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Repower – Kosovo Demand Side Response in Kosovo Power System

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Repower – Kosovo Demand Side Response in Kosovo Power System REPOWER – KOSOVO DEMAND SIDE RESPONSE IN KOSOVO POWER SYSTEM DATE: July 2019 This publication was produced for review by the United States Agency for International Development. It was prepared by AECOM. ___________________________________________________________________________________________ REPOWER – KOSOVO i/77 REPOWER-KOSOVO DEMAND SIDE RESPONSE IN KOSOVO POWER SYSTEM Contract Number: AID-OAA-I-13-00012 Task Order: AID-167-TO-14-00007 Submitted to: USAID/Kosovo Prepared by: AECOM International Development DISCLAIMER: The authors’ views expressed in this document do not necessarily reflect the views of the United States Agency for International Development or the United States Government. ___________________________________________________________________________________________ REPOWER – KOSOVO 2/77 Contents 1. GENERAL CONCEPT OF DEMAND SIDE RESPONSE ................................................. 4 2. OTHER COUNTRIES EXPERIENCE ............................................................................... 10 2.1. Austria ............................................................................................................................................................. 13 2.2. Belgium ............................................................................................................................................................ 16 2.3. Bosnia and herzegovina ............................................................................................................................... 19 2.4. Croatia ............................................................................................................................................................ 21 2.5. Finland ............................................................................................................................................................. 23 2.6. Great britain .................................................................................................................................................. 25 2.7. Greece ............................................................................................................................................................ 28 2.8. Sweden ............................................................................................................................................................ 30 3. KOSOVO MARKET POTENTIAL FOR DEMAND SIDE RESPONSE .......................... 32 3.1. New co Ferronikeli ...................................................................................................................................... 36 3.2. Sharrcem ........................................................................................................................................................ 39 3.3. The Trepça mines......................................................................................................................................... 41 3.4. Mines (kek coal division)............................................................................................................................. 43 4. HOW TO ATTRACT CUSTOMERS TO PARTICIPATE ? ........................................... 47 5. COMPENSATION METHODOLOGY ............................................................................. 51 5.1. Baseline consumption .................................................................................................................................. 43 6. QUALIFICATION PROCESS FOR DSR PROVIDERS ................................................... 54 7. DEMAND SIDE RESPONSE CONTRACT TEMPLATE ................................................ 56 8. NEEDED AMENDMENTS TO GRID CODE AND MARKET RULES IN KOSOVO ... 65 8.1. Law on electricity ......................................................................................................................................... 65 8.2. Transmission Grid Code ............................................................................................................................ 66 8.3. Market Rules .................................................................................................................................................. 68 9. CONCLUDING REMARKS ............................................................................................... 70 10. LITERATURE ...................................................................................................................... 74 11. LIST OF TABLES ............................................................................................................... 74 12. LIST OF FIGURES .............................................................................................................. 75 ___________________________________________________________________________________________ REPOWER – KOSOVO 3/77 1. GENERAL CONCEPT OF DEMAND SIDE RESPONSE Enabling more flexible demand is high on the European agenda. In the electricity market of the future, with a high proportion of renewable and variable electricity production, it will be important to utilize all of the available flexible resources in the power system, including flexible production, storage, and flexible Demand Side Response (DSR). Understanding the specifics of Kosovo’s power system and lack of system reserve capacities, in June 2019 the Kosovo Transmission System Operator (KOSTT) initiated analyses of demand side response mechanisms to support tertiary reserves (manual frequency restoration reserve, mFRR) in the Kosovo power system. KOSTT asked the USAID-funded Kosovo REPOWER program to undertake development of this report, with the purpose of proposing measures to facilitate and accelerate development towards greater efficiency on the electricity market through increased demand side flexibility. This document provides details about other countries’ experiences, Kosovo DSR market potential, compensation methodology, qualification process, DSR contract template and needed amendments to Kosovo’s legislative framework. The report explains the general concept of DSR through twelve basic questions and answers. The report also provides information regarding potential third-party reserve providers (DSR as a source for reserve) in Kosovo’s power system. The last chapter contains set of conclusions and recommendations for KOSTT’s consideration of eventual initiation of DSR mechanism. 1. What is DSR? When the electricity demand exceeds forecasted levels, transmission system operators (TSO) engage available reserve capacities to compensate for the given difference between forecasted and realized demand in order to balance the system. These reserve capacities can be both on the generation side (to increase its electricity output) and on the consumption side (to decrease its demand level). In order to provide this kind of service, end-customers need to have manageable consumption units that can be reduced, or cut down, to the given level and with ramp-down rate exactly as required by the TSO. Demand response means the change of electricity load by final customers from their normal or current consumption patterns in response to market signals, including in response to time- variable electricity prices or incentive payments, or in response to the acceptance of the final customer's bid to sell demand reduction or increase at a price in an organized market as defined in point (4) of Article 2 of Commission Implementing Regulation (EU) No 1348/20141, whether alone or through aggregation1. Demand response can be implemented with two divergent approaches: 1. Implicit Demand Response: Direct consumer reaction to time-varying electricity supply prices that consumers are exposed to in the retail market; 2. Explicit Demand Response: Individual or aggregated flexible demand which is sold on the electricity markets. 1 Definition from the Directive of the European Parliament and of the Council on common rules for the internal market for electricity and amending Directive 2012/27/EU (recast) ___________________________________________________________________________________________ REPOWER – KOSOVO 4/77 Implicit Demand Response Implicit demand response means voluntary changes by end-customers in their usual electricity consumption patterns in response to short-term (day-ahead and intraday) market signals. This type of demand side participation in electricity markets will be further developed with the roll-out of smart metering. Explicit Demand Response Explicit demand response means that consumers (on their own or through DSR Aggregators) are rewarded for their willingness to change their demand for electricity at a given point in time, usually in response to a specific request of TSO. The explicit demand response can be performed by large consumers themselves or DSR Aggregators - a generic name used with respect to retailers or independent aggregators which act on behalf of a pool of consumers. Explicit demand response has already been developed among larger industrial customers directly participating at the electricity market. The concept of demand side flexibility can be defined in various ways. In short, in this study the following definition is used [1]: Demand side response (flexibility) is a voluntary change in the demand for electricity from the grid during shorter or longer periods, caused by of some type of incentive. This definition differs from other definitions of DSR (flexibility), which start from a customer’s electricity consumption instead of demand from the grid (see for example
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