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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement N° 691689.

Technical, legal and regulatory barriers for optimal deployment and operations of current business models

August 2016 www.bestres.eu

Ref. Ares(2016)4891565 - 31/08/2016

http://www.bestres.eu/

Technical, legal and regulatory barriers for current business models

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement N°691689.

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Acknowledgement This report has been produced within the BestRES project “Best practices and implementation of innovative business models for Renewable Energy aggregatorS”. The logos of the partners cooperating in this project are shown below and information about them is available in this report and at the website: www.bestres.eu This report has been written by Fabian Pause (SUER - Stiftung Umweltenergierecht), Stefanie Wizinger (SUER – Stiftung Umweltenergierecht), Andreas Fleischhacker (TUW-EEG) and Georg Lettner (TUW-EEG). The authors thankfully acknowledge the valuable contributions from all project partners, especially from Ruben Verhaegen (3E), Carlos Dierckxsens (3E) and Pieter Joseph (3E) to complete this report.

Disclaimer This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 691689. The sole responsibility for the content of this report lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither INEA nor the European Commission are responsible for any use that may be made of the information contained therein. While this publication has been prepared with care, the authors and their employers provide no warranty with regards to the content and shall not be liable for any direct, incidental or consequential damages that may result from the use of the information or the data contained therein. Reproduction is authorized providing the material is unabridged and the source is acknowledged.

http://www.bestres.eu/



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Contacts Project coordinator Silvia Caneva, Ingrid Weiss & Mak Dukan WIP – Renewable Energies Sylvensteinstrasse 2, Munich, Germany Email: [email protected] Email: [email protected] Email: [email protected] Authors Fabian Pause & Stefanie Wizinger SUER – Stiftung Umweltenergierecht Ludwigstraße 22, 97070 Würzburg, Germany Email: [email protected] Andreas Fleischhacker & Georg Lettner TUW-EEG Gusshausstrasse 25-29/370-3 A-1040 Wien Email: [email protected]

mailto:[email protected]





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Table of contents

Table of contents ................................................. 4

List of Figures ...................................................... 6

List of Tables ....................................................... 7

Abbreviations ...................................................... 8

Executive Summary ............................................... 9

1. Introduction ................................................... 13

1.1 The BestRES project ........................................................... 14

1.2 Structure of the document ................................................... 18

2. Methodology ................................................... 19

3. Legal and regulatory framework for energy aggregation ........................................................ 20

3.1 Existing business models ...................................................... 20

3.2 Business models of the aggregators within the consortium ............ 21

3.3 EU-Regulation ................................................................ 22

3.3.1 Energy Efficiency Directive 2012/27/EU ................................. 22

3.3.2 Directive on the internal energy market 2009/72/EC .................. 24

3.3.3 Renewable Energy Directive ............................................... 25

3.3.4 Network Codes ............................................................... 26

4. Technical, legal and regulatory barriers in the countries that are covered by the consortium ........................... 28

4.1 Technical barriers .............................................................. 30

4.1.1 Lack of data provision/access and data forwarding .................... 31

4.1.2 Shorter life cycle of storage technologies ............................... 34

4.1.3 Lack of forecast quality ..................................................... 35

4.1.4 Need of standardization .................................................... 37

4.2 Main barriers for developing business models ............................ 38

4.2.1 Legal and regulatory framework .......................................... 39

4.2.2 Market situation .............................................................. 40

4.3 Lack of regulation .............................................................. 42

4.3.1 Lack of standard contracts and lack of standards and processes for interactions between market actors ............................................. 42

4.3.2 Rules regarding allocation, metering, billing, reconciliation and data communication ...................................................................... 46

4.3.3 Lack of clear overall objectives and role of the national regulator .. 48

4.3.4 Data and privacy protection ............................................... 50

4.4 Market rules ..................................................................... 52



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4.4.1 Wholesale and network tariffs ............................................. 52

4.4.2 System of bids ................................................................ 55

4.4.3. Prequalification for market participation ............................... 58

4.5 Miscellaneous .................................................................... 59

4.5.1 No appropriate CACM, network codes, cooperation mechanisms and measurement technology for flexibility between Member states ........... 59

4.5.2 No legal choice between building new capacity and contracting flexibility for grid operators....................................................... 60

5. Conclusions .................................................... 61

5.1 Legal and regulatory framework ............................................. 61

5.2 Technical barriers .............................................................. 61

5.3. Main barriers ................................................................... 61

5.4 Lack of regulation .............................................................. 61

5.5 Market rules ..................................................................... 62

5.6 Miscellaneous .................................................................... 63

5.7 Summing up the legal and regulatory barriers ............................ 63

6. Annex ........................................................... 64

Annex: Questionnaire with respect to barriers for aggregators developing their business model ................................................................ 64

Technical references ............................................ 67



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List of Figures

Figure 1: Barriers for optimal deployment and operations of current BMs ...... 10

Figure 2: Technical Barriers ............................................................ 10

Figure 3: Lack of regulation ............................................................ 11

Figure 4: Market rules ................................................................... 12

Figure 5: Countries covered by the consortium...................................... 28

Figure 6: Histogram of the rating related to technical barriers ................... 30

Figure 7: Smart Metering deployment in the European Union ..................... 33

Figure 8 Histogram of question 4.1 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value. ................................... 43

Figure 9: Histogram of question 4.2 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value. .......................... 44

Figure 10 Histogram of question 4.3 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value. .......................... 46

Figure 11 Histogram of question 4.4 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value. .......................... 48











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List of Tables

Table 1: Business models for aggregation ............................................ 20

Table 2: Business models for aggregators within the consortium ................. 21

Table 3: Answers related to data provision/access ................................. 32

Table 4: Answers related to data forwarding ........................................ 34

Table 5: Answers related to storage life cycle ....................................... 35

Table 6: Answers related to forecast quality ........................................ 36

Table 7: Answers related to the need of standardization .......................... 37

Table 8: Answers related to main barriers for aggregators ........................ 38

Table 9: Answers related to standards and processes .............................. 45

Table 10: Answers related to rules regarding allocation, metering, billing, reconciliation and data communication ......................................... 47

Table 11: Answers related to data and privacy protection ........................ 51

Table 12: Answers related to wholesale and network tariffs ...................... 53

Table 13: Answers related to minimum bid sizes and minimum duration of activation bids ....................................................................... 56

Table 14: Answers related to symmetric bids ........................................ 57



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Abbreviations

ACER

BM

Agency for the Cooperation of Energy Regulators

Business Model

BRP

CACM

Balancing Responsibility Provider

Capacity Allocation and Congestion Management

CAPEX Capital Expenditures

CCGT Combined Cycle Gas Turbine

CHP Combined Heat and Power

DR Demand Response

DSM Demand Side Management

DSO

EED

Distribution System Operator

Energy Efficiency Directive 2012/27/EC

EPC Engineering, Procurement, Construction

ESCO Energy Service company

EV Electric Vehicles

FiP Feed-in-Premium

FiT Feed-in-Tariff

GPRS General Packet Radio Service

ICT Information and Communication Technology

LCA Life Cycle Analysis

OPEX Operational Expenditures

PPA

TFEU

Power Purchase Agreement

Treaty on the Functioning of the European Union

ToU Time-of-Use

TSO Transmission System Operator

VPP Virtual Power Plant



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Executive Summary

System flexibility becomes crucial in a changing electricity market landscape where the share of intermittent renewable energy in the energy mix is increasing. As part of the solution, the aggregation of renewable energy can significantly accelerate the integration of intermittent electricity sources, complement demand flexibility and decrease the reliance on renewable energy support schemes. Aggregators of demand and/or generation are therefore expected to have an increasingly important role to play in the future.1 In this context, the present report analyses the technical, legal and regulatory barriers for optimal deployment and operations of current business models for energy aggregation. The focus has been set on the countries in which the consortium is active: Austria, Belgium, Germany, France, Italy, Cyprus, Portugal, Spain and the United Kingdom. In depth interviews were carried out by 3E and TUW with aggregators whereas literature was also reviewed.

Legal and regulatory framework

The EU regulation for aggregators is not sufficiently differentiated. The aggregators are incorporated in the market and accepted as market participants. However, an aggregator-specific regulation does not yet exist and the legal provisions, especially the definition of the “aggregator”, are not up to date with the variety of existing business models. The formal definition of ‘aggregator’ in Art. 2 number 45 of the Energy Efficiency Directive (EED) is just seen from the load side and does not include the generation side, whereas the definition in practice includes both sides of aggregation. This report focuses further on identifying the technical, regulatory and legal barriers for the implementation of the business models that exist at a national (for target consortium countries) and European level. These barriers will be studied to establish which specific barriers must be lifted in order to develop the improved BMs.

Barriers

The evaluated barriers have been distinguished into technical barriers and legal/regulatory barriers:

1 BestRES, D2.1, Existing business models for renewable energy aggregators, 06/2016, p. 9.



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Figure 1: Barriers for optimal deployment and operations of current BMs

Figure 1 indicates a wide variety of possible barriers for aggregators for their optimal deployment and operations of current business models. The importance of the barriers is ranked differently by the aggregators as shown in the following figures.

Figure 2: Technical Barriers

Technical barriers

I M PORTANC

E



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Missing smart grid infrastructure seems to be the main technical barrier upstaging other technical barriers (e.g. limited cycles of storages). Although this problem will be solved in the upcoming years by the European-wide smart meter rollout, the situation between European countries will still vary in future. Another key element of smart grid infrastructure addresses standardization of components and communication devices to allow aggregators using the same equipment. The need for improved forecast quality will stay an important issue in future terms, e.g. in respect of higher product variety and an increasing share of renewables within the aggregator’s portfolio. Legal and regulatory barriers The legal and regulatory barriers for optimal deployment and operations of current business models are resulting largely from the lack of regulation and the missing clear framework for aggregation in the EU and in the national laws. The unappropriated market situation is also a result of the missing regulation in wide parts. However, it should be emphasised that some aspects, e.g. the system of bids, should be self-regulated by the market. The rising share of distributed generation across Europe requires a clear legal framework and a long-term energy policy with inclusion of aggregators.

Figure 3: Lack of regulation

The aggregators within the consortium perceive the lack of regulation as a problematic barrier for their business models. The lack of standard contracts and the lack of standards and processes have more relevance for aggregators operating in countries with less stable frameworks. On the other hand, the lack of rules regarding allocation, metering, billing, reconciliation and data communication is not seen as a major problem. The lack of regulation is important for aggregators with small-scale and medium-scale DSM in their portfolio. The lack of clear and specific overall objectives (e.g. societal, environmental objectives) is seen as a problem in some of the countries. Further, a certain unwillingness of the regulator or lack of knowledge is valuated as a barrier and some of the aggregators are demanding a more proactive approach

Lack of regulation

I M P O R T A N C

E



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of the regulators. The answer to the question, whether the data and privacy protection has to be seen as a real barrier for the implementation of aggregators` business models, depends mainly on the national framework and the respective business model.

Figure 4: Market rules

The market rules are influencing the participation of the aggregators in the market; in their opinion, different aspects could be improved. The wholesale and network tariffs are considered very important. Whereas the prequalification does not state a real barrier for the majority of the aggregators. Furthermore, the system of the bids is playing an important role for the aggregators, but in their opinion, they should be regulated by the market actors, not by the regulators. Miscellaneous The instruments between the Member States, as CACM or other network codes, are important for the aggregators who act cross-border way. However, the issue of having a legal choice between new capacities and contracting flexibility for grid operators is not seen as an important one. To sum up, the main barriers for optimal deployment and operations of current business models of energy aggregation can be identified in the missing smart grid infrastructure and the lack of regulation which also are influencing the market rules. Based on the analysis undertaken, innovative European aggregation business models will be developed during the next phase of this project in order to overcome the existing barriers.

Market rules

I M P O R T A N C E



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1. Introduction

In the past, European electricity markets were designed around centralized fossil-fuel generation along national or regional borders. The electricity market landscape is however changing because a rising share of distributed generation increases intermittency and price volatility in the system. This requires a more flexible system with more flexible consumption. As highlighted in the state aid guidelines published in April 2014 by the European Commission, this implies that renewable sources are better integrated in electricity markets and rely less on subsidies as was the case in the past. Renewable energy aggregation can significantly accelerate the integration of intermittent electricity sources, enhance demand flexibility and decrease the reliance on renewable energy support schemes.2 More aggregation and market integration can however not be achieved by single individual, commercial or domestic consumers since they would only have a limited impact. It is only through a coordinated steering of vast amounts and types of consumers and producers in a market that the use of distributed generation, demand response and (battery) storage can be effective. A lot of literature has been published with respect to demand response management and more and more market players are active in this field but management of distributed generation and storage including electric vehicles is less developed. An explanation for this might be that this requires the extensive use of new technological solutions and ICT to directly control consumption and generation at lower costs. For this reason, there is an important role for Renewable Energy Aggregators who act on behalf of consumers and use technological solutions and ICT for optimization. They are defined as legal entities that aggregate the load or generation of various demand and/or generation/production units and aim at optimizing energy supply and consumption either technically or economically. In other words, they are facilitators between the two sides of electricity markets. On the one hand, they develop energy services downstream for industrial, commercial or domestic customers who own generation and storage units or can offer demand response. On the other hand, energy aggregators are offering value to the market players upstream such as BRPs, DSOs, TSOs and energy suppliers to optimize their portfolio and for balancing and congestion management. Furthermore, wholesale electricity markets might benefit from aggregation if appropriate incentives are present. A last option is that energy aggregators offer value to specific customers such as is the case for ESCO’s. In this situation, the player downstream and upstream could potentially be the same entity.3

2 See for the introduction: BestRES, D2.1, Existing business models for renewable energy aggregation, 06/2016, p.12.

3 Guidelines on State aid for environmental protection and energy 2014-2020.



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1.1 The BestRES project

The main objective of the BestRES project is to investigate the current barriers and to improve the role of Energy Aggregators in future electricity market designs. In the first stage, the project is focusing on existing European aggregation business models taking into account technical, market, environmental and social benefits. In the second stage, we will develop improved business models that are replicable in other countries in the EU considering market designs and with a focus on competiveness and LCA. These improved business models will then be implemented or virtually implemented with real data and monitored in the following target countries: United Kingdom, Belgium, Germany, France, Austria, Italy, Cyprus, Spain and Portugal. The BestRES project will last three years. It entered into force on 1st March 2016 and will end until 28th February 2019. The target group, the Renewable Energy Aggregators, has been directly involved in the BestRES project consortium as partners:

Good Energy, renewable energies aggregator active in United Kingdom

Next Kraftwerke Belgium, renewable energies aggregator active in Belgium

Oekostrom, renewable energies aggregator active in Austria

Sauba G., Van der Burgt J., Varvarigos E., Makris P., Schoofs A., VIMSEN – Smart Tool for Energy Aggregators, Conference Paper, 37th IEEE International Telecommunications & Energy Conference (INTELEC), October 2015.

NordREG Nordic Energy Regulators, Discussion on different arrangements for aggregation of demand response in the Nordic market – February 2016, February 2016, Available at: http://www.nordicenergyregulators.org/wp-content/uploads/2016/02/NordREG-Discussion-of-different-arrangements-for-aggregation-of-demand-response-in-the-Nordic-market.pdf.

IndustRE project, Main variations of business models for Flexible Industrial Demand combined with Variable Renewable Energy, Working Document, Deliverable 2.1, April 2015, Available at: http://www.industre.eu/downloads/category/project-results.

Quentin Lambert, Business Models for an Aggregator, Application to the situation on Gotland, KTH Royal Institute of Technology, Available at: https://www.kth.se/social/upload/5093c048f276545fbd1c6378/KTH%20Energy%20Award-QL.pdf.

The birth of a European Distributed EnErgy Partnership, The Main players of the DER aggregation field, EU-deep, Available at: http://www.eudeep.com/index.php?id=653.

Sauba G., Van der Burgt J., Varvarigos E., Makris P., Schoofs A., VIMSEN – Smart Tool for Energy Aggregators, Conference Paper, 37th IEEE International Telecommunications & Energy Conference (INTELEC), October 2015.

Eurelectric, Flexibility and aggregation, Requirements for their interaction in the market, January 2014, Available at: http://www.eurelectric.org/media/115877/tf_bal-agr_report_final_je_as-2014-030-0026-01-e.pdf.

European Commission-Seventh Framework Programme, DREAM electricity market design, WHITE PAPER, October 2014, Available at: https://webhotel2.tut.fi/units/set/ide4l/DREAM2%20DREAM-market-design.pdf.

https://www.kth.se/social/upload/5093c048f276545fbd1c6378/KTH%20Energy%20Award-QL.pdf

https://www.kth.se/social/upload/5093c048f276545fbd1c6378/KTH%20Energy%20Award-QL.pdf

http://www.eurelectric.org/media/115877/tf_bal-agr_report_final_je_as-2014-030-0026-01-e.pdf

http://www.eurelectric.org/media/115877/tf_bal-agr_report_final_je_as-2014-030-0026-01-e.pdf



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RE-Pro, renewable energies aggregator active in Italy and Cyprus

Next Kraftwerke Germany, renewable energies aggregator active in Germany and France

Energias de Portugal, renewable energies aggregator active in Spain and Portugal

The innovative business models to be provided during the project will be based on on-going business models available in Europe and adapted to the future market design by research institutions and energy expert partners such as the Energy Economic Group of the Technical University of Vienna (TUW-EEG) and 3E. The consortium also includes a legal expert, SUER (Stiftung Umweltenergierecht /Foundation for Environmental Energy Law), who will provide a relevant contribution to the development of National and European recommendations on the business models implementation. The BestRES project is coordinated by WIP – Renewable Energies. The project communication and dissemination will be carried out by WIP with the support of Youris. A short description of the BestRES project partners is provided in the following paragraphs.

WIP – Renewable Energies (WIP)

WIP - Renewable Energies has been founded in 1968 in Munich, Germany, and has been active in the renewable energy sector for over three decades, working with both industrial and public sector clients at the international level. The company’s mission is to bridge the gap between research and implementation of sustainable energy systems. WIP’s interdisciplinary team of professionals provides consultancy services to improve the grid and market integration of renewable energies. WIP offers project development, project management, technical supervision and realization of projects, which involve the co-ordination of international consortia. WIP counts more than 300 projects accomplished. WIP organizes international events in the field of renewable energies. Website: www.wip-munich.de

3E

3E is an independent consultancy and software service company, delivering solutions for performance optimisation of renewable energy and energy efficiency projects. We provide expert services to support project developers, asset managers, operators, investors and policy-makers and our key areas of expertise are solar, wind, sustainable buildings & sites and grids & markets. Bridging the gap between R&D and the market, 3E combines in-house innovation and partnerships with leading R&D centres. 3E’s international team operates from Brussels (HQ), Toulouse, Milan, Istanbul, Beijing and Cape Town. The company has a project track-record of over 15 years in over 30 countries. Website: www.3e.eu

http://www.3e.eu/



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Technische Universitaet Wien (TUW-EEG)

The Energy Economics Group (EEG) is a department of the Institute of Energy Systems and Electric Drives at TU Wien, Austria. The core fields of research of EEG are: (i) system integration strategies of renewable and new energy technologies, (ii) energy modelling, scenario analysis and energy policy strategies, (iii) energy market analysis in general (competition and regulation), (iv) sustainable energy systems and technologies and (iv) environmental economics and climate change policies. EEG has coordinated and carried out many international as well as national research projects, international and national organizations and governments, public and private clients in several fields of research. www.eeg.tuwien.ac.at

Stiftung Umweltenergierecht (SUER)

The Foundation for Environmental Energy Law (Stiftung Umweltenergierecht – SUER) was created on 1 March 2011 in Würzburg. The research staff of the foundation is concerned with national, European and international matters of environmental energy law. They analyze the legal structures, which aim to make possible the necessary process of social transformation leading towards a sustainable use of energy. Central field of research is the European and German Law of renewable energy and energy efficiency. The different legal instruments aiming towards the substitution of fossil fuels and the rise of energy efficiency are analyzed systematically with regard to their interdependencies. Interdisciplinary questions, e.g. technical and economical questions, are of particular importance. Website: http://stiftung-umweltenergierecht.de/

Good Energy

Good Energy is a fast-growing, 100% renewable electricity supplier, offering value for money and award-winning customer service. Good Energy is proud to have been the first dedicated 100% renewable electricity supplier in the UK, with over 68,000 electricity customers – a mix of residential and commercial supplies – 38,000 gas customers and supports over 112,600 homes, business and communities generating their own renewable energy. We source our supply from a large and growing network of over 1,000 independent generators across the country, in addition to operating our own wind farms and solar farms. Website: www.goodenergy.co.uk

Next Kraftwerke Belgium (NKW BE)

Next Kraftwerke Belgium pools distributed renewable generation and flexible demand in a virtual power plant (VPP). We trade and deliver the aggregated power on the most relevant markets and, most importantly, we make the virtual power plant’s flexibility available to the grid operator to support the management of the Belgian power system. Next Kraftwerke Belgium is a joint venture with Next Kraftwerke GmbH in Germany. Website: www.Next-Kraftwerke.be

http://www.eeg.tuwien.ac.at/

http://stiftung-umweltenergierecht.de/

http://www.goodenergy.co.uk/

http://www.next-kraftwerke.be/



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Next Kraftwerke Germany (NKW DE)

Next Kraftwerke Germany is the operator of a large-scale Virtual Power Plant (VPP) and a certified power trader on various European energy exchanges (EPEX). The concept of a Virtual Power Plant is based on the idea to link and bundle medium- and small-scale power producing and power consuming units. The objective is to smartly distribute supply and demand and to profitably trade the generated and consumed power. Next Kraftwerke's VPP now bundles around 3,000 medium- and small-scale power-producing and power-consuming units. Among other energy sources, it includes biogas, wind, and solar power generators. Next Kraftwerke also operates in Belgium, France and Austria. Website: https://www.next-kraftwerke.com/

Oekostrom

Oekostrom AG is a holding company owned by about 1.900 stockholders. It was founded in 1999 aiming at building a sustainable energy industry, supplying customers with clean energy and supporting the development of renewable energy sources in Austria. All products and services of oekostrom AG represent an active contribution to climate and environmental protection and increase independence from fossil and nuclear energy sources. Oekostrom AG engages in the fields of power production, trading, sales and energy services and currently supplies 100 % renewable energy from Austria to more than 52.000 customers in all parts of the country. Website: http://oekostrom.at/

RE-Pro Management (RE-Pro)

RE-Pro is a renewable energy provider dedicated to clean and renewable energy sources. Specialized in the fast-growing areas of solar power generation and energy efficiency management, RE-Pro has successfully launched its services through a range of photovoltaic power parks in southern Europe. Guaranteed power purchasing contracts with national grids generate a stable revenue stream, which forms the basis for the development of RE-Pro's innovative energy efficiency management services. Website: http://www.re-pro.eu/

Centre for New Energy Technology (EDP-CNET)

EDP Group is an integrated energy player, with strong presence in Europe, US and Brazil and the third player in the world in terms of wind installed capacity. EDP is an innovative European Utility with an important presence across all the energy value chain, in Generation, Distribution, Energy Trading and Retail of electricity and gas. EDP owns HC Energia, the 4th Energy Utility in Spain and Energias do Brasil. EDP Centre for New Energy Technologies (EDP CNET) is a subsidiary of the EDP Group with the mission to create value through collaborative R&D in the energy sector, with a strong focus in demonstration projects. Currently, EDP has no activity as an aggregator, but, as the electricity sector evolves, EDP may consider aggregation either on the generation or supplier side through different companies within EDP Group. In the scope of this project EDP has chosen to focus on the supplying activity, therefore the information provided in this report is focused on the retailer side.

https://www.next-kraftwerke.com/

http://oekostrom.at/

http://www.re-pro.eu/



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Websites: https://rd-new.com and http://www.edp.pt/en/Pages/homepage.aspx

Youris.com (Youris)

youris.com GEIE is an independent non-profit media agency promoting the leading-edge European innovation via TV media and the web. youris.com designs and implements media communication strategies for large research organizations and EU-funded projects and is able to establish permanent links between the research communities and the media. youris.com media products cover a wide spectrum of research areas including ICT, Environment, Energy, Health, Transport, Nanotechnologies, Food, Society, Gender and many others and are designed for large-scale distribution world-wide. Youris.com is a European Economic Interest Group (EEIG) based in Brussels with branch offices in Italy, Germany and France. Website: http://www.youris.com

1.2 Structure of the document

The objective of this report is to determine the technical, regulatory, and legal barriers preventing optimal deployment and operations of current business models for renewable energy aggregators. The remainder of the document is structured as follows:

Section 2 briefly outlines the project methodology

In Section 3, we outline the regulatory and legal framework for energy

aggregation

In Section 4, we look into the technical, legal and regulatory barriers preventing

optimal deployment and operations of current business models for renewable

energy aggregators in the countries that are covered by the consortium

Section 5 concludes the current discussion of this report

https://rd-new.com/

http://www.edp.pt/en/Pages/homepage.aspx

http://www.youris.com/



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2. Methodology

The project is set around six aggregators in nine countries:

1. Western Europe: Germany (Next Kraftwerke DE), France (Next Kraftwerke DE),

Belgium (Next Kraftwerke BE) and Austria (Oekostrom)

2. Southern Europe: Spain (EDP) and Portugal (EDP), Italy (RE-Pro) and Cyprus

(RE-Pro)

3. British Isles: the United Kingdom (Good Energy)

In order to better understand the barriers that aggregators identify for preventing optimal deployment and operations of current BMs, 3E and TU Vienna carried out an extensive desk research to develop a comprehensive questionnaire (annex 1). The questionnaire was revised by all consortium partners and afterwards surveys were carried out with the aggregator consortium partners. The results of the surveys and the desk research were analysed by SUER and TU Vienna and are extensively discussed in the following sections. The analysis of the surveys and the rankings done by the partners have been used to identify the most relevant barriers. It has to be highlighted that the outcomes for each country should be evaluated in its context since the relevance of topics can differ between the examined Member States and its current national situation in the energy market. The same issue can be more relevant for one country but not for the others, so especially the usage of tables in the report shall not indicate a strict comparability of the results. The results of the rankings will be shown in histograms of each question’s ranking, from 1-5 with 1 as most important. Additionally, the vertical line illustrates the mean values. Although the sample (n=9) is not very large, a trend is empirically observable.



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3. Legal and regulatory framework for energy aggregation

The objective of this part of the report is to give an overview of the existing legal and regulatory framework for energy aggregation at EU level. First, we will give a short résumé of the existing business models (section 3.1) and the business models of the aggregators within the consortium (section 3.2). These results have been identified in the report “Existing business models for renewable energy aggregators” published in June 2016 within the BestRES project under the lead of 3E. Based on this information, in section 3.3 we describe the current EU regulation regarding energy aggregation.

3.1 Existing business models

Table 1 provides an outline of the existing situation for aggregators in the energy market for a better understanding of the barriers for aggregators:4

Table 1: Business models for aggregation

Business Model Explanation

Combined aggregator-supplier Supply and aggregation are offered as a package and there will be one BRP per connection point

Combined aggregator-BRP There are 2 BRPs on the same connection point, the BRP (independent aggregator) and the BRP (supplier). The supplier is compensated for imbalances

Combined aggregator-DSO NOT tackled: regulated and unregulated roles should not be combined

Independent aggregator as a service provider

The aggregator is a service provider for one of the other market actors but does not sell at own risk to potential buyers

Independent delegated aggregator The aggregator sells at own risk to potential buyers such as the TSO, the BRP and the wholesale electricity markets

Prosumer as aggregator Large-scale prosumers choose to adopt the role of aggregator for their own portfolios

4 BestRES, Existing business models for renewable energy aggregators, June 2016, p. 9.



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3.2 Business models of the aggregators within the consortium

The BestRES project report D2.1 “Existing business models for renewable energy aggregators” from June 2016 summarizes the existing business models of the aggregators within the consortium. Table 2 shows that within the consortium of the project a wide variety of business models is implemented: Good Energy, Oekostrom and EDP are focused on the aggregator-supplier model, Next Kraftwerke targets both the delegated aggregator and aggregator-supplier business model and RE-Pro is developing ESCO services.5

Table 2: Business models for aggregators within the consortium6

United Kingdom

Aggregator-supplier business model and moving towards delegated aggregator business model

Focus of aggregation: distributed generation (mainly wind) but DSM (small-scale industrial) more and more important in the future

Valorization aggregation: wholesale markets, optimization situation electricity consumers and own balancing

Belgium

Delegated aggregator business model and moving towards aggregator-supplier business model

Focus of aggregation: distributed generation but DR (industrial) more and more important

Valorization aggregation: wholesale markets, reserve markets and own balancing

Germany and France

Delegated aggregator business model and aggregator-supplier business model in Germany. Starting up aggregation in France.

Focus of aggregation: distributed generation but DR (industrial) more and more important

Valorization aggregation: wholesale markets, reserve markets and own balancing


6 BestRES, Existing business models for renewable energy aggregators, June 2016, Table 20, p. 75.



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Austria

Aggregator-supplier business model

Focus of aggregation: distributed generation (mainly wind) but DSM (domestic plug –in PV systems) more and more important

Valorization aggregation: wholesale markets, optimization situation electricity consumers and own balancing

Italy and Cyprus

Aggregator as service provider business model

Focus of aggregation: distributed generation (PV) but DSM (commercial/industrial) more and more important

Valorisation aggregation (planned): auto production and energy saving measures

Spain and Portugal

No aggregation but assessing the feasibility of the aggregator-supplier business model

Focus of aggregation: DSM

Valorization aggregation (planned): wholesale markets, reserve markets and own balancing

3.3 EU-Regulation

The aggregators are active participants in the energy market. Like other participants, they are subject of general regulations within the energy market. In this section, the general EU regulations and guidelines will be outlined and the existing EU-regulation related to “aggregation” and to “aggregators” shown. It can be stated that the intensity of regulation is low and that aggregators do not have an independent position in the framework of the EU regulation so far.

3.3.1 Energy Efficiency Directive 2012/27/EU

The 2012 Energy Efficiency Directive establishes a set of binding measures to help the EU reach its 20% energy efficiency target by 2020. Under the Directive, all EU countries are required to use energy more efficiently at all stages of the

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1399375464230&uri=CELEX:32012L0027



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energy chain from its production to its final consumption.7 In Art. 2 number 45, the Energy Efficiency Directive 2012/27/EU (EED) defines the term ‘aggregator’ as a

“demand service provider that combines multiple short-duration consumer loads for sale or auction in organised energy markets”.

This definition includes only consumer loads and not the generation of energy. In contrast to this definition, within the BestRES project (and according to other reports 8 ) ‘aggregation’ is understood in a wider sense: Renewable energy aggregators should be understood as legal entities that aggregate the load or generation of various demand and/or generation/production units and aim at optimizing energy supply and consumption either technically or economically.9 According to this definition, aggregation involves not only the demand side, but also the generation side. The discrepancy between the formal definition of the term and its understanding in practice (wider definition) might be due to the development of the aggregators market over the years after the EED was enacted (2012) and the term ‘aggregator’ defined. Both aggregation and acting as an aggregator are relatively new concepts. It was only in the last few years that aggregators have found their position in the market and developed a relevant portfolio. Article 15 sec. 8 EED regulates that – subject to technical constraints inherent in managing networks – EU Member States shall ensure that transmission system operators and distribution system operators, in meeting requirements for balancing and ancillary services, treat demand response providers, including aggregators, in a non-discriminatory manner, on the basis of their technical capabilities. Furthermore, the Member States shall promote access to and participation of demand response in balancing, reserve and other system service markets; inter alia by requiring national energy regulatory authorities (or, whenever their national regulatory systems require so, transmission system operators and distribution system operators in close cooperation with demand service providers and consumers) to define technical modalities for the participation in these markets on the basis of the markets’ technical requirements and the capabilities of demand response. These modalities shall allow the participation of aggregators. Additionally, in Annex XI number 2 of the EED, the energy efficiency criteria for energy network regulation and for electricity network tariffs determine that network regulation and tariffs

7 https://ec.europa.eu/energy/en/topics/energy-efficiency/energy-efficiency-directive (20/07/2016).

8 See also the definition in the EG3Report, Regulatory Recommendations for the Deployment of Flexibility, January 2015, p. 19.




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“shall not prevent network operators or energy retailers from making system services available for demand response measures, demand management and distributed generation on organised electricity markets, in particular: […] (b) energy savings from demand response of distributed consumers by energy aggregators.”

The Public Consultation for the EED raises the issue whether aggregation of small-scale investments (pooling/bundling) is a potential benefit of energy efficiency obligation schemes. About half of the stakeholders agree or strongly agree with this statement.10 To sum up, the EED incorporates the aggregators as active participants in the energy market and defines them as demand service providers. It guarantees the absence of discrimination and the market entry as well as the aggregators’ participation in the market.

3.3.2 Directive on the internal energy market 2009/72/EC

With a view to improving and integrating competitive electricity markets in the European Union, the Directive on the internal energy market establishes common rules for the generation, transmission, distribution and supply of electricity, together with consumer protection provisions. It lays down the rules relating to the organization and functioning of the electricity sector, open access to the market, the criteria and procedures applicable to calls for tenders and the granting of authorizations and the operation of systems. Energy efficiency and the protection of the environment must be taken into account by Member States for the grant of authorizations in this field.11 Recital (35) of the Directive on the internal energy market 2009/72/EC determines that the transmission system operators should facilitate participation of final customers and final customers’ aggregators in reserve and balancing markets. By promoting the possibilities of voluntary aggregation of representation for household, small and medium-sized consumers, Article 3 number 3 of the Directive on the internal energy market declares that nothing in this Directive shall prevent Member States from strengthening the market position of this class of consumers. The Directive on the internal energy market likewise includes the aggregators as a community of households and final customers and guarantees their market position. In Annex I of the Directive on the internal energy market 2009/72/EC it is determined that the

10 European Commission, Public Consultation for the Review of Directive 2012/27/EU on Energy Efficiency, Final Synthesis Report, 02/2016, p. 47.

11 http://www.ecolex.org/details/legislation/directive-200972ec-of-the-european-parliament-and-of-the-council-concerning-common-rules-for-the-internal-market-in-electricity-and-repealing-directive-200354ec-lex-faoc124471/ (20/07/2016).



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“Member States shall ensure the implementation of intelligent metering systems that shall assist the active participation of consumers in the electricity supply market.”

This should happen based on an economic assessment and where the roll-out of smart meters is assessed positively, at least 80 % of consumers shall be equipped with intelligent metering systems by 2020.12 Most of the Member States assessed the roll-out of smart meters positively and will integrate them by 2020. (More details are shown in 4.1.1; figure 2). In the preliminary results of the public consultation on Electricity Market Design, set out by the European Commission, a number of respondents stressed the need to support the development of aggregators by removing obstacles for their activity to allow full market participation of renewables.13 The inception impact assessment for the initiative to improve the electricity market design, set out by the European Commission, points out in a first set of policy approaches that the increase of the flexibility of the electricity markets is an option; for example through measures that facilitate the demand to become more elastic, most notably the roll-out of fit-for-purpose smart metering systems, the introduction of more dynamic/time-responsive hourly tariffs and measures that ensure full and effective market access for independent demand aggregators.14 The New Market Design will see the aggregator as an important participant for the future energy market.

3.3.3 Renewable Energy Directive

The Renewable Energy Directive 2009/28/EC (RES Directive) does not explicitly refer to aggregators. As the RES Directive sets the framework for the deployment of renewable energies in the European Union, the regulation plays an important role for all actors in the renewable energy market in general. Regarding the concrete design of national support schemes for electricity from RES, the Commission´s Guidelines on State aid for environmental protection and energy 2014-2020 have to be kept in mind, as far as the national support scheme constitutes a forbidden state aid according to Article 107 TFEU (Treaty on the Functioning of the European Union). Articles 6 to 11 of the RES Directive content regulation on so-called Cooperation Mechanisms which provide Member States with the option to agree on cross-border support of RES. The RES Directive provides different options for the cooperation between Member States: (1) Statistical transfers: Renewable energy which has been produced in one Member State is transferred to the RES statistics

12 Annex I of the Directive on the internal energy market 2009/72/EC.

13 European Commission, Preliminary results from the public consultation on Electricity Market Design, p.2.

14 European Commission, Inception Impact Assessment for new electricity market design, p. 4.



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of another Member State, counting towards the national RES target of that Member State; (2): Joint projects between Member States: RES electricity or heating/cooling projects are developed under framework conditions jointly set by two or more Member States; (3) Joint projects with third countries: Joint projects can also be implemented between Member States and third countries; (4) Joint support schemes: Member States coordinate (parts of) their RES support schemes.

3.3.4 Network Codes

The European Commission, the Agency for the Cooperation of Energy Regulators (ACER), ENTSO-E, Distribution System Operator (DSO) organisations and other stakeholders from across the electricity sector are responsible for the development of so-called network codes for electricity.15

3.3.4.1 Network Code on Electricity Balancing

The framework guidelines on electricity balancing declares that the Network Code on Electricity Balancing shall take precedence over relevant national frameworks (legislation, regulation, codes, standards, etc.) for cross-border and market integration issues and national frameworks shall be adapted to the extent necessary, to ensure proper implementation at the national level.16 Electricity Balancing is one of the key roles of Transmission System Operators where they act to ensure that generation equals demand in real time. The potential for balancing resources to be effectively shared between countries can enhance security of supply and reduce cost, hence there is a strong rationale for developing cross border balancing markets. The network code on Electricity Balancing shall ensure that the correct framework will be put in place for this to happen.17 The Network Code on Electricity Balancing (NC EB) declares in Art. 10 the “facilitating [of] the participation of Demand Side Response including aggregation facilities and energy storage” to one of its general objectives of the balancing market. Furthermore, the Network Code contains in Art. 27 (4) and (5) that “the conditions for aggregation of Demand Side Response, the aggregation of generation units or the aggregation of both should be part of the terms and conditions for Balancing Service Providers”. Moreover in Art. 29 (7) is foreseen that the requirements for standard and specific products “facilitate the participation of […] aggregation facilities as a Balancing Service Provider.”

15 https://www.entsoe.eu/major-projects/network-code-implementation/Pages/default.aspx.

16 ACER, Framework Guidelines on Electricity Balancing, 09/2012, p. 8/9.

17 https://www.entsoe.eu/major-projects/network-code-development/electricity-balancing/Pages/default.aspx.



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Network codes need to be finalised and adopted by Member States, and are therefore expected to evolve over time. They do not have to be implemented in national law, but they have to be adopted by the TSOs. The NC EB will be prepared by experts from the European Commission before it enters the Comitology process, through which it should become a European law.18 The NC EB aims to include the aggregators and the aggregation of Demand Side Response as well as the aggregation of generation units in the energy market with appropriate rules.

3.3.4.2 Capacity Allocation and Congestion Management

The CACM (Capacity Allocation and Congestion Management) is based on the Commission regulation (EU) 2015/1222. It sets out the methods for allocating capacity in day-ahead and intra-day timescales and outlines the way in which capacity will be calculated across the different zones. Putting in place harmonised cross border markets in all timeframes it should lead to a more efficient European market to benefit customers.19 Although the CACM does not refer explicitly to aggregators, it is relevant (see section 4.4.1).

18 https://www.entsoe.eu/major-projects/network-code-development/electricity-balancing/Pages/default.aspx.

19 https://www.entsoe.eu/major-projects/network-code-development/capacity-allocation-and-congestion-management/Pages/default.aspx (20/07/2016).



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4. Technical, legal and regulatory barriers in the countries that are covered by the consortium

The six aggregators who are part of the consortium are active in nine countries: the United Kingdom, Germany, France, Belgium, Austria, Portugal, Spain, Italy and Cyprus (Figure 5).

Figure 5: Countries covered by the consortium

In the following sections, we will elaborate on the various technical, legal and regulatory barriers that aggregators are confronted with within the power system and markets in these countries. Alongside 14 questions relating to the legal and regulatory barriers and 4 questions relating to the technical barriers, the questionnaires also included a more general question relating to the main barriers concerning the aggregators within the consortium. First, TU Vienna evaluated the technical barriers (4.1). Then, SUER assessed the other relevant barriers (4.2) and separated the questions relating to the legal and regulatory barriers into three groups. In the first group “Lack of regulation” (4.3), we elaborated on the areas in which no or not sufficient regulations exist. Within this section, a whole set of possible shortcomings has been worked out:



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the lack of standard contracts and processes (4.3.1), the rules regarding allocation, metering, billing, reconciliation and data communication (4.3.2), the lack of clear overall objectives and unproductive role of the national regulator (4.3.3) as well as the data and privacy protection (4.3.4). All these issues have in common that the absence of their regulation or the insufficient regulation can be a barrier for the aggregators. The second group “Market rules” (4.4) focuses on the existing “Market rules” and the current market situation. The questions relate to the wholesale and network tariffs (4.4.1), the complex of bids (4.4.2) and the prequalification (4.4.3). These points have in common that they are focused on aspects which might hinder the full market participation of aggregators and its cost-effectiveness. The last group “Miscellaneous” (4.5) summarizes the remaining questions, which cannot be classified explicitly in one of the previously named sections. Under this section, Network Codes, especially the Capacity Allocation and Congestion Management (CACM) and mechanisms of cooperation between the Member States (4.5.1) and the choice between new capacity and contracting flexibility for grid operators (4.5.2) are examined.



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4.1 Technical barriers

Technical barriers mainly arise due to immature and missing technology. The aggregators in the consortium were interviewed about existing main technical barriers. As part of the interview, comments and rating for following statements were asked:

Question 3.1: “No sufficient access to data on consumption, self-production

and pricing (smart grid infrastructure is missing)”

Question 3.2: “No possibility of registering consumption on balance settlement

period (15, 30 or 60 minutes)”

Question 3.3: “Short life cycle of storage (15 year) compared to other

technologies”

Question 3.4: “Insufficient forecasting techniques for RES”

Question 3.5: “Insufficient standardization on flexibility technology and

requirements”

Figure 6 shows the histogram of each question’s ranking, from 1-5 with 1 as most important. Additionally, the vertical line illustrates the mean values. Although the sample (n=9) is not very large, a trend is empirically observable.

Figure 6: Histogram of the rating related to technical barriers

Histogram of the rating related to technical barriers from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value.



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The most important technical barriers for the aggregators seems to be missing smart grids infrastructure (question 3.1), followed by a lack of standardization (question 3.5). In the following sections, each technical barrier is briefly described and additional comments of the aggregators were discussed.

4.1.1 Lack of data provision/access and data forwarding

In context to data provision and forwarding, the aggregators were asked about two issues:

“No sufficient access to data on consumption, self-production and pricing

(smart grid infrastructure is missing)” and

“No possibility of registering consumption on balance settlement period (15, 30

or 60 minutes)”.

The questionnaire’s results (comparing Table 3 and Table 4 in addition to the illustration in Figure 6) show that data provision/access has a higher rate than forwarding data for an enhanced schedule. Smart grids infrastructure is the missing link between customers and aggregators/utilities, whereas smart meters are an essential cornerstone for smart grids. As Good Energy mentioned, particularly for small and domestic customers smart grids data is required to develop new business models. Metering (provided by DSO) and control infrastructure is needed to check performance of provided demand response and infeed (of decentralized generation and storages) per user.20 Smart Grids enable to forward real-time price signals to small customers, as it is already status quo for medium and large-scale customers. These price signals are an adequate control signal for storage dispatch and demand response technologies, because higher monetary benefits compared to conventional tariff designs are achievable.21

20 Energy Pool, “Unlocking energy market flexibility and demand side response,” in CEER Annual Conference, 2015, pp. 1–12.

21 Van de Ven, P. et al, „Optimal Control of Residential Energy Storage under Price Fluctuations“, ENERGY 2011.



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Table 3: Answers related to data provision/access

3.1) No sufficient access to data on consumption, self-production and pricing (smart grid infrastructure is missing)

Comments

Good Energy (United Kingdom) Yes, particularly at a smaller-scale (as granular consumption data is not accessible through compliant means for smaller & domestic energy users).

Next Kraftwerke Germany (Germany)

Smart meter roll out will provide access to small scale. Currently, Next Kraftwerke focuses on mid to large scale demand for which consumption data is available.

Next Kraftwerke (Belgium) For larger consumption and production sites this is usually no issue and therefore it is less relevant for Next Kraftwerke because Next Kraftwerke currently focusing on medium sized and large-scale DR

Oekostrom (Austria) Smart meter roll-out is only at the beginning in Austria.

EDP (Portugal) Real time data is not available to the retailer because smart meters are owned by the DSO and data is sent to retailers once a day (just for big consumers and industrial clients). This barrier has to be overcome if we want to implement DSM schemes. A possible solution could be the deployment of HEMS (Home management system), whose information is available to EDP Commercial. Also very low percentage of smart meters at this moment in Portugal

EDP (Spain) In Spain, hourly data can be accessed by retailers.

Regarding the demand side, mid to large scale consumers are main customers of aggregators within the consortium (see comment of Next Kraftwerke). Many of these customers have already devices installed (smart-meters) giving insight about real-time consumption. In Europe solely Sweden and Italy have 100% smart meter rollout, implying many customers are still measured with traditional meters, which are not able to communicate in real-time with the retailer or potential aggregator. Figure 7 shows the current status of smart meter rollout in Europe according Joint Research Centre.22 The responsible party for smart-meter implementation and ownership is mainly the DSO, except UK as it is the supplier’s responsibility.

22 http://ses.jrc.ec.europa.eu/smart-metering-deployment-european-union, (31/08/2016).

http://ses.jrc.ec.europa.eu/smart-metering-deployment-european-union



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Figure 7: Smart Metering deployment in the European Union

Smart Metering deployment in the European Union (Source: JRC23)

If aggregation potential and flexibility should become a tradable and profitable commodity, it is required that it is reliable and widely available. As shown in Table 4, short-term products are currently not provided, because data cannot be forwarded. As mentioned by the aggregators, missing smart-grids infrastructure is the main reason that forwarding data is not possible yet. This issue of smart metering and contracting of the customer is related to the data-management and transaction guarantee function of the aggregator.24

23 http://ses.jrc.ec.europa.eu/smart-metering-deployment-european-union (31/08/2016).

24 Cherrelle Eid, Paul Codani, Yurong Chen, Yannick Perez, Rudi Hakvoort, “Aggregation of demand side flexibility in a smart grid: A review for European market design.”, European Energy Market (EEM), 2015 12th International Conference, May 2015, Lisbon, Portugal, 2015.



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Table 4: Answers related to data forwarding

3.2) No possibility of registering consumption on balance settlement period (15,30 or 60 minutes)

Comments

Good Energy (United Kingdom) As above. Also, for non-Half Hourly metering as is used in the UK, all of this consumption is profiled, so shifting demand impacts on the amplitude of a profiled load, rather than the load shape.


Currently, not an issue since NK is focusing on mid to large scale consumers.

Next Kraftwerke (Belgium) Small-scale DR and DSM is not so relevant for Next Kraftwerke because Next Kraftwerke focuses on medium sized and large-scale DR.

Oekostrom (Austria) Smart meter roll-out is only at the beginning in Austria.

EDP (Portugal) For clients with smart meters, consumption is recorded with 15 min resolution. However, retailers have no access to this information in real time, as explained in the previous table. In order to implement an aggregator based on DSM, retailers have to install equipment that allow them to communicate directly with their clients.

EDP (Spain) Not an issue for Spain

4.1.2 Shorter life cycle of storage technologies

Table 5 shows the answers related to the issue “Short life cycle of storage (15 year) compared to other technologies”. The lifetime of electricity storages highly depends on the storage technology. While battery storage systems are characterized by a low (cycle-dependent) lifetime, mechanical storages such as pumped hydro, compressed air or flywheel have a lifetime of >20 years. The economic inefficiency of storages (as missing smart grids infrastructure) causes a lack of business models for small-sized customers. Therefore, aggregators currently do not have a high share of distributed storages in their portfolio. As a result, short lifetime does not represent an essential technical barrier nowadays, especially for business models where no investments in assets are performed (see Next Kraftwerke (Belgium)). Nevertheless, for improved business models, storage will be an essential technology (in addition to smart grids infrastructure).



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Table 5: Answers related to storage life cycle

3.3) Short life cycle of storage (15 year) compared to other technologies

Comments

Good Energy (United Kingdom) Not particularly concerning – renewable assets do not last much longer. Battery costs are decreasing all the time and the market for them is still developing. Revenue streams for batteries can be much higher meaning shorter life is irrelevant. (Also, note not all storage has short lifetime – e.g., pumped hydro or CAES).


Not relevant for Next Kraftwerke. It would also not be

a barrier though investments in assets is not a part of Next Kraftwerke’s BM.

Next Kraftwerke Germany (France) Not relevant for Next Kraftwerke. It would also not be

a barrier though investments in assets is not a part of Next Kraftwerke’s BM.

Next Kraftwerke (Belgium) Would not be a barrier though investments in assets is not a part of Next Kraftwerke’s BM at the moment. We can and did already integrate battery technologies in the VPP.

EDP (Portugal) The BM of EDP’s aggregators does not depend on storage investments.

EDP (Spain) The BM of EDP’s aggregators does not depend on storage investments.

4.1.3 Lack of forecast quality

The third technical barrier affects “Insufficient forecasting techniques for Renewable Energy Sources (RES)”, summed up in Table 6. Volatile RES causes schedule (such as operational schedules) deviations, due to a lack of forecast quality. To balance these schedule deviations, balancing energy is required. Therefore, imbalances are usually associated with monetary losses (except for periods with negative prices). A high quality of forecast techniques is essential for an economically participation of RES in short-term markets, such as spot markets. An aspect of the business model of Next Kraftwerke (Germany/France), Oekostrom (Austria), Good Energy (UK) and EDP (Portugal/Spain) is the avoidance of schedule imbalances (and compensation payments) resulting from forecast errors. For the participation in long-term markets, such as forward markets or ESCO business models (RE-Pro (Italy, Cyprus)), high performing forecast technologies are not mandatory. According to Next Kraftwerke (Germany, France, Belgium) the current forecast quality for balancing market participation seems to be a minor issue. For detailed answers, see Table 6.



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Table 6: Answers related to forecast quality

3.4) Insufficient forecasting techniques for RES

Comments

Good Energy (United Kingdom) Depends on the market participation: For wholesale markets, current techniques are ok (For up to 5 days ahead). For ancillary services, which need to be determined 1 week ahead, the skill of current forecasting techniques really drops.


Still an issue but forecasting techniques are improving a lot.

Next Kraftwerke Germany (France) Still an issue but forecasting techniques are improving a lot.

Next Kraftwerke (Belgium) A minor issue and forecasting techniques are improving a lot.

EDP (Portugal) EDP’s aggregator wants to enhance the consumption of renewable energy as the ultimate goal, EDP Commercial would need a RES forecast tool combined with demand forecast in order to decide the best plan for the following hours. The demand forecast model that EDP Comercial is using nowadays could be improved based on the historical data that will be collected with the installation of new equipment. This equipment are the same that will allow retailers to have access to real time consumption data.

EDP (Spain) EDP’s aggregator wants to enhance the consumption of renewable energy as the ultimate goal, EDP would need a RES forecast tool combined with demand forecast in order to decide the best plan for the following hours.

Aggregation seems to be an appropriate method to reduce forecast errors, if the aggregator’s portfolio include multiple sites. Imbalances due to weather events tend to be decreased by aggregation, because of spatial distribution of production sites.25 For example, if one wind power plant generates more energy than predicted and another generates less, they will compensate for each other, resulting in a more accurate forecast. This circumstance makes it easier participating at electricity markets with spatial distributed generation units. Actually forecasting is not used for RES generation prediction, only. Additionally forecasting techniques are applied to predict:

Consumption,

Flexibility Potential and

Market (Prices).

Consequently, aggregators do have an interest of increasing forecast quality of these parameters too.

25 CERC, “Framework on Forecasting, Scheduling and Imbalance Handling for Variable Renewable Energy Sources (Wind and Solar)”, 2015.



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4.1.4 Need of standardization

The last technical barrier addresses the need of standardization by questioning “Insufficient standardisation on flexibility technology and requirements”. As shown in Figure 7, standardization tends to be an important issue for the aggregators. Aggregators need the technical capability to physically connect the customers and integrate their load into their aggregated pool. These activities require a sophisticated communication infrastructure (hardware and software) and a central IT system capable of dealing with wide variation of loads with different properties.26 Standardization is import, in order to allow aggregators using the same equipment. This would incentive the participation of small aggregators in the market and lowers the entry barriers. This results in an enlarged participation by the implementation of standardized technical products.27

Table 7: Answers related to the need of standardization

3.5) Insufficient standardization on flexibility technology and requirements

Comments

Good Energy (United Kingdom) Generation is often favoured over demand – it

should be viewed agnostically as a change in

power

Small sites cannot enter but need an aggregator

Many different contracts / mechanisms to

procure similar services.

Next Kraftwerke (Belgium) The connection of assets can be very different for different technologies. Without standardisation it be difficult to connect small units with economic viability.

EDP (Portugal) Since aggregators based on DSM are inexistent in Portugal, standardization will facilitate a large scale implementation. The ICT infrastructure at client´s side, the format of data, the DSM signals to clients, are some examples of issues whose standardization is important. EDP is available to participate in the definition of standardization process.

EDP (Spain) Since aggregators based on DSM are inexistent in Spain, standardization will facilitate a large scale implementation. The ICT infrastructure at client´s side, the format of data, the DSM signals to clients, are some examples of issues whose standardization is important. EDP is available to participate in the definition of the standardization process.

26 SEDC, „Demand Response: ”Clarification of the standard processes required between BRPs and independent aggregators - Clarification of Standardised Processes for Demand Response“, July 2015.

27 Losi, A., Mancarella, P., Vicino, A., “Integration of Demand Response into the Electricity Chain: Challenges, Opportunities and Smart Grid Solutions”, John Wiley & Sons, 2015.



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As Next Kraftwerke Belgium states, the connection of assets can be different for different technologies. If standardization process gets pushed, (and smart grids infrastructure is available) it may be more economic to add small-sized customers/prosumers into their portfolio. EDP actually claimed that they might be part of the standardization process. This approach would allow hard- and software developer to design their products in accordance with an aggregator, and reduce the developers financial risk.

4.2 Main barriers for developing business models

As mentioned above, the aggregators in the consortium were asked about the main barriers, which exist when developing and operating their respective business models. The answers and comments of the partners are illustrated in Table 8 and can be categorized into barriers relating to the legal and regulatory framework (4.2.1) and barriers relating to the current market situation (4.2.2).

Table 8: Answers related to main barriers for aggregators

1) What are the main barriers for developing your business model?

Answers

Good Energy (United Kingdom) Very hard for existing renewable generators to compete as value of subsidies is very high (no interest to change)

Not accepted for renewables (e.g. wind) to perform ancillary services

Lack of high-resolution data for smaller renewable sites (of which we contract with many)

Lack of understanding on demand side (e.g. customers don’t understand value of flexibility or what assets are potentially flexible)

TSO depends very granular data for all service providers regardless of size (e.g. metering requirements for domestic would be the same as for industry)

Lack of clarity around storage.


Current grid charges and surcharges system hampers flexibility from the demand side

Correction of imbalance and information transfer to supplier is an issue when talking about Flexibility from aggregators as service providers.

Next Kraftwerke Germany (France) Participation at control reserve markets mainly via secondary market (Market power of larger scale generators)

Important information concerning the new implemented renewables supporting scheme is still missing ( slow implementation process).



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Next Kraftwerke (Belgium) No centrally coordinated energy policy (regional regulators, support schemes etc.).

Relatively closed reserve power product markets that open only slowly (in particular secondary control power market).

No merit order activation and price caps in the market for secondary reserves

Market power of larger players

No general allowance to provide all services with units from distribution grid level.

Oekostrom (Austria) Technical implementation and installation remote control system

Suitable generation

Installation cost as fixed cost

Legal barriers regarding other/future models.

EDP (Portugal) Infrastructure (smart meters, home management systems, platforms) for DSM is not deployed yet (also no plan designed).

It is very costly (both in terms of time and human resources) to bring clients on board. Client manager has to explain how DSM schemes work. Moreover, it is very time consuming to acquire new clients

The benefits of EDP Comercial have not been clearly justified and evaluated

No regulatory and legal framework related to aggregator entities

Reserves are only designed for thermal and hydro plants.

EDP (Spain) No specific regulatory and legal framework related to demand aggregator entities (except for the interruptibility service)

The benefits of DSM have not been clearly justified and evaluated.

RE-Pro (Italy) A lot of competition

Legal barriers (both authorization process and technical regulation)

Stability in the law and taxation.

RE-Pro (Cyprus) Legal barriers in general

market is not yet completely opened.

4.2.1 Legal and regulatory framework

The legal framework for aggregators in the target countries is often unclear and inconsistent between the EU Member States. It depends widely on the status quo of the liberalization of the particular markets. The main criticism of the aggregators within the consortium centres on the fact that a clear legal framework for energy aggregation is missing and that a general policy in this area does not exist. For a better integration of aggregators as participants, the



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aggregated load should be legal, facilitated and enabled in all markets. To achieve this aim, aggregators and suppliers should have the same ability to extract the value of flexibility services on behalf of their customers.28 Next Kraftwerke Belgium sees as a first barrier that in Belgium no centrally coordinated overall energy policy exists. Different regional regulators and different support schemes require constantly varying considerations in respect of the submarkets. This implies higher overall costs, a disadvantage which is even reinforced by long-lasting (decision) processes. In general, the absence of a long-term policy in Belgium can be stated. Moreover, Next Kraftwerke Belgium claims that there is no general allowance yet to provide all services also with units from distribution grid level. Further, because of a certain fear of policy of having high imbalance prices, price caps were introduced. The price caps on the R2 market are also due to the high market power of currently about 2-3 players offering their services there. These price caps are further tailored for CCGTs. This makes it difficult for aggregators to offer with new technologies as long as the price caps are in force (compare 4.2.2.). For the situation in France, Next Kraftwerke Germany states that important information concerning the new implemented renewables supporting scheme is still missing. It exists a slow implementation process of the regulations. A similar situation is described for Italy, where RE-Pro Italy sees especially legal barriers as the main obstacles, especially regarding both authorization processes and technical regulations. In addition, the stability in the law and in the taxation rules needs to be improved. Finally, EDP claims that in Portugal and Spain no specific regulatory and legal framework related to business models for aggregator entities exists and that the benefits of DSM have not been clearly justified and evaluated.

4.2.2 Market situation

It was highlighted in the BestRES D2.1 report that “the interviews with project partners have demonstrated that the focus of aggregation within the consortium is on generation providers (5 out of 6 aggregators). […] Nevertheless, across Europe, many aggregators put emphasis on DSM. Across Europe, we observe that aggregators are often active on multiple markets; the combined participation on wholesale and reserve markets is most common.”29 Hence, the market situation is of high relevance for aggregators and might likely be an obstacle for the participation in the energy market. The current market situation is criticized mainly for the complexity of the market entry and the lack of relevant infrastructure (smart meters, home management systems,

28 EG3 report, Regulatory recommendations for the Deployment of Flexibility, January 2015, p. 29.




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platforms). It is important that aggregators have an equal access to electricity markets. Therefore, Member States should adapt market rules so that the flexibility provided by demand side measures and all sizes of generation can compete on a level playing field with existing actors in these markets.30 For Belgium, Next Kraftwerke Belgium sees as a problem in a relatively closed reserve power product market that opens only slowly: While the secondary reserve market (R2) is still completely closed, the primary reserve market (R1) is opening and will be fully opened by August. A further barrier in the eyes of Next Kraftwerke Belgium is the market power of larger players. Due to the market power, in particular for R2 price caps for activation are introduced. These price caps in combination with a pro-rata activation (no merit order) make it difficult for any new player to offer on this market with a different technology from the one the price caps where designed for. In the end there is low competition on the R2 market resulting in higher prices for the TSO and therefore for the end consumer. In the UK (Good Energy), R1 is open to all. Large generators are obligated to participate with the remainder of the service being provided through tenders and bilateral contracts. R2 does not exist in the UK. R3 is also open and provided through tenders and bilateral contracts. Next Kraftwerke Germany highlights that the current grid charges and surcharges system in Germany hampers flexibility from the demand side. In addition, the correction of imbalance and information transfer to supplier is an issue when talking about flexibility from aggregators as service providers. Moreover, Next Kraftwerke Germany claims that In the French market, the participation at control reserve markets is mainly possible via secondary market. For the Austrian aggregator Oekostrom, the technical implementation and installation of remote control system as well as suitable generation and installation costs as fixed costs are the main barriers. Further, Oekostrom states, that new market participants can be observed in the last couple of years which has increased competitiveness on the markets. Market entry requires technical prequalification examination of the units or pools. RE-Pro Italy highlights the fact of a lot of competition in the market. In contrast, the market in Cyprus is not open yet for aggregators such as RE-Pro Cyprus as the liberalization in the Cypriot market is not finished so far. The Third Energy Package has not yet been fully implemented by Cyprus. This is because in Cyprus only one company generates and supplies electricity. Therefore, there is no wholesale market and there are no cross-border links.31 As a consequence, the determination of the wholesale price is not completely free from political


31 Bertoldi P, Zancanella P, Boza-Kiss B.; Demand Response Status in EU Member States; EUR 27998 EN; doi: 10.2790/962868, p. 110.



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interference. A clear cost based analysis is missing, which happens as well irrespective of the upward or downward movement of the market. EDP underlines the importance of infrastructure for DSM/DR, such as smart meters, home management systems, platforms, which is not yet deployed (and not even planned) in Portugal or Spain. Due to the complexity of the business models, the acquisition of new costumers is very time consuming. Besides, the benefits of EDP Comercial have not been clearly justified and evaluated and the real value of DSM at this moment is rather unclear. Finally, an important barrier in Portugal is linked to the fact that reserves are designed just for thermal power plants and hydro. A participation in reserves with DSM will only be possible if the rules and the regulatory and legal framework changes.

4.3 Lack of regulation

The lack of regulation or standardisation can be a barrier for aggregators due to legal uncertainty and high investment risks, as already seen partly in chapter 4.2.1. It may have various forms with different consequences for the aggregators, so we examine in the further course of the text the following issues: The lack of standard contracts or complexity to deal with certain (new) technologies within a standard contract as well as a lack of standards and processes for interactions between market actors (4.3.1), the lack of rules regarding allocation, metering, billing, reconciliation and data communication (4.3.2) and the lack of clear overall objectives and role of the national regulator (4.3.3) as well as the data and privacy protection (4.3.4). Defining the roles and responsibilities of the different actors involved (e.g. retailers, BRPs, DSOs, aggregators, etc.) is crucial to guarantee well set boundary conditions.32

4.3.1 Lack of standard contracts and lack of standards and processes for interactions between market actors

The aggregators were asked to comment and rate two issues related to the subject:

Lack of standard contracts or the complexity to deal with certain (new)

technologies within a standard contract

Frameworks for different market actors hinder each other and a lack of

standards and processes for interactions between market actors.

In general, standard contracts as well as certain standards and processes can decrease the complexity and increase the legal certainty for the participants. The standards should ensure smooth contractual processes, fair financial

32 To “avoid that any of these actors exploit regulatory loopholes and free-ride on the back of other actors and ultimately all customers”, Eurelectric, CEER Consultation “Regulatory and Market Aspects of Demand-Side Flexibility”, 01/2014, p. 7.



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adjustment mechanism and standard communication procedures. If contractual arrangements are necessary between market parties, they should be streamlined and simple, and reflect the respective costs and risks for all parties.33 Standard contracts as well as standards and processes between market actors are also important to enable cross border flexibility trade. There is in the longer perspective a need for harmonised EU wide principles and methodologies.34

Lack of standard contracts

Figure 8 and the answers given by the aggregators demonstrate that the majority of the aggregators does not see the lack of standard contracts or the complexity to deal with certain (new) technologies within a standard contract as an important problem.

Figure 8 Histogram of question 4.1 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value.

Only few aggregators within the consortium criticized the lack of these instruments. EDP declares that these issues need to be taken into account, but it should not be seen as a dramatic problem. Relevant exceptions have to be made for the cases of Italy and Cyprus. In both countries the lack of standard contracts and standard processes is weighted as very important and seen as a relevant barrier. RE-Pro Italy highlights that the framework is very crucial, as it gives precise guidance for potential activities. For Cyprus it has to be highlighted that the Cypriote market is still isolated from the European system and that

33 EG3 Report, Regulatory Recommendations for the Deployment of Flexibility, January 2015, p. 35.




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technologies like CHP, biogas and biomass can only be implemented after prior clear governmental decision.

Lack of standards and processes for interactions between market actors

Figure 9 and Table 9 illustrate that the lack of standards and processes for interactions between market actors has more relevance for aggregators operating in countries with rather closed markets and less stable frameworks (with a certain exemption to be made for Germany).

Figure 9: Histogram of question 4.2 from 1-5 (with 1: most important). The dashed blue line indicates the rating’s mean value.



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Table 9: Answers related to standards and processes

4.2) Frameworks for different market actors hinder each other and a lack of standards and processes for interactions between market actors.

Comments

Good Energy (United Kingdom) Unknown outcomes of providing aggregation/flexibility services to the TSO, whereby customers connected on to the DSO may be causing localised issues - frameworks are currently not linked.


Standardisation helpful in case of Combined aggregator model to regulate relationship between BRPs.

Next Kraftwerke (Belgium) Standardisation helpful in case of Combined aggregator model to regulate relationship between BRPs.

EDP (Portugal) The regulatory and legal frameworks do not envisage the aggregator entity. Therefore, this figure needs to be included as well as their rights and duties, namely the relation with other energy bodies/ entities. If independent aggregators appear in the market asking clients for changing their consumptions, then it could introduce deviation/ unbalances for EDP Comercial.

EDP (Spain) Nothing is yet defined. The aggregator entity should be correctly defined.

RE-Pro (Italy) Framework is very important, existing, regulated and hence giving precise guidance for potential activities.

RE-Pro (Cyprus) [No rating, as no framework in place].

Oekostrom and Good Energy do not see the lack of standard processes for interactions between market actors as an important barrier. In particular, Good Energy explains that in the United Kingdom unknown outcomes of providing aggregation/flexibility services to the TSO exist, whereby customers connected on to the DSO may be causing localised issues. This could become a problem in the future as DSOs become more responsible for balancing their networks. Next Kraftwerke Germany sees an issue with respect to relationships with BRPs. There are no standards for this, and the BRP and retailer often have no interest in working with the aggregator to reach such an agreement. The reason for this is that BRPs/retailers usually see the aggregator as a competitor.35 In case that there are two BRPs on the same connection point (one BRP as independent aggregator and one BRP as supplier), the supplier is compensated for imbalances. A standardisation of this relationship would be helpful. Further, the standardisation could also include the information exchange between aggregator and supplier (e.g. it is important for the supplier to know what is going on in his




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BRP when the aggregator gets a call for control reserve). Whereas Next Kraftwerke Belgium does not identify a current problem, but standards and processes are under discussion. EDP Portugal claims that the lack of standards and processes for interactions between market actors is a barrier of high importance. The Portuguese regulatory and legal frameworks do not envisage the business models of aggregators as such. Therefore, this issue needs to be included as well as the rights and duties of the aggregators, namely the relation with other energy bodies or entities. Also Re-Pro Italy states that the framework is very important. RE-Pro claims especially for Cyprus that there is no framework in place for energy aggregation.

4.3.2 Rules regarding allocation, metering, billing, reconciliation and data communication

The second aspect relates to the question whether the (lack of) rules regarding allocation, metering, billing, reconciliation and data communication hinders the work of the aggregators.


Figure 10 and Table 10 show that the lack of rules regarding allocation, metering, billing, reconciliation and data communication is not seen as a major problem but also cannot be neglected by the aggregators within the consortium. The lack of regulation is important for aggregators with small-scale and medium-scale DSM in their portfolio, a lack of rules is mainly seen related to small-scale DSM.



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Table 10: Answers related to rules regarding allocation, metering, billing, reconciliation and data communication

4.3) Lack of rules regarding allocation, metering, billing, reconciliation and data communication

Comments

Good Energy (United Kingdom) These specifications are well defined but complex and not easy to access for all.


More related to small-scale DSM so not relevant for Next Kraftwerke because they are focusing on large-scale DSM.

Next Kraftwerke Germany (France) More related to small-scale DSM so not relevant for Next Kraftwerke because they are focusing on large-scale DSM.

Next Kraftwerke (Belgium) More related to small-scale DR and DSM so less relevant for Next Kraftwerke because Next Kraftwerke focuses on medium-sized and large-scale DR.

EDP (Portugal) The billing scheme for DSM should be evaluated. The regulatory authority probably would like to define rules to protect customers. In addition, the DSM devices that customer have to install at their homes/ properties should comply with standards, i.e., not all brands/ types of equipment are allowed.

EDP (Spain) Same comment for Spain.

As Table 10 illustrates, for Next Kraftwerke Belgium and Next Kraftwerke Germany this problem relates rather to small-scale DR, so it is less relevant for Next Kraftwerke Belgium as they are focusing on medium sized and large-scale DR/DSM. In Germany is a new law on the way with respect to smart meters and supplements. The “Gesetz zur Digitalisierung der Energiewende” (“Law on digitalisation of the German energy transition”) regulates inter alia the rollout of smart meters. In the eyes of Good Energy, these specifications are well defined in the United Kingdom but complex and not easy to access for all. It is highlighted that data requirements are the same for all participants regardless of size, but for small sites it can be cost prohibitive. Good Energy suggests that a more sensible approach would be to allow smaller sites to participate on a data sampling basis. EDP states that in Portugal and Spain the billing scheme for DSM should be evaluated. The regulatory authority probably would like to define rules to protect customers (e.g. the amount of penalisations for not providing the subscribed flexibility, the maximum amount that clients have to provide, etc.). In addition, the DSM devices that customers have to install at their homes should comply with certain standards.



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4.3.3 Lack of clear overall objectives and role of the national regulator

A lack of clear overall objectives and an unproductive role of the national regulator can also constitute barriers for aggregators. For examining this, the aggregators were asked whether they could observe (1) a lack of clear and specific technical, societal, political and environmental objectives and (2) an unwillingness of the regulator to discuss or a lack of knowledge/resources at the level of the regulator.

Lack of clear overall objectives


Figure 11 highlights that the lack of clear and specific overall objectives is seen as a problem of medium importance by the aggregators within the consortium. Next Kraftwerke Belgium and Next Kraftwerke Germany in France express their concerns in respect of the national nuclear power policy. Next Kraftwerke France states that nuclear power plants are the main electricity producers. Therefore, sustainable objectives should target a decrease in production out of nuclear power plants instead of its protection. The recent decision to prolong electricity production from nuclear plants has a big impact on long-term business models. This underlines the call of Next Kraftwerke Belgium for a long-term policy (see 4.2.1). Good Energy criticizes that apart from “speed of response”, there are no other objectives included as part of these services. It is further stated that the market finds the cheapest solution, regardless of long-term benefits (environmental, societal).



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Role of the national regulator

Figure 12 and the respective answers by the aggregators underline that a certain unwillingness or lack of knowledge by the national regulators is seen as a problem by the aggregators within the consortium. Especially a more proactive approach of the regulators is demanded.


The unwillingness of the regulator to discuss or the lack of knowledge/resources at the level of the regulator is seen as a problem by the aggregators within the consortium in Austria, Cyprus and the United Kingdom, whereas EDP does not think that this is an issue from the Portuguese side. Cyprus has not yet finished the full implementation of the Third Energy Package.36 Next Kraftwerke Belgium states that the Belgian regulator has an in-depth knowledge about the functioning of the energy market. Recently, the regulator started to show a more and more proactive approach in order to allow smaller players to enter new market segments. Therefore, expectations for the future are rather positive. Good Energy states that competing administrative models exist between the market regulator, the TSO and the DSO; all have a roll but separate regulation and objectives exist. The actors do not operate in a joined-up way. In addition, the UK is structured to deal with peak output rather than demand limiting or demand shift.




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4.3.4 Data and privacy protection

Finally, the aggregators were asked as part of the barrier analysis how they assess the data and privacy protection in their respective countries and whether they could determine a lack of a clear approach for the management of this data represent a barrier for them. Without appropriate data, neither DSOs nor retailers and other market players will be able to perform their task. Customers must always give their explicit consent before their data are made available to third parties and must be informed for what purpose the data are used.37 New technologies, such as smart meters, make it technically possible to process much more granular data than is currently processed in the retail energy market sector, which could give a unique insight into the activities of households. If compliance with the data protection framework and effective enforcement is not ensured, this information may be used not only for analysing the consumption patterns of particular households but also for other purposes that are not compatible with the one for which the data has been collected.38


Figure 13 and Table 11 indicate that whether the data and privacy protection is to be seen as a real barrier for the aggregators, depends mainly on the national framework and the respective end-consumers (not large-scale industrial). It is not to be qualified as an important barrier for aggregation in general.

37 Eurelectric, CEER Consultation “Regulatory and Market Aspects of Demand-Side Flexibility”, 01/2014, p. 8.

38 BEUC, Building a consumer-centric Energy Union, 07/2015, p. 20.



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Table 11: Answers related to data and privacy protection

4.6) Data and privacy protection and lack of a clear approach for the management of this data

Comments

Good Energy (United Kingdom) Data privacy and protection are well regulated in the UK.


Client data is always treated confidentially and all data management will in particular be in line with privacy regulation of Germany.

Next Kraftwerke Germany (France) Client data is always treated confidentially and all data management will in particular be in line with privacy regulation of France.

Next Kraftwerke (Belgium) More related to small-scale DR and DSM so less relevant for Next Kraftwerke because Next Kraftwerke focuses on medium-sized and large-scale DR.

Oekostrom (Austria) Biggest issue concerning data is their availability of the customer. Currently there are only very few network operators who have started or completed smart-meter roll-out, and the access to data in a prompt and safe way is crucial; no regulation on user-friendly visualisation, regulation involves technical and safety standards and communication and data storage intervals; not so much an issue for current business model but for future.

EDP (Portugal) Clients’ data are confidential. Data privacy and protection are well regulated in the Portugal. Cyber security has to be taken into account on the implementation of our aggregator.

EDP (Spain) Clients’ data are confidential. Data privacy and protection are well regulated in the Spain. Cyber security has to be taken into account on the implementation of our aggregator.

RE-Pro (Italy) Data in our understanding: accuracy of any and each item that builds up the customers energy bill (E.g. grid charges, pure electricity price, metering device, RES surcharge & taxes); effectively these components are very transparent, communicated by the providers and traceable.

The rating of this issue varies a lot among the aggregators. For Next Kraftwerke Germany and Next Kraftwerke Belgium the data and privacy protection is more related to small-scale DR and DSM, so it is not relevant as their focus is on (medium-sized and) large-scale DR/DSM. Good Energy states that the data and privacy protection is well regulated in the United Kingdom, whereas for EDP, RE-Pro Italy and Oekostrom this issue shows a relevant barrier.



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For Oekostrom, the biggest issue concerning data and privacy protection in Austria is the availability of the customer. EDP underlines that clients’ data has to be kept confidential, so certain activities are hindered. In respect to the cyber security, EDP stresses that this issue has to be taken into account on the implementation of their aggregator.

4.4 Market rules

The aggregators within the consortium defined the current market situation as one of the two main barriers for the deployment and operations of their business models (see 4.2.2). The market situation is largely determined by the market rules, which arise in varying forms and cause different impacts on the aggregators and their business models. The main regulatory barriers relating to market rules are the wholesale and network tariffs (4.4.1), the complex of bids (4.4.2) and the prequalification for the market (4.4.3).

4.4.1 Wholesale and network tariffs

The aggregators were asked whether no or not flexible enough wholesale and network tariffs (i.e. low proportion of the energy component in the final electricity cost) and a lack of quarter-hour measurement were seen as barriers. The wholesale and network tariffs of energy have an influence on the cost-effectiveness and market participation of the aggregators. The degrees of influence depend on the national network tariffs and the categories of customers, e.g. time of use tariffs rely on a price signal to provide an incentive to respond and will allow consumers to see the value of their service. 39 Smart metering will presumably open the door to a more cost-reflective tariff structure.40


40 Eurelectric, CEER Consultation “Regulatory and Market Aspects of Demand-Side Flexibility”, 01/2014, p. 10.



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Figure 14 and Table 12 point out that the wholesale and network tariffs are important for the aggregators. They are influencing their participation in the markets and its cost-effectiveness. The lack of quarter-hour measurement is not seen as a fairly important barrier by the aggregators.

Table 12: Answers related to wholesale and network tariffs

4.7) No or not flexible enough wholesale and network tariffs (low proportion of the energy component in the final electricity cost?) and lack of quarter-hour measurement

Comments

Good Energy (United Kingdom) Benefits of flexibility can only be accessed by Half Hourly settled customers apart from fixed day/night or seasonal products.


Domestic customers not measured quarter-hourly; Network tariffs/ EEG surcharges are not flexible and are very high: Earnings from flexible power supply are marginal for customers.

Next Kraftwerke (Belgium) Answer the same as for Next Kraftwerke Germany.

Oekostrom (Austria) Lack of quarter-hour measurement is crucial point in this issue; as long as smart-meters are not in operation, there is no quarter-hour measurement for customers with synthetic load profiles.



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EDP (Portugal) Electricity consumption data is recorded in a quarter-hour basis, so no issue at this point. It is just required to ensure that retailers have access to these data, as mentioned in

Table 3.

Regarding the Mibel market (Iberian Electricity Market), it is worth to mention that negative prices are not allowed, i.e., the floor price is 0 €/MWh and the cap price is 180,3 €/MWh. This narrow band of prices (compared to other markets without this limitations) may hinder the activity of an aggregator based on DSM, because the incentives to reduce/increase consumption based on price signals could be poorly attractive. As pointed out above, the benefits of DSM have not been clearly justified and evaluated in Portugal and Spain, being this point an import issue to be validated.

EDP (Spain) The same for Spain.

RE-Pro (Cyprus) Only one central electricity producer; wholesale price not fully based on clear cost based analysis, certain political influence; irrespective of the upward or downward movement of the market.

For Next Kraftwerke Germany and Next Kraftwerke Belgium the network tariffs are not flexible and very high. As a consequence, the earnings from flexible power supply are marginal for customers which do not provide incentives to shift consumption patterns. Next Kraftwerke Germany states that the lack of quarter hour measurement is not an issue for their business model. They are focusing on mid-range and large scale consumers above 100.000 kWh which are currently quarter-hour measured, so that a lack does not exist from their point of view. Good Energy notes that benefits of flexibility can only be accessed by half hourly settled customers. The wholesale and network tariffs as well as the lack of quarter-hour measurement are important for RE-Pro which operates as an aggregator as service provider for large scale. In addition, Oekostrom attaches the wholesale and network tariffs as well as the lack of quarter-hour measurement a high importance. Further, Oekostrom highlights that the lack of quarter-hour measurement is in their view the crucial point in this issue. As long as smart-meters are not in operation, there is no quarter-hour measurement for customers with synthetic load profiles. EDP states that the electricity consumption data is recorded in a quarter-hour basis. In general, the benefits of DSM have not been clearly justified and evaluated in Portugal and Spain, so this point shows an import issue to be validated.



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4.4.2 System of bids

The influence of the bids as potential barriers for the aggregators were examined under different aspects. The aggregators were asked

whether they thought that the minimum bid sizes for generation units

were too high or the minimum duration of activation bids was too high,

and

whether they assumed that the bids needed to be symmetric on the

different markets.

Minimum bid sizes for generation units


Figure 15 and Table 13 illustrate that the minimum bid sizes for generation units and the minimum duration of activation bids could be a barrier for aggregators, but is not seen with a general high priority by the aggregators within the consortium.



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Table 13: Answers related to minimum bid sizes and minimum duration of activation bids

4.8) Minimum bid sizes for generation units are too high or minimum duration of activation bids is too high

Comments

Good Energy (United Kingdom) Benefits of flexibility can only be accessed by Half Hourly settled customers.


For Next Kraftwerke Germany, it is less a problem since Next Kraftwerke already has a sufficient portfolio. All this information (bid sizes, activation time, gate closures) and other details is publicly available on website (regelleistung.net).

Next Kraftwerke Germany (France) Large scale controllable generators are obliged to provide the R1 and R2” of control reserve. Third parties can only participate via a secondary market. Aggregators should offer what the TSO need but they should be allowed to participate directly.

Next Kraftwerke (Belgium) A smaller bid size is always beneficial. The activation duration of products should be defined by the TSO based on the needs of the system.

Oekostrom (Austria) Not relevant for business model.

EDP (Portugal) N/A because our aggregator is based on DSM (retailer side). If we want to evolve our aggregator so it can participate in reverses, then this point is important, because our reserves are specially designed for thermal power plans and hydro. In this case, it is an important barrier.

EDP (Spain) N/A because our aggregator is based on DSM (retailer side).

As can be seen from Table 13, Oekostrom, Good Energy and Next Kraftwerke Germany stated that the minimum bid sizes and the minimum duration of activation bids are not relevant for their business models. It is less a problem since Next Kraftwerke already has a sufficient portfolio. All this information (bid sizes, activation time, gate closures) and other details is publicly available on website (regelleistung.net). Next Kraftwerke Belgium takes the view that the bid sizes and the minimum duration of activation bids are something the TSO should define and not the regulator. The TSO defines the product criteria independent of the assets providing it. In France, Edf is obliged to provide all control reserve. Large scale generators are obliged to provide R1 and R2. Third parties can only participate via a secondary market. Next Kraftwerke Germany in France underlines that aggregators should offer what the TSO need but they should be allowed to participate directly. Furthermore, EDP underlines that the minimum bid size might be problematic for prosumers (small producers), but the bid complexity is



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currently not an issue for EDP. However, the generation of small producers is much lower than clients demand.

Symmetric bids


Figure 16 shows that there is no consistent picture regarding the rating of the importance among the aggregators. Table 14 underlines that the need to be symmetric on the different markets relates only to the reserve market.

Table 14: Answers related to symmetric bids

4.9) Bids need to be symmetric on the different markets

Comments


All this information (bid sizes, activation time, gate closures) and other details are publicly available on regelleistung.net.

Next Kraftwerke (Belgium) In general, the possibility to allow (uncombined) asymmetric bids can give additional flexibility to the market. This means that a symmetric overall product as R1 spanning over 200mHz deviations of the grid frequency can be combined by independent bids of symmetric and asymmetric products together forming a standard symmetric product (see R1 in Belgium as explained on the Elia website).

Oekostrom (Austria) Not relevant for business model.

EDP (Portugal) Not relevant for business model.

EDP (Spain) Not relevant for business model.



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Related to the need of the bids to be symmetric on the different markets, Next Kraftwerke Germany declares that only for primary reserves it needs to be symmetric, other reserve markets do not have to be symmetrical. All the information (bid sizes, activation time, gate closures) and other details are publicly available on the website (regelleistung.net). For Belgium, the information can be found on the TSO website (www.elia.be).

4.4.3. Prequalification for market participation

The aggregators were asked whether there existed high barriers (for example bank guarantees) to become prequalified in their respective Member States. Aggregation is only beneficial to consumers if the aggregator is able to transform multiple small chunks of flexibility resources into a product that is tradable on the market. For this purpose, the aggregator must be able to fulfil registration, prequalification (if relevant), measurement and communication required in these markets, as if they were a single power plant in the place of the individual consumer.41


For the majority of the aggregators within the consortium, the prequalification is not a high barrier (see Figure 17). The survey under the aggregators reveiled that the prequalification as a barrier depends on the national framework and legal requirements in the operated country. For Oekostrom, EDP and Next Kraftwerke Germany, the aspect of prequalification is not a high barrier. In Belgium, the need for prequalification for the reserve power market and the




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ability check for the trading market do not constitute high barriers. However, prequalification is mentioned as a barrier in Italy and Cyprus.

4.5 Miscellaneous

4.5.1 No appropriate CACM, network codes, cooperation mechanisms and measurement technology for flexibility between Member states

The aggregators were asked whether no appropriate Capacity Allocation and Congestion Management (CACM), network codes, cooperation mechanisms and measurement technology for flexibility between Member states were a barrier for inter-EU treatment. In order to strengthen the interaction between the Member States, they should ensure that internationally accepted open and interoperable standards for interfaces are in place.42 To achieve this target, the network codes, cooperation mechanisms etc. are important measures.


Figure 18 and the answers of the aggregators illustrate that the importance of the CACM (as one of the network codes) depends on the respective business model and whether the aggregator acts in a cross-border way. For aggregators that offer their products in more than one Member State, the regulations between the Member States can state a high barrier. Cooperation mechanisms are hardly used in any of the Member States.




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In general, a higher market liquidity would be beneficial for the aggregators, so the CACM is highly valued by some of the aggregators. Whereas Good Energy does not have any direct experience with this and the UK is limited in its current interconnectivity. Spain and Portugal are well interconnected and the MIBEL is an Iberian market.

4.5.2 No legal choice between building new capacity and contracting flexibility for grid operators

The aggregators were asked whether a missing legal choice between building new capacity and contracting flexibility for grid operators presents a barrier in their point of view. Figure 19 demonstrates that the issue of the legal choice between building new capacity and contracting flexibility for grid operators is not assessed as very important by the aggregators within the consortium.


Next Kraftwerke Belgium considers that the bid sizes are too high so this might hinder the legal choice. Good Energy declares that the choice is there, but market favours cheapest cost solution with no limitation of carbon. Since EDP´s aggregator will just embrace the activities of retailers and it will be purely based on DSM, this question is not applicable for their aggregator.



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5. Conclusions

The objective of this report has been to analyse the technical, legal and regulatory barriers for current business models. The research illustrates that there currently exists a high number of barriers for the full participation of aggregators in the energy market.

5.1 Legal and regulatory framework

The EU regulation for aggregators is not sufficiently differentiated. The aggregators are incorporated in the market and accepted as market participants. However, an aggregator-specific regulation does not yet exist and the legal provisions, especially the definition of the “aggregator”, are not up to date with the variety of existing business models. The formal definition of ‘aggregator’ in the EED is just seen from the load side and does not include the generation side, whereas the definition in practice includes both sides of aggregation.

5.2 Technical barriers

Technical barriers aggregators are currently dealing with is the lack of smart grids infrastructure. Missing smart grid infrastructure seems to be a main technical barrier upstaging other technical barriers (e.g. limited cycles of storages). Although, this problem will be solved in the upcoming years by the European-wide smart meter rollout, the situation between European countries will still vary in future (e.g. see different time horizons). Another key element of smart grids infrastructure addresses standardization of components and communication devices to allow aggregators using the same equipment. The need for improved forecast quality will stay an important issue in future terms, e.g. in respect of higher product variety and an increasing share of renewables within the aggregator’s portfolio.

5.3. Main barriers

The aggregators within the consortium identify the main barriers for the optimal deployment and operations of current business models in the areas legal and regulatory framework and the current market situation. It can be stated that the aggregators are asking for a clearer framework and the development of a stronger position of the aggregators in the market. The role of the aggregators has to be established in a stable and long-lasting way in the existing regulations and markets rules.

5.4 Lack of regulation

The aggregators within the consortium perceive the lack of regulation as a problematic barrier for the deployment of their business models:



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The lack of standard contracts and the lack of standards and processes

have more relevance for aggregators operating in countries with less

stable frameworks.

The lack of rules regarding allocation, metering, billing, reconciliation

and data communication is not seen as a major problem but also cannot

be neglected by the aggregators within the consortium. The lack of

regulation is important for aggregators with small-scale and medium-

scale DSM in their portfolio, a lack of rules is mainly seen related to

small-scale DSM.

The lack of clear and specific overall objectives as well as a certain

unwillingness of the regulator or lack of knowledge is seen as a problem

by the majority of the aggregators within the consortium. They demand

especially a more proactive approach of the regulators.

Whether the data and privacy protection is to be seen as a real barrier

for the aggregators, depends mainly on the national framework and the

respective business model. In general, it is not to be qualified as an

important barrier for aggregation.

5.5 Market rules

The market rules are influencing the participation of the aggregators in the market; in their opinion, different aspects could be improved. The wholesale and network tariffs are considered very important. Whereas the prequalification does not state a real barrier for the majority of the aggregators. The complex of bids is playing an important role for the aggregators, but in their opinion, they should be regulated by the market actors, not by the regulators.

The wholesale and network tariffs are important for the aggregators.

They are influencing their participation in the markets and its cost-

effectiveness. The lack of quarter-hour measurement is not seen as an

important barrier by the aggregators.

Bidding is an important activity of aggregators in the market. The

minimum bid sizes for generation units, the minimum duration of

activation bids as well as their symmetry on the different markets could

be a barrier for aggregators, but is not seen with high priority by the

aggregators within the consortium. They should not be defined by the

regulator in the view of the majority of the aggregators within the

consortium. The need to be symmetric on the different markets relates

only to the reserve market.

Prequalification as a barrier depends on the national framework and

legal requirements in the operated country. For the majority of the

aggregators within the consortium, the prequalification is not assessed

as a high barrier.



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5.6 Miscellaneous

The instruments between the Member States, as CACM or other network codes, are important for the aggregators who act cross-border way. The issue of having a legal choice between new capacities and contracting flexibility for grid operators is not seen as an important one.

5.7 Summing up the legal and regulatory barriers

The regulatory and legal barriers for optimal deployment and operation of current business models are resulting largely from the lack of regulation and the missing clear framework for aggregation in the EU and in the national laws. The unappropriated market situation is also a result of the missing regulation in wide parts. However, it should be emphasised that some aspects, e.g. the complex of bids, should be self-regulated by the market. The rising share of distributed generation across Europe requires a clear legal framework and a long-term energy policy with inclusion of aggregators.



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6. Annex

Annex: Questionnaire with respect to barriers for aggregators developing their business model

Technical barriers

3) Which of the following technical barriers for aggregation do you experience? [please

also rank 1-5 with 1: most important]

3.1) No sufficient access to data on consumption, self-production and pricing (smart grid infrastructure is missing)

3.5) Insufficient standardisation on flexibility technology and requirements

3.2) No possibility of registering consumption on balance

settlement period (15,30 or 60 minutes)

3.3) Short life cycle of storage (15 year) compared to other

technologies

3.4) Insufficient forecasting techniques for RES

3.5) Others?

General barriers

1) What are the main barriers for developing your business model?



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Legal and regulatory barriers

4) Which of the following legal and regulatory (and market design) barriers for

aggregation do you experience? [please also rank 1-5 with 1: most important]

4.1) No or not flexible enough wholesale and network tariffs (low proportion of the energy component in the final

electricity cost?) and lack of quarter-hour measurement

4.2) Minimum bid sizes for generation units are too high or

minimum duration of activation bids is too high

4.3) Bids need to be symmetric on the different markets

4.4) Gate closures are too early and/or not harmonized as

close as possible to real time.

4.5) Lack of standard contracts or the complexity to deal

with certain (new) technologies within a standard contract

4.6) Data and privacy protection and lack of a clear

approach for the management of this data

4.7) Frameworks for different market actors hinder each

other and a lack of standards and processes for interactions between market actors.

4.8) Lack of rules regarding allocation, metering, billing,

reconciliation and data communication

4.9) Lack of clear and specific technical, societal, political

and environmental objectives.



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4.10) No legal choice between building new capacity and

contracting flexibility for grid operators (minimum duration of activation is too high or bid sizes are too high, etc...)

4.11) The definition of products does not correspond to

flexible product requirements (for example baseload blocks)

4.12) Unwillingness of the regulator to discuss or lack of

knowledge/resources at the level of the regulator

4.13) High barriers (for example bank guarantees) to

become prequalified

4.14) No appropriate Capacity Allocation and Congestion Management (CACM), network codes, cooperation

mechanisms and measurement technology for flexibility between member states

4.15) Others?



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Technical references

Project Acronym BestRES

Project Title Best practices and implementation of innovative business models for Renewable Energy aggregators

Project Coordinator Silvia Caneva - WIP [email protected]

Project Duration March 2016 – February 2019 (36 months)

Deliverable No. D2.3

Dissemination level* PU

Work Package WP2 - Adequacy Analysis of Current Business Models

Task Task 2.3 – Determine technical, regulatory, and legal barriers preventing optimal deployment of current BMs

Lead beneficiary SUER

Contributing beneficiaries All partners

Due date of deliverable 31 August 2016

* PU = Public

PP = Restricted to other programme participants (including the Commission Services)

RE = Restricted to a group specified by the consortium (including the Commission Services)

CO = Confidential, only for members of the consortium (including the Commission Services)

v Date Beneficiary Author

1.0 28/07/2016 SUER Fabian Pause



4.0 31/08/2016 WIP Silvia Caneva

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