Local flexibility markets: Smart Otaniemi D4.1

This report is part of the results of Smart Otaniemi WP 4, Local flexibility market. Smart Otaniemi is a smart energy piloting area and ecosystem in Otaniemi, Espoo. This report includes a state-of-the-art analysis of local markets, especially in Germany and the UK, and of the system wide markets in Finland, in which demand response can almost conclusively participate, aggregated or not. The notion of local flexibility markets hits the first snag with the question of who will buy the local flexibility in Finland: analysis shows that it is not other end-users, not the seller per se, nor the local generator unless it is a clearly better solution than selling to the energy market. For example, although a small end-user does not participate in the spot market directly, she can use her flexibility via market price based contracts. The main answer is the DSO. The DSO’s demand for flexibility might have different reasons such as local ancillary service needs or fighting bottlenecks. However, in general, flexibility should be available for multiple uses in order to enable value stacking. Local energy markets could be practical for reasons other than the utilization of flexibility for the management of the local network. Local markets could enable more specialised or granular trading, especially if trading is not possible on existing markets for the interested stakeholders. In addition, the local markets could act as an aggregation platform for existing markets. The more markets and interested parties, including independent aggregators, are involved, the more important and complicated balance settlement will become. One option of simplifying things that this research came up with is to elevate all end-users to the status of balance responsible. To better understand the balance implications for different parties under various conditions, a balance model was created. The report presents a general framework for flexibility markets (Smart Otaniemi logic) consisting of considerations for balance responsibility and product design. The framework could be implemented in Otaniemi and beyond.