Towards new electricity market operating models Cleaner, more innovative, more individual

The renewal of the electricity market represents an opportunity for market actors and consumers. However, the transition phase will create pressure to change and uncertainty for both groups as the discussion shifts to bidirectional power system products, energy community regulations and energy storage.

Renewable forms of energy will mean more fluctuation in production because they are dependent on weather conditions. The situation will require renewal from the entire energy system and on the part of electricity market operators. Although we still don’t know what the new operating models and products will be like, the general development directions are clear.

“Consumers will become active market parties and electricity suppliers will develop into service companies. The industry’s business models have been simple until now. Electricity suppliers have purchased energy from the wholesale market, tried to estimate demand correctly and sold the purchased energy to the end customers. In the future, suppliers will offer their customers complete solutions,” explains Executive Consultant Aki Toivanen from Eera Oy.

This is a major change and plenty of challenges have to be resolved, but in terms of the end customer and overall development this is more of an opportunity than a threat.

A smart grid creates flexibility

The prerequisite for this revolution is a smart power system that provides the framework for an open, real-time energy market.
“In the future, customers will have access to a wide range of energy management solutions that they will use to optimise the overall costs and profiles of their own electricity use,” explains Toivanen.

The activity level of consumers depends on supply, so it’s clear that market actors have to renew their role. The aim is to provide existing and new electricity market actors with fair and balanced market rules that allow consumers to take a more active role than earlier.

A big change for traditional operators

The distribution system operator must be capable of bidirectional distribution, and electricity suppliers must have products that take the new bidirectional power system into account.

“The existing resale contracts will no longer be sufficient. Electricity companies in the future will need a much more developed offering if they want to be part of the business,” says Toivanen.

Energy community and battery storage activities will become easier. Not everyone can afford to invest in a small, user-specific power plant. Instead of installing solar panels, it may be better to establish a community that builds a larger renewable energy production plant in the optimal location. This is called an energy community. The model has thus far been slowed by various regulations, but Toivanen says that these barriers are being resolved.

“Enabling energy communities is something that concerns consumers in particular. Their possibilities to produce energy cost-effectively and be part of the energy system will increase significantly.”

At this time, the use of battery storage devices is not very profitable because of taxation. A change is being sought in this area, because developing storage would eliminate the constant challenge of balancing production and consumption. Toivanen considers the development of battery storage devices to be a very positive matter.

“In the future, we’ll be able to store energy when production is high and remove it from the storage device when necessary. This is common practice in other sectors. Storage is very important to the whole industry, and the impact on the market will already be visible in the 2020s.”

Basic consumer or active selector?

The upcoming change is large and it will not happen overnight. New products will be launched alongside traditional ones so that frontrunners can adopt them and save money. The products will gradually become more widespread as savings are realised.
Although new actors are welcome on the electricity market, it’s good to remember that most consumers still only want a reliable supply of electricity for their homes.

“Many are satisfied when their phone charges and the lights go on. Customers who want an easy solution can be offered a standard comprehensive package.”

The end customer always decides what kind of consumer he wants to be. The majority are likely to utilise automation and analytics to optimise energy costs. There are already many solutions for this need.

At the other end of the spectrum is the consumer who actively studies the market, monitors prices and makes choices. Different consumers have the same basic needs: they want a reliable supply of electricity at a reasonable price.