D 4.6.81 (15)

8.2.2013

D 4.6.8

Study of customer, contract and product management related processes

Version 1.0

Created: / 8.2.2013
By: / Niko Joensuu, Empower IM Oy
Jan Segerstam, Empower IM Oy
Pekka A. Pietilä, Empower IM Oy
Joni Aalto, Empower IM Oy

Table of Contents

1.Preface

2.Introduction

3.Demand response product design and pricing

4.Effects of the demand response products to the self-service for ordering an electricity product

5.Transferring demand response contract information into the supplier’s information systems

6.Integration between the contract module and the demand response module

7.Integration between the demand response module and the electricity procurement process

8.Sum up and continuation of the work during the fourth funding period

1.Preface

This report is a part of the results from the third funding period of the Finnish national research project”Smart Grids and Energy Markets”. The project has been funded by Tekes – the Finnish Funding Agency for Technology and Innovation. This document is based on the internal workshops and research work which were carried through with multiple specialists.

2.Introduction

SGEM Task 4.6.3 defined the demand response process as a conclusion of the second funding period. The different participants of the process were identified as well as the required information system modules and the information flows between them. The demand response process from the supplier’s point of view is illustrated in the Figure 1. Thefirst deliverable “Study of pricing process flows and connection of control processes” from current SGEM funding period discussed the utilization of demand response from the electricity supplier’s point of view and how it should be connected to the electricity trading processes in the different electricity market levels. Also, the alternatives for the pricing of the retail products related to demand response were discussed based on their usability. The focus of this report is in the interface between the electricity supplier and the end customer, which is also highlighted with the red circle in the Figure 1.

Figure 1. Demand response process from the electricity supplier’s point of view.

The focus of the research work, which forms a basis for this report, was in the demand response contract process between the electricity supplier and the customer. The goal was to define the interaction between the electricity supplier and the customer during the contract agreement phase before the beginning of the electricity delivery process and which parts of the overall demand response process are carried through at this point. Consumption metering and billing during the delivery process are not included into this research work.

The most significant research questions related to this researchwere:

-How the demand response contract process differs from the traditional electricity contract process?

-What kind of information the customer should be able to provide during the demand response contract process?

-How the electricity supplier introduces the new products, pricing and the contract terms?

-Which sub processes are activated once the customer signs a demand response contract with the electricity supplier?

  • E.g. connections to the demand response process and to the risk management process

- A most simple use case from the customer’s point of view was selected as a starting point for the research work, which means that the customer is required to do a minimum number of choices during the contract process

-In the use case of this research work, the customer signs a demand response contract as a web based self-service functionality. (E.g. in the public web pages of the electricity supplier)

3.Demand response product design and pricing

There are many alternatives for the electricity supplier to handle the overall product design and the pricing of the demand response products. In this research, it was concluded that the most effective option for the electricity supplier would be to build the overall product offering beforehand and offer these to the customers. This way the electricity supplier has the best possibilities to manage and evaluate the pricing and the product design processes.

From the customer’s point of view, this makes the buying easy as there is a limited amount of prepared product types for the customer to choose from. This also reduces the overall complexity of the process. The alternative option would be a totally dynamic product, which would require the customer to do all the choices related to the terms of the demand response contract and the price of the product would be based on these choices. The overall possibilities to design a more dynamic product offering which include more optionsincreases when considering the industrial customers or the private customers as an aggregated group.

There are multiple issues which need to be paid attention by the electricity supplier in the product design and the pricing processes. Some of the issues have already been discussed in the previous reports and for example a possible load control device which can be included into the demand response agreement brings out some issues. The total price of the equipment needs to be included into the price of the demand response product. The most important cost components for the equipment are the device itself and the installation of the device. Therefore estimation of payback periods is required and it must be noticed that andin some cases the cost of installation of the device can be even more relevant than the price of the device itself. It is likely that in the future the price of installation will vary between the network areas depending on the partner network which provides the installation service for the electricity supplier. This is required as traditionally electricity suppliers do not have installation resources themselves.

Finally, the owner of the equipment must be determined. Alternatives are that the equipment is owned by the end customer or by the electricity supplier. On the other words, it needs to be decided if the consumers buy or rent the equipment. Additionally, the demand response products should most likely be designed as fixed-term products. This aims to reduce the overall costs for the installation during the life-span of the equipment. Naturally the moving process, which occurs if the customer chooses to switch the electricity supplier, must be taken into consideration when evaluating this issue.

The most important optimization process for the electricity supplier related to demand response utilization is to make it economically profitable. This means that the electricity supplier needs to define the monetary benefits which can be achieved with a certain amount of load control capacity and on the other hand, determine the monetary compensations which can be paid to the customers. Basically the compensations for the customers must add up with the requirements from the customers, but the compensations cannot be too high, so that they would make the whole demand response utilization unprofitable. This issue was covered in the previous report, which discussed the possibilities of the electricity supplier to utilize demand response in the different levels of the electricity market.

The starting point for this research work was that the rules and agreements for demand response utilization between the customer and the electricity supplier would be collectively modeled into the demand response module, which would reduce the need for major changes of the present contract structures e.g. in the contract module of the CIS(customer information system). On the other hand, it must be pointed out that the demand response module cannot still be implemented as a totally separated function, because the handling of the demand response process during the electricity delivery process requires some changes for example to the metering and billing modules.

4.Effects of the demand response products to the self-service for ordering an electricity product

This chapter introduces the actions in the end-customer interface related to the demand response contract process. The description is based on the idea, that the electricity supplier provides a web based self-service functionality for end customers to select a most appropriate product for the customer. It was concluded that the demand response contract does not necessarily require major changes into the current end customer interface.

Figure 2. Flow chart of the web based self-service for ordering a demand response product.

The demand response contracts are handled with the same product management actions as the traditional electricity contracts. Therefore, the demand response products would simply be regarded as products/services among the others. The electricity supplier can determine how diverse demand response product offering should be offered for the end customers. Therefore, for examplethe demand response product for the customers with direct electric heating would have a product type of it’s own, while the product for the customerswith storaging electric heating would be different.

The demand response products are created into the contract module of the electricity supplier’s information systems similarly with the traditional electricity products. Still, the demand response products require that the information about which type of load control actions are related to the product and whether the product requires additional load control equipment must be possible to connect to the product information. The information about the type of the controllable loads and the profiles of these loads can be crosslinked in the separate demand response module.

The electricity supplier can also design the product offering to be individual in the network areas of the different DSO’s. This enables to take into consideration the different partners which provide the installation resources for the load control equipment or the load control infrastructure based on the smart meters that could be offered by the certain DSO’s.

It is also possible to utilize the demand response contract process to acquire additional information from the customer. This information can include for example the type of the controllable load and an estimate about the demand response capacity. Depending on the nature of this information, some changes may be required to be implemented into the current information system modules e.g. into the contract module. In addition to this,it must be noticed that currently only the overall electricity consumption is measured in the private customer premises, meaning that the information about the consumption of single devices’ is not generally known by the end customers.

5.Transferring demand response contractinformation into the supplier’s information systems

When comparing the demand response contract process to the traditional electricity contract process, the most significant change is the possible sub process for the installation of a load control device which could be provided by the electricity supplier. The following chart illustrates the process of storing the demand response contract into the information systems of the electricity supplier.

Figure 3. The demand response contract process.

The need for the installation of the load control device is meaningful as until today all of the device installations have been handled by the local DSO, for example the metering of a new consumption place. The operations related to the installations have not been connected to the electricity supplier’s processes in any way. Therefore, the installation process sets some new requirements for the electricity supplier’s information systems. In the device module of the information systems, it must be enabled to set an electricity supplier or an end customer as an owner of the device in addition to the DSO. In addition to this, there must be information about the requirement for the device installment in the product information or in the contract information. This information is needed in the process in order to create the installation work order. In addition to this issue, it must be prepared in the process planning to be able to connect to the load control process which could be provided by the local DSO. In this case, the demand response process would be run by utilizing the system interfaces which are provided by the DSO.

6.Integration between the contract module and the demand response module

The need for a separate demand response module arises from the need to keep the contract module as generic and modular as possible. Therefore, it would be beneficial if the issues related to the demand response would be handled in the separate demand response module. The basic structure of the integration between the contract module and the demand response module is illustrated in the figure 4 below.

Figure 4. Integration between the electricity supplier’s information system’s contract module and DR module.

Basically, the demand response module would be used to estimate the available demand response capacity of the different demand response targets. The load types of the loads which are utilized in DR could be connected to the product information and would be acquired as a crossconnection from the contract module. A certain load type could include different load profiles which are modelled into the system by the electricity supplier. The forecastingof the demand response capacity would require also the information about the annual electricity consumption.

The possible limitations which have been agreed between the electricity supplier and the end customer have an significant role in the overall usability of DR. The management of this information would be also handled in the demand response module. Themost significant boundaries for the DR utilization are the time limitations, volume limitations and the cost for the demand response utilization. Thetime limitations include the rules which define the time period in which the demand response operations can be implemented. The volume limitations define how often the demand response operations can be implemented and what is the maximum amount of the demand response operations during a pre-defined time period. Cost for the DR utilization is depended on the agreed volume based compensations or the agreed fixed compensations, which are paid regardless of the actualization of the demand response operations.

7.Integration between the demand response module and the electricity procurementprocess

This chapter discusses the integration between the demand response module and the electricity procurement as well as the risk management related to the electricity procurement. Basically there is a need that the demand response module produces information based on the demand response agreements for the risk management process. The following figure illustrates the integration between the demand response module and the electricity procurement/risk management process.

Figure 5. Integration between the electricity supplier’s information systems’ DR module and electricity procurement process.

In this example case, the electricity supplier has allocated it’s overall customer portfolio into the procurement portfolios. The allocation can be done based on the product or product group information. The outcome from the electricity procurement process is the procurement forecast for each of the procurement portfolios. Thedemand response products can be allocated into the own procurement portfolios. Basically there can be two kind of demand response products. The demand response products can be products in which the spot price of electricity is used as a retail price and the load control device controls the customer loads based on the actualized spot prices. In this case the electricity supplier needs to forecast the automatically done load controls for example by utilizing the spot price forecast. On the other hand, the demand response products can be fixed priced products and the electricity supplier can implement load control actions within the limits which have been agreed with the end customer.

The DR module forms the required load control requests based on the input from the electricity procurement process. Basically the need is to estimate the procurement portfolio based procurement forecasts and the overall demand response potential and by combining this information to the spot price forecast, allocate the consumption to the cheapest hours by using the demand response operations.

In order to deliver the actual load control requests/messages, the DR module needs information from the other system modules as well. The required information includes for example electricity market identification codes for the sender (the electricity supplier) and the receiver (e.g. DSO) of the load control messages, identifier for the load control targets or target groups and the distribution network identifier. The DR module also defines the load control periods, load control methods and the required load control commands into the load control messages.

8.Sum up and continuation of the work during the fourth funding period

To sum up, this report described the most significant interactions between the electricity supplier and the end customer during the demand response contract process. This started by introducing the process where the end customer chooses the most suitable demand response product from the electricity supplier’s product offering and provided the possible additional information which could have value during the demand response utilization. Next, the process of storing the information of the demand response contract into the electricity supplier’s information systems was walked through and finally the actual utilization of this information as a part of overall electricity procurement process was introduced.