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The Untapped Potential Of Device Flexibility With Fixed-price Electricity Contracts
How Can Customers With Fixed Contracts Benefit From Spot Optimization?
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Transform Customer Devices into Profitable Electricity Traders with Podero
A lot of buzz surrounds spot optimization, electricity trading, and household device flexibility, yet most customers have never earned a single Euro. The reason? Most utilities lack the necessary software systems. In this article, we'll explore the root causes of this issue, solutions for giving devices access to the electricity markets, and how Podero helps utilities achieve this.
Over 95% of European customers can't benefit from volatile electricity markets because most utilities lack the necessary software systems. Podero enables utilities to trade their customers’ device flexibility, allowing customers to save money by shifting consumption to cheaper times. Podero helps utilities calculate the savings of each customer so that market earnings can be fairly shared with customers.
The Problem: Few Customers Have Dynamic Electricity Contracts. How Can They Benefit From Their Devices Flexibility?
Until recently, consumers didn’t have devices capable of shifting their electric loads. Therefore, spot optimization and electricity trading were irrelevant for them. The rise of powerful flexible devices like heat pumps, electric vehicles, and batteries has fundamentally shifted customer needs.
Renewables like solar and wind cause spikes in production, while these new flexible devices cause spikes in consumption — unfortunately, mostly at opposite times. As an example, we turn up our heating and plug in our car just as the sun sets. Experts call this the duck curve.
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Image Source: Soltaro. The Duck Curve and Solar.
Wholesale spot market prices correlate closely with the duck curve. This means you can use the duck curve to your advantage to save energy costs by changing your consumption patterns by just a few hours. In practice this means using more energy during sunny and windy times of the day. For example you can pre-heat house before sunset or predominately charge your car during favorable times.
But there's a problem: over 95% of customers are not billed according to market prices (i.e. the duck curve) but have fixed price contracts. They are billed the same price per kilowatt-hour regardless of when they use energy. That means even if they shift their devices electricity consumption to cheap and green times, they can’t profit from it.
The Solution: Trade the Aggregated Device Flexibility on the Electricity Markets and Pass on the Proceeds
Electricity trading happens somewhat independently of customers’ electricity contracts. In practice, utilities buy/trade the aggregate load of their customer base on various electricity markets, such as the spot market or balancing energy markets.
Most utilities have to buy electricity according to the duck curve because they can't influence customer device behavior. Those that can steer devices shift power from expensive to cheap, resulting in their aggregated load curve to run roughly counter to the duck curve.
Utilities buy power based on their forecasted load curve. A utility with steering abilities can therefore buy a different forecasted curve than one that can’t control devices. Because this steered load curve runs counter to the duck curve, it is usually much cheaper to buy.
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Through cheaper electricity purchasing, the utility saves money. If prices change after purchasing, the utility can make additional money on the intra-day markets by selling power already purchased and buying it back at cheaper times.
Knowing precisely how much power has been bought for each customer and at what price, the utility can pass on the exact savings generated through cheaper purchasing and trading to each customer. Done correctly, this can result in significant savings for customers.
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Podero provides utilities with software to perform the mechanisms described above.
Utilities use Podero’s white-label app (often to start) or integrate Podero’s Partner API into their user interface. Customers can then onboard their devices via this user interface. Podero starts monitoring the devices and calculates the optimal load curves.
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Podero integrates with the trading system, most often with the virtual power plant of the customer, and transmits the load curves of the aggregated device fleet to the utility. The utility then buys electricity based on this optimal load curve. The forecast can be adapted if prices change on the intra-day market, and a more optimal load curve can be bought.
Once the utility buys the optimized load curve, Podero steers devices accordingly. Podero’s steering algorithms ensure that users’ comfort is never compromised. Should a customer shower longer than expected or drive their car much differently than forecasted, Podero ensures enough warm water is available and the car is adequately charged. Podero predicts certain deviations from the forecasted user/device behavior, often absorbed by the rest of the device fleet.
After the device has been steered, Podero calculates the savings of each device and transmits this information to the utility’s billing system. The utility can then deduct the customers’ savings from the bill at the end of the month.
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