How will the operational environment change?
Traditionally electric power has been produced in centrally located power plants are they thermal, nuclear or hydro power plants. Produced electricity has been transferred via nationwide high voltage transfer grids (110kV to 400kV) to local middle voltage distribution networks (10kV to 33kV) and further to clients (110V to 660V) are they businesses, communities or consumers.
Technology development of harvesting wind and solar energy economically in small scale has made it possible to start to produce electric energy locally. Also, regulatory limitations to produce and sell electric power to local distribution networks has been removed gradually and today any electric power user is a potential power producer.
A major market driver for a local energy community to produce its own energy is the opportunity to cutting its electricity costs. For example, a business park could produce its own energy from renewable energy sources such as wind and solar. In practice that leaves basically two technical options: an on-grid or off-grid solution. Both systems need its own middle voltage distribution network, but with on-grid system the community can safeguard its energy supply by covering some part of its demand from public grid and also supply its surplus to public grid.
With off-grid system the energy community is independent on outside operators and needs therefore different means to safeguard energy availability. Those can be technical and operational. Technical means are for example energy storages and technical capacity limitations while operational means are tariff structures that utilize elasticity of demand and can be either incentives or punishments.
However, while electric power tariff consists of three main components (i) capacity charge, (ii) consumption charge and (iii) taxes, only part of the tariff structure can be set by energy producer or community itself. Taxes are set by political decision makers and that’s something single power producers cannot have an impact. In renewable energy production major part of the costs incur from initial investment, while energy itself can be harvested free of charge. However, traditionally capacity charge that comes from initial investment cost has been in the same range as consumption charge and therefore it would be lucrative to find a technical solution, that minimizes capacity charges and makes it possible to cut some part of the consumption charge, too.