Linkoping Studies in Science and Technology Thesis No.746 c, MARIU till 4 R I.T., Optimized Energy Systems and New Customer Services S' > The Deregulated Electricity Market and the Ronneb: ‘EllVED APR 3 01999 Ulfika BergstroifltS^I /Six -aL W INSTITUTE OF TECHNOLOGY LINKOPING $ UNIVERSITET LiU-TEK-^IC-1999:04 Division of Energy Systems Department of Mechanical Engineering Linkopings Universitet, S-581 83 Linkoping, Sweden / Linkoping 1999 Linkoping Studies in Science and Technology Thesis No. 746 I.T., Optimized Energy Systems and New Customer Services The Deregulated Electricity Market and the Ronneby Case % Ulrika Bergstrom Akademisk avhandling som for avlaggande av teknologie licentiatexamen vid Linkopings tekniska hogskola kommer att offentligt forsvaras i H&llfasthetslara’s seminarierum, hus A, ing&ng 15 Linkopings universitet, mindagen den 19 april 1999 kl 13.00. Opponent ar doktor Maria Andersson, SAAB, Linkoping. Avhandlingen finns tillganglig vid amnesomr&det Energisystem, IKP, hus A, Linkopings Universitet Abstract This thesis concerns the utilization of information technology (IT) to obtain optimized energy systems and the increasing dependence on IT applications within the power industry in general, and especiallywithin electricitysales. i Based on energy systemoptimizations, industrial simulations, interviews and literature "i surveys, the thesis concludes that information technology is a condition for optimized energy systems. Through large-scale load control, enabled by IT, the energy system cost for supplying a local energy system can be reduced considerably. Diurnal energy systemoptimizations further illustrate the increased utilization of load control, accentuated, when customers are exposed to the variations of the spot market price. Thereby, the increased need for load management on a deregulated market, where real time pricing is applied, is mirrored. However, given the boundary conditions of the deregulated electricity market, optimization of energy systemsis no condition for competitiveness within electricity sales. This study also points out that, apart from industrial customers, other market actors, like electricitysales companies and local distributors, have few incentives to introduce load control. Distributors mainly lose money on power reducing measures, except for when there are distribution limitations. Neither do electricity sales companies make short-term earnings from large-scale . : i load control. The combination with small economic savings for residential customers make the financing of large-scale load control problematic. Regarding electricitysales companies, increased IT utilization is observed to enable marketing and service offerings on the Internet, and IT-based value-added services (VAS). For pure communication services, the sales companies utilize IT to offer telephone services (analogue technique) and Internet access, the latter is sometimes performed on the electricity grid. Extended IT-systems for customer administration, customer service, and market analyses are consequences of the competition and of aggressive corporate energy expansion. :l Due to the introduction of other IT-based services, load control is likely to become utilized as well, since this information flow might piggy-back on the costs of other more attractive services for the customers. Thereby, as a side effect, the deregulation may also lead to more i optimized energy systems. Division of Energy Systems Department of Mechanical Engineering Linkopings Universitet, S-581 83 Linkoping, Sweden ISBN 91-973567, ISSN 0280-7971 .}< ‘i'V Linkoping Studies in Science and Technology Thesis No.746 I.T., Optimized Energy Systems and New Customer Services The Deregulated Electricity Market and the Ronneby Case Ulrika Bergstrom /ST* % v INSTITUTE OF TECHNOLOGY LINKOPINGS UNIVERSITET LiU-TEK-LIC-1999:04 Division of Energy Systems Department of Mechanical Engineering Linkopings Universitet, S-581 83 Linkoping, Sweden ISBN 91-973567-1-9 ISSN 0280-7971 DISCLAIMER Portions of this document may be illegible in electronic image products. Images are produced from the best available original document. ABSTRACT This thesis concerns the utilization of information technology (IT) to obtain optimized energy systems and the increasing dependence on IT applications within the power industry in general, and especially within electricity sales. Based on energy system optimizations, industrial simulations, interviews and literature surveys, the thesis concludes that information technology is a condition for optimized energy systems. Through large-scale load control, enabled by IT, the energy system cost for supplying a local energy systemcan be reduced considerably. Diurnal energy system optimizations further illustrate the increased utilization of load control, accentuated, when customers are exposed to the variations of the spot market price. Thereby, the increased need for load management on a deregulated market, where real time pricing is applied, is mirrored. However, given the boundary conditions of the deregulated electricity market, optimization of energy systems is no condition for competitiveness within electricity sales. This study also points out that, apart from industrial customers, other market actors, like electricity sales companies and local distributors, have few incentives to introduce load control. Distributors mainly lose money on power reducing measures, except for when there are distribution limitations. Neither do electricity sales companies make short-term earnings from large-scale load control. The combination with small economic savings for residential customers make the financing of large- scale load control problematic. Regarding electricity sales companies, increased IT utilization is observed to enable marketing and service offerings on the Internet, and IT-based value-added services (VAS). For pure communication services, the sales companies utilize IT to offer telephone services (analogue technique) and Internet access, the latter is sometimes performed on the electricity grid. Extended IT-systems for customer administration, customer service, and market analyses are consequences of the competition and of aggressive corporate energy expansion. Due to the introduction of other IT-based services, load control is likely to become utilized as well, since this information flow might piggy-back on the costs of other more attractive services for the customers. Thereby, as a side effect, the deregulation may also lead to more optimized energy systems. i The thesis contains two main presentations. The first focuses on the main tendencies regarding information technology utilization within the different areas of power industry, concentrating on the impact of deregulation. In this part, there is an introduction, containing background and hypothesis, a study of consequences from deregulation on different actors, a survey of IT utilization in the power industry and a description of the performed work and the methodology. In the second part, a case study of the Ronneby energy system is outlined, which referring to the enclosed papers, shows the necessity of information technology in obtaining an optimized energy system. Finally, comments on the enclosed papers appear and conclusions are drawn. The following papers are included in thethesis: (I) Bergstrom, U., Simulation of a local energy system with focus on cost efficient DSM measures on a deregulated electricity market, In the proceedings of the international conference on Distribution Automation and Demand Side Management (DA/DSM), October, Vienna, Austria, pp 631-644, 1996. (II) Bergstrom, U., Impact of deregulation - DSM in industries, In the proceedings of the international conference on Distribution Automation and Demand Side Management (DA/DSM), October, London, UK, CD ROM, 1998. (III) Bergstrom, U., Traditional load management versus real time load control, Paper for the European (EU) RISI (Regional Information Society Initiative) conference, November, Graz, Austria, 1998. II ACKNOWLEDGEMENTS Many creative discussions with several inspiring persons have contributed to the completion of this thesis. To start with, I want to thank my supervisor Prof. Bjorn Karlsson, for his support and advice during this time. I also gratefully acknowledge the financial support from Enersearch and Sydkraft that has enabled the writing of this thesis. Especially, I would like to thank Hans Ottosson, Enersearch, for his never-ceasing enthusiasm regarding IT and energy, and for bringing inspiration into the project at times when my creativity was at low. Further, I would like to thank my employer, SYCON, for giving me the opportunity to enter more deeply into the questions of energy system optimization. Special thanks go to Tekn. Dr. Dag Henning, for all his valuable advice and especially for his patience with all my never-ending questions, put to him at the most inconvenient times, weekdays and weekends. I would also like to express my gratitude to Hans Olausson, President of Ronneby Energi AB, who has introduced me to the business of REAB, the local electricity distribution utility, focused on in part of this thesis. Warm thanks, also to Lennart Nilsson, Malmo Varme, for many pleasant conversations, and for sharing some of his experience of district heating operation. Many thanks go to my colleagues at SYCON, especially to Lennart Larsson, Per-Axel Nilsson and Bertil Strandh, who always took time off to discuss certain issues. At Sydkraft, I especially would like to thank Paul