Facilitating the cohesion of energy efficiency and demand response markets

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The EU has set targets to make buildings more energy efficient and also offer greater energy flexibility. New and resounding technical and business solutions are considered a necessity to reach these objectives. Two European projects, NOVICE and HOLISDER are both testing innovative models to increase the impact of flexible energy services by addressing the relationship between ESCOs, demand response aggregators and end-users but in slightly different ways – one in the building renovation sector and the other in the deployment of end-user technologies for consumer empowerment

Recent updates to the Energy Efficiency Directive (EED) highlight that EU buildings need to be 30 per cent energy efficient by 2030 and Member States need to incentivise Demand Response (DR) participation and liberalise the market to help lower electricity use at times of high market prices or grid instability. 

Currently, energy services companies (offer supporting energy services to end-users), aggregators (acquire flexibility from end-users to serve different market players) and end-users are limited in their involvement in addressing the challenges of the EED. In order to meet these aims, incentives which increase public engagement and the cooperation of ESCOs and aggregators is needed. 

In bringing these two stakeholders to work together, not only will they be able to access wider DR markets, but their joint expertise can significantly benefit customers in exploring new revenue streams and reducing their energy costs.

The EU-funded NOVICE project is developing a new business model for building renovation projects that uses an enhanced Energy Performance Contract (EPC), to allow ESCOs and aggregators to work together. By combining revenues from both energy efficiency and demand response, clients can maximise revenues from their energy assets which leads to shorter payback periods and an improved return on investment compared to projects that consider energy efficiency alone. NOVICE will attempt to demonstrate and validate this business model through implementation at pilot sites in some of Europe’s most mature energy markets.

The HOLISDER project is taking a more technical and consumer-centric approach, in the context of Living Labs and four pilot site demonstrations. The project aims to pull together intermediaries and third parties for defining new business models in energy efficiency and DR optimisation. By acting on behalf of the consumer, third parties can give them more empowerment in energy market transactions across Europe.

“In bringing these two stakeholders to work together, not only will they be able to access wider DR markets, but their joint expertise can significantly benefit customers in exploring new revenue streams and reducing their energy costs”

United cause

Throughout the EU, energy markets are volatile and at odds with one another, regulated and managed differently from one to the next, making it extremely difficult to implement cohesive applications and policies for smart sustainable buildings. HOLISDER and NOVICE are developing new business models to demonstrate the opportunities available in open markets, such as those in the United Kingdom and Ireland where more DR markets are open, mature and more accessible. These models will offer a major opportunity to influence policy makers and regulators to integrate, monetise and create new revenue streams in otherwise restricted markets.

“It is rare to consider both energy efficiency and DR together in a single building retrofit project,” Jo Southernwood, coordinator of NOVICE believes, “but both NOVICE and HOLISDER are looking at new business models that enable these two approaches to work together in closer alignment.” Southernwood and Ander Romero, project coordinator of HOLISDER, see eye-to-eye in the slight differences between how each project is going about this.

“HOLISDER is developing new and innovative technologies that facilitate residential and small tertiary buildings to be involved in the DR market with more ease through collaboration with ESCOs and aggregators,” explains Romero. “NOVICE is more focused on emerging value propositions for commercial buildings, using a new EPC template to combine the services of ESCOs and aggregators into a single offering that that benefits all stakeholders,” adds Southernwood.

This collaboration provides each market player with the opportunity to access a new market type and facilitate consumers’ involvement by making the most out their flexibility value. Traditionally, ESCOs and aggregators work quite independently – ESCOs typically attract public sector clients whilst aggregators look for industrial clients with large, easily controllable loads. “By working together, an ESCO might be able to provide energy efficiency advice to some of those industrial clients they otherwise wouldn’t interact with, and an aggregator might be able to provide DR services to public sector clients they wouldn’t normally have approached,” explains Southernwood. 

For HOLISDER, “this collaboration means helping aggregators act as energy service providers, and ESCOS and energy retailers as aggregators, to offer DR optimisation services to individual consumers,” Romero added.

Project information

Project Title:

NOVICE – New Buildings Energy Renovation Business Models incorporating dual energy services

Project Objective:

NOVICE aims to develop and demonstrate an innovative business model that provides energy savings to buildings and demand response services to the grid when buildings are renovated. This will create a dual revenue stream, reducing the payback period for building renovations and accelerating market uptake of Energy Performance Contracting.

Project Duration and Timing:

3 years starting on 1st June 2017

Project Funding:

H2020 funded, €2.041 million

Project Partners:

International Energy Research Centre, Tecnalia, KiWi Power, Hypertech, e7, Solintel, Joule Assets, Noel Lawler Green Energy Associates, Apleona

Project Title:

HOLISDER. Integrating Real-Intelligence in Energy Management Systems enabling Holistic Demand Response Optimization in Buildings and Districts

Project Objective:

Introduce a Holistic Demand Response Optimization Framework that enables significant energy costs reduction at the building/ consumer side, while introducing small and medium sized buildings (residential and non-residential ones) as a major contributor to energy networks’ stability through optimised energy management in response to network constraints and conditions.

Project Duration and Timing:

October 2017-September 2020

Project Funding:

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 768614. EU contribution M€ 3.9

Project Partners:

TECNALIA, HONEYWELL, HYPERTECH, TNO, ETRA, SOLINTEL, KONCAR, BELIT, ASM, MYTILINEOS, KIWI, CAVERION, BEOELEK

Addressing market barriers

Though the partnership between ESCOs and aggregators is a challenge in itself, the contrast in the level of maturity of energy markets across Europe and the subsequent involvement in, and implementation of, DR services is a greater barrier that both projects are also addressing, making it important to understand the dynamics and opinions between existing players in the market today. Currently, when completing a building energy efficiency upgrade an ESCO will secure finance to deploy energy saving actions on the client side and recover their contracted investment in static revenue, Southernwood explains. This current model, which also sees clients have two separate contracts for aggregators and ESCOs, can be unattractive in terms of contract length and returns on investment making it difficult to persuade clients and investors to sign up to energy saving contracts. “At NOVICE we are looking to roll out a dual energy services business model for building energy renovation upgrades to see whether it’s possible to include conditions and clauses that cover both DR and energy efficiency services into a new EPC contract. This will bring aggregators and ESCOs together for significant financial and energy efficiency benefits,” Southernwood states. 

“The lack of government support, complexity of EPCs, lack of familiarity across the EU on the opportunities DR services offers and the perception that building owners or managers will lose control of their building, however, makes our business model difficult to implement,” she adds.

In a bid to increase the engagement and implementation of a dual energy business model the project, now in its final year, is organising workshops, webinars, events and developing online tools to attract all the actors across the supply chain – building owners, end-users, ESCOs and aggregators for example – to start them thinking about the different ways they can do business together and differentiate themselves from competition, Jo adds. 

HOLISDER is also using demonstrations and results to address the barriers the project faces in implementing DR across the EU. Four pilot sites are located across Europe in Greece, UK, Finland and Serbia, incorporating diverse building typologies to validate the establishment of an open interoperability and data management framework comprising in a fully-fledged suite of tools for DR implementation spanning diverse climatic conditions, demographics and cultures.  

Romero goes on to describe how HOLISDER, like NOVICE, is keen to engage with all actors along the DR value chain (building occupants, ESCOs, aggregators, facility managers etc.) and gather intelligence to overcome the several challenges the project faces. To help implement the project’s business models which look to pull together ESCOs and aggregators to help tackle market capacity restrictions that cannot be addressed by individual consumers, the project is adopting a Living Labs approach.

“The Living Labs will be a platform to validate the co-creation of the energy efficiency and DR sectors the project is targeting,” explains Romero. “They will look to address the engagement of pilot site occupants, involve and train end-users to transform into active market players through a variety of innovative end-user applications such as personalised informative billing and load scheduling, plus enable extensive feedback obtainment and ensure the seamless exchange of best practices between all stakeholders involved towards user-driven open products and services.” The business models derived at the end of the project will inform and educate aggregators and ESCOs on how they can better manage their markets, individually and collaboratively, for the wider deployment of DR through the increased engagement of their customers. 

“It is rare to consider both energy efficiency and DR together, but both NOVICE and HOLISDER are looking at new business models that enable these two market players to work in closer alignment”

Driving trends across the EU

Raising awareness of how DR systems can be implemented more successfully and facilitating the deployment of these solutions to improve the energy efficiency of smart buildings aligns with the energy targets set out by the European Commission.

From the outcomes of the projects and their results, both HOLISDER and NOVICE are keen to provide recommendations on realistic regulations and mechanisms that could increase the DR uptake across EU Member States and mediate the active participation in various schemes for more sustainable and smart buildings. In order to incentivise this successfully, there is the understanding that the standards put in place need to cater for the unstable energy markets. “At HOLISDER,” Romero points out, “the project is looking to provide advanced adaptability to DR regulations by allowing the ability to switch between the different DR services, implicit (the consumers reaction to price signals), explicit (open, tradable flexibility) and hybrid and their applicability in varying market structures.”

The project is also making it easier to implement the wide adoption of flexible energy services by ensuring the replicability of its Interoperability and Secure Data Management Framework across different EU building types and systems, establishing a human-centric DR optimisation framework that provides personalised energy management guidance or automation, and developing five emerging business models to address the current energy market of aggregators, retailers and ESCOs, in order to make it easier for each energy market to be included. For NOVICE, with its aim of increasing renovation rates of tertiary buildings throughout Europe by taking advantage of the dual revenue streams created by energy efficiency and demand response, the differences in energy markets across Europe also creates an added challenge. “Knowing of the complexities of the energy markets and the unique interests of investors in EPCs, it’s extremely difficult to develop a business model suitable for every European market,” Southernwood
states.

“What NOVICE can do is create complete or simplified models using data from a range of stakeholders in well-established markets. NOVICE can then look to establish a standardised risk assessment for investors to help them make decisions on energy related projects. These can be used as case studies to support policy recommendations that can be replicated throughout the EU, to make it as simple as possible for other Member States to adopt similar models,” she continues.  

From one project, measuring the appeal and financial viability of the NOVICE dual revenue stream EPC template, to another, facilitating the real-time optimisation of energy management services in an ever-changing market place. Both NOVICE and HOLISDER are raising significant awareness and interest of how a coordinated effort between ESCOs, aggregators and end-users, is needed at local and European level to provide a solution that successfully addresses both demand response flexibility and improves efficiency in infrastructure of the EU energy
market.

Main Contact

Jo Southernwood

Jo is a skilled low carbon energy specialist with over 10 years’ experience in energy efficiency and low carbon technologies for the built environment. Jo coordinates the NOVICE project, which is exploring solutions that combine energy efficiency with demand side response to improve ROI for deep energy efficiency retrofit projects.

Contact:

Tel:
+353 21 234 6458

Email:
jo.southernwood@ierc.ie

Web:

www.ierc.ie

 

Ander Romero

Project Manager in the Building Technologies Division of TECNALIA. Having worked for more than 15 years managing projects and departments in the fields of energy efficiency and sustainability in buildings and cities, he has extensive experience within the international research and innovation industry.

Contact:

Tel:
+34 667 178 893

Email:
ander.romero@tecnalia.com

Web:

www.tecnalia.com

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