We recently spoke with Staffan Sjölander, the project manager for E.ON’s demonstration project. The project has already attracted a lot of media attention and the Minister of Energy, Ibrahim Baylan, will attend its inauguration.
On 1 January 2016 Germany energy giant E.ON separated its fossil fuel assets into a new company (Uniper). E.ON has decided to focus entirely on renewables, energy distribution, and energy efficiency services. This was E.ON’s response to the dramatic changes in global energy markets. To develop their understanding of a number of aspects of how to be a next generation utility E.ON has launched a demonstration project for Local Energy Systems. This system aims to provide a reliable electricity supply, which gives the customer greater value for money from locally produced, 100 per cent renewable power.
At the start of September, we met Staffan Sjölander, the project manager for E.ON’s demonstration project. The project has already attracted a lot of media attention and the Minister of Energy, Ibrahim Baylan, will attend its inauguration.
Pilot Project Simris
Staffan explained the background, “The project originated in a major strategy review carried out in the E.ON Group in 2014.” E.ON recognised the problem of grid bottle necks when many customers in Germany started to produce their own electricity from solar. These ‘prosumers’ were producing most electricity when the sun was shining in the middle of the day, the time when the demand from households is at its lowest. The result was an unstable grid, and power sold to the grid during the day had to be bought back in the evenings. E.ON thought about how this change in the energy system could be operated more efficiently and developed the idea of testing a fully-automated Local Energy System. They wanted to know how smart a smart grid could be.
Change of location
The project had a troubled initial phase as the location was first set to be Åstön close to Sundsvall in Sweden. When there was an appeal against the permit for building a new wind power plant, the “NIMBY-effect” (not in my backyard) grew and in the end it became clear this wouldn’t be a great start for a project focused on creating collaboration between the utility and the customers. E.ON decided to look for another location even though the permit had been granted. They looked for a site where a wind turbine was already operating. Simris, in the south of Sweden, about 1,000 kilometers from the first location at Åstön, fulfilled the requirement. Simris has 140-150 connections (mainly houses) and the area isn’t connected to a district heating network which means that electricity is used for heating purposes as well. “Although Simris mainly consists of household customers, Local Energy Systems have great potential for industrial customers as well”, Staffan believes.
What’s in it for the customer? To test the system E.ON requires a number of the households to invest in the solar and battery package E.ON provides and it’s very important that most of the customers actually agree to be part of the project. Staffan outlined the position, “The solar+battery package comes with a special offer to customers” and discussion with customers has been fruitful. E.ON hopes that even more households than expected will buy the package and produce their own electricity and provide flexibility in the system using the battery for electricity storage. The customers won’t have to pay any specific costs or see changes in their supply as it’s part of E.ON’s development work and will be paid for by funds earmarked for such work. Customers are given incentives to join the project and be part of driving down loads when there’s a lot of consumption and production is insufficient. The main added value for customers is that they’re using 100 per cent renewable energy produced locally and the satisfaction of being ‘self-sufficient’.
How will it work?
Besides the solar panels and batteries in households, the renewable electricity generation in the system will consist of an old Enercon wind power plant, solar panels and battery storage. For back-up purposes, when the system is running in island mode, a generator fueled by renewable HVO will be installed. HVO (hydro-treated vegetable oil) is a renewable, paraffinic fuel produced from vegetable sources.
Behind the local energy system is an advanced control system making it possible to control production and consumption, and to ensure power quality and that the local energy system is optimised to meet the required conditions.
The control system will send information to a demand side response platform that will activate customer flexibility based on the needs of the micro grid. The customers that are engaged will either have home batteries, heat pumps or water boilers that can be activated or deactivated to support the balance in the system. The project will also include a steerable EV-charging station being part of the demand response system. The system will be fully automated, meaning that it’s able to optimise its operations using all the flexibility built-into the system including demand response in the households which have signed up to the project. The control system will send information to a demand side response platform that will activate customer flexibility based on the needs of the micro grid. The customers that are engaged will either have home batteries, heat pumps or water boilers that can be activated or deactivated to support the balance in the system. The project will also include a steerable EV-charging station being part of the demand response system. However, when steering heat pumps the maximum change in indoor temperature will be +/- one degree Celsius.
Many vendors are involved but E.ON will ensure the different kinds of equipment work together. As Staffan says, “It was a strategic decision by E.ON not to give this project to one of the bigger players who wanted to take ownership of both battery and control system for example”.
Staffan underlined that one of the most interesting features is the question of how peak demand could be shaved in this kind of system. This is an important factor for the future of Local Energy Systems. “Initially simulations made by E.ON distribution indicates only a very small decrease”, he says. “However, if the maximum demand could be cut substantially a benefit would be a need for smaller dimensions of the future grid. We are then talking about optimisation leading to a lower need for investment and cheaper bills for customers”, Staffan continues.
In the U.S the idea of cutting the connection to the grid is evolving, and it’s probably only then that a profitable business case can be made. If the grid is used as a back-up to the Local Energy System there would still be a need to cover costs for the network operator. Although the project is interesting from a commercial perspective, Staffan emphasised that the Simris experiment is mainly aimed at testing the technology and secondly at a new E.ON business model.
On the question of whether Staffan thinks the utilities will find a business model that can enable Local Energy Systems, he says they have a number of important capabilities in-house such as measurement, settlement and the asset management expertise to support these projects. However, he can also envisage other players taking over the market completely such as Google, Tesla and so on.
Another challenge right now is regulation. At present E.ON Distribution, the owner of the project, would not have been able to be the owner of the solar and wind units. That’s because in Sweden distribution companies are only allowed to have production facilities to cover losses in the grid. For the Simris project this doesn’t matter as these facilities are owned by a private company.
However, the trend is for regulators to adopt policies aimed at promoting greater competition, integration, sustainability, energy efficiency, resiliency, reliability, affordability, and demand elasticity. So we can expect laws and regulations to move in this direction.
What is certain is that the customers joining the Simris project will have many more opportunities to interact with their utility compared with today. Prosumers will be able to understand their consumption and production profile better and optimise their link with the utility. E.ON is well aligned with the trend of using digital technologies to optimise performance, customer service, and safety and reliability and taking steps to become a utility equipped to meet future needs.