Transformation of the energy sector increases renewable power generation that depends on the weather. Consumers will become also producers. Society is being electrified; for instance, electric cars are changing the energy market. It is evident for a variety of reasons that a new kind of agility is needed on the electricity market. What sort of intelligence does this require of systems?
In Finland, power generation is largely based on nuclear energy as baseload power, combined heat and power generation, and condensing power capacity used during peak demand. Hydropower imported from the Nordic countries has been a major source of regulating power.
Alongside the implementation of EU and national energy and climate policies, the share of weather-dependent wind and solar power generation is on the rise while the production capacity based on fossil fuels is shrinking. Carbon dioxide emissions are reduced, but at the same time the vulnerability of the system is increasing. The EU is responding to this trend by revising its electricity market rules.
Electricity is an exceptional commodity in that its production and consumption in the network must be in balance at all times. There is always the risk of system failure and black-outs. Demand peaks can be cut by reducing power use, for instance, at industrial plants that are suited to this purpose. At the same time, power plants are kept in reserve to provide for exceptional disturbances. However, such means are often relatively expensive. On the other hand, maintaining momentary balance will require that even smaller players act flexibly.
There is much talk about storing electricity in batteries, but so far their importance is marginal and applies mainly to levelling the highest demand peaks locally. No doubt, electric cars with their large batteries may gradually change this picture. Absolutely the most powerful ‘batteries’ in the Nordic countries are still the dams of the hydropower plants on the slopes of the Scandinavian Mountains, which can be regulated effectively in keeping with demand. There is also growing demand for this regulating power in Central Europe.
Money is the best motivator. The best way to create the right investments and business practices is to let the market determine the price. The value of electrical energy is completely different on a sunny summer day than it is in freezing January.
In northern Europe, we have already advanced far in developing short-term, intra-day trading. When the electricity price encountered by both producers and users is determined by the hour, both have an incentive to act flexibly. This should be our common objective.
Finland has already laid a good foundation: smart meters read remotely every hour have been installed in nearly every home; Fingrid, the transmission system operator, is building an effective national data hub, and so on. Modern networks use large amounts of data, and information security and cybersecurity play a central role. The importance of well-functioning and reliable information exchange cannot be overemphasised.
A smart power grid could be described as a system that effectively combines the traditional wholesale and retail markets, production, transmission and distribution through various smart applications to decentralised energy resources, demand and supply responses, and storage.
Intelligence is needed, above all, to optimise demand and supply and the operation of physical power networks in a cost-effective manner. This helps avoid oversized investments, for instance, in power plants and transmission links, while taking care of the security of supply. At the same time, consumers – who can also be producers – get a better chance to benefit from price fluctuations on the market by means of various automated services. The smart grid is a great opportunity for providers of new services. Finnish companies and IT expertise have a lot to give here, even globally.
Defining artificial intelligence is not easy. I have seen VTT, the Technical Research Centre of Finland, use this kind of definition: Artificial intelligence allows machines, equipment, programs, systems and services to function in a sensible manner depending on the task and situation.
Weak artificial intelligence may be, for example, speech recognition. Strong artificial intelligence, in turn, approaches human intelligence, requires the application of extensive background information and is able to learn.
In energy systems, the ability to learn can be seen as a kind of watershed. It is not much of a trick for effective data-crunching machines to react, for instance, to given market prices and to schedule, say, electric heating accordingly. There is already more artificial intelligence, for example, in smart homes that adjust the temperature according to each resident’s preferences. For the wider energy system, artificial intelligence can be utilised, for instance, for learning associated with the impacts of weather or consumer behaviour (big data) and for integrated energy systems in the fields of electricity, heat and transport.
The task of the public authorities is to create prerequisites for the efficient functioning of the market and for the development of new services. Regulation must set and maintain clearly defined roles for various market players, such as network operators and sellers of electricity. Barriers to entry into competitive markets must be low and the same operating conditions must apply to everyone, for instance in terms of market information.
In autumn 2016, the Ministry of Economic Affairs and Employment of Finland appointed a working group to study the potential of smart grids on the electricity market. Among other things, the working group was commissioned to present concrete actions available for smart grids that would improve customers’ opportunities to play an active role on the electricity market and, in general, would promote the continued security of supply.
Examples of the topics discussed by the working group are: the roles of various players in demand-side management and storage; energy communities and the possibilities they create for customers; transfer pricing supporting demand-side management; the exchange of information associated with demand-side management; and taxation issues.
The working group will issue its report in autumn 2018. However, an interim report will be available in October 2017. It will describe how the work has proceeded and will present the first outlines on the topic. All in all, the aim is to keep Finland a leading country in the development of smart grids.
Director-General at the Energy Department of the Ministry of Economic Affairs and Employment in Finland. The column was initially published on the Ministry's website.