The Role of Aggregators in Smart Grids

1. Introduction

In the ERA-NET Smart Multi-layer Aggregator project [1], the University of South-Eastern Norway (USN) was leading a work package on emerging business models in the energy sector [2] and also performed research on the adoption of new technology to achieve more flexibility within electricity grids [3]. Before this project, we had been researching electronic government, refocusing on smart cities since 2015 [4]. During the ERA-NET project, we soon saw the emerging role of the aggregator as a new actor in the energy market. Smart energy is closely connected to smart cities. Improving energy efficiency is one of the obvious ways of being smart. Smart energy has become more important with energy shortage and increasing energy prices.

The utilization of energy in a city is a complex process. A modern city needs to fulfill the demand for energy for purposes of commerce, household, infrastructure, transport, etc. Sustainable energy, especially solar energy produced in households and other buildings, has changed the current energy market and plays a significant role in the energy landscape for a smart city [5]. Solar power is primarily used for electric energy generation, but a small fraction of the solar power is used for thermal energy.

Statistics published by the International Renewable Energy Agency (IRENA) [6] show that in the last ten years, worldwide solar energy generation capacity increased with a steady high annual growth both for solar photovoltaic and solar thermal; even in the year 2020 when COVID-19 struck the world heavily. The change is shown in Figure 1. Solar photovoltaic energy dominates renewable capacity expansion, accounting for around 100 GW installation capacity growth in 2018−2020.

The next section discusses smart energy as one application domain of smart cities. The third section discusses smart grids and the emerging role of prosumers. The fourth section focuses on the role of aggregators. Section five brings in the topic of electric vehicles in smart cities, and finally, the sixth section provides a conclusion.

2. Smart cities and smart energy

The smart city is a concept with no unified definition [7], but technology plays an important role. The main objective is to improve the quality of life for its citizens through better service provision, reduced environmental footprint, and improved participation. In most cases, smart cities are materialized through projects within application areas [8]. Such application areas can be smart traffic [9], smart parking [10], smart public transport [11], smart waste handling [12], smart safety and security [13], and smart energy, as shown in Figure 2.

Smart energy is a concept where information and communication technologies are used to achieve the process of using devices for energy efficiency. Smart energy is about reducing energy use but also introducing new renewable energy sources.

Smart energy relies on smart grids to improve energy efficiency mainly by adopting smart meters (SM) that allow almost real-time tracking of power consumption. SM can also monitor and control the electric power consumption of appliances. In addition, SM can measure power production from solar panels and power transmission from electric vehicles. During the shift of grids toward smart grids, SM enable customers to use electric power more efficiently, but also contribute to energy pricing based on current demand in the market. This will incentivize customers to plan their consumption and thereby contribute to increased flexibility.

Calvillo, Sánchez, and Villar [14] propose a comprehensive smart city model that includes all energy-related activities while keeping the size and complexity of the model manageable. Such a model is highly desirable to successfully meet the increasing energy needs of present and future cities. They propose five main energy-related activities that have been called intervention areas:

• Generation

• Storage

• Infrastructure

• Facilities

• Transport (mobility)

All these areas are related to each other but contribute to the energy system in different ways: generation provides energy, while storage helps in securing its availability; infrastructure involves the distribution of energy and user interfaces; facilities and transport are the main final consumers of energy, as they need it to operate.

3. Smart grids and prosumers

The energy distribution normally follows a two or three-layer model, where the top level is the transmission system operator (TSO). In Norway, Statnett is the transmission system operator. Statnett is a state enterprise owned by the Norwegian state through the Ministry of Petroleum and Energy. The mission of Statnett is to secure the Norwegian power supply through operations, monitoring, and preparedness. Statnett also plays an essential role in realizing Norway’s climate objectives [15].

The distribution system operators connect the customers to the grid. In 2018 Norway had 124 distribution system operators, with the ten largest having two-thirds of the customers and 60% of the total energy deliveries [16]. Figure 3 shows the organization of the electricity grid.

A smart grid is a local electricity grid enabling a two-way flow of electricity and data, including various operation and energy measures, such as SM, smart appliances, renewable energy resources, and energy-efficient resources [17].

Figure 4 shows a smart grid consisting of four households with installed photovoltaic panels and SM. The SM communicate with a smart meter data collection point through wireless technology or power line communication. The households are examples of prosumers since they can both produce and consume electric energy.

The most common production comes from solar panels, but prosumers can also generate electricity from wind and geothermal wells. Renewable energy is dependent upon environmental conditions. These conditions vary with the hours of the day and the weather.

In the context of smart cities, prosumers are not restricted to households. All buildings, including apartment blocks, office buildings, and shopping malls, can be prosumers. As long as they have open areas exposed to the sun, they may produce energy. Also, geothermal energy may be an option since geothermal energy can be used both for heating and cooling purposes.

Flexibility is when a building or household can change consumption patterns based on the situation in the energy market. Flexibility can be precious to the DSO to handle possible peaks.

Load shifting and peak shaving are two important techniques to improve energy use [18]. The consumption of electricity varies throughout the day. In Norway, we have one peak in the morning and one in the afternoon. The peak in the morning is mainly caused by electric water heaters kicking in after morning showers. The afternoon peak happens when most are coming home from work, cooking dinner, etc. Load shifting can simply be explained as moving the load to other time periods. One example is to spread the load from water heaters. Another example is to charge electric vehicles during the night.

Figure 5 shows load shifting in practice. The goal is to keep the consumption at a maximum of 5.5 units throughout the day. The morning peak, from 07:00 to 10:00, is above this level. By controlling water heating, some of the load can be shifted to later in the day. A total of 8.5 units need to be moved. From 12:00 until 16:00, the consumption is lower than 5.5 units, so the spare capacity can be used for water heaters and other appliances that have been put into flexibility mode. Note that the limit of 5.5 units is not fully utilized from 13:00 to 16:00. A new peak appears from 17:00 to 19:00. For this period, a total of 3.5 units need to be shifted to later in the evening,

Peak shaving has to do with storage. If electricity can be stored somewhere in the facilities, this stored energy can be used to shave the peaks. Tesla has introduced its power wall as a household battery storage system [19]. Storage can also be centralized, as described in the next section. Load shifting and peak shaving are important since the grid needs to be dimensioned to handle the peaks.

4. The role of aggregators

A prosumer can produce and sell surplus energy in the energy market. In Norway, a prosumer can sign an agreement (energy customer plus agreement) with an energy provider. The distribution system operator is obliged to facilitate energy transfer to and from the customer. The prosumer cannot produce more than 100 kWh per hour. If production exceeds this limit, the prosumer must seek a license as an energy producer [20]. The tariffs for selling energy to the market are generally not beneficial. A prosumer will seek to use its own produced energy before selling to the market.

To facilitate collaboration among a group of prosumers, an aggregator is necessary. The EU 2019/944 Electricity Directive defines aggregation as a “function performed by a natural or legal person who combines multiple customer loads or generated electricity for sale, purchase, or auction in any electricity market” [21].

The role of aggregators and their function has become a hot topic for the reason of being a significant part of the European power market. The European framework assigns aggregators a fundamental role in energy market liberalization and distributed energy resources (DER) integration toward carbon-neutral energy systems. The aggregators cannot only participate in the demand response activity and wholesale market bidding but also contribute to maximizing economic efficiency and fostering cross-zonal trading, considering, in particular, the overall system efficiency [22].

As the number of prosumers grows, the business opportunities for a new energy ecosystem actor, the aggregator, emerge. As earlier mentioned, flexibility may be important to shift or shave peaks caused by differences in consumption during the day. The aggregator is a business entity that can aggregate energy from a group of prosumers. A higher volume benefits the aggregator when negotiating with the distribution system operators and energy providers. The aggregator can also provide services, such as settlements, storage, etc.

4.1 Smart-MLA

The Smart-MLA project [1] made a prototype for a multi-layer aggregator, as shown in Figure 6.

The main goal of the ERA-NET Smart Multi-Layer Aggregator project (Smart-MLA) was to demonstrate how an aggregator could improve energy efficiency through flexibility [2]. On the lowest layer, the community aggregator simply collects information from a household to optimize energy use. The primary impact is the reduction of energy bills, but a secondary effect is increased customer awareness related to their energy use.

On the second layer, the aggregator will start controlling appliances. The community aggregator collects usage patterns and constraints from the household. One such constraint could be the charging of an electric vehicle. The car should be fully charged at 7 am. The community aggregator can then decide when to charge the car as long as the constraint is met. The aggregator will consider the future hour-by-hour energy prices and information about the weather to predict output from photovoltaic panels.

On the third layer, the aggregator does not only optimize the flexibility obtained by controlling appliances but also uses this flexibility to negotiate with the market. The aggregator uses the combined flexibility of its prosumers to improve the market position. The aggregator handles settlements with its prosumers and the energy provider.

While the project demonstrated the opportunities of the multi-layer aggregator model, there are still barriers to overcome. First, there are regulatory issues that need to be handled. The aggregator needs to be established as part of the energy ecosystem. Using Norway as a selected case, the current regulatory environment does not recognize the aggregator as a market actor. A prosumer can sell energy to an energy provider within the limit of 100 MWh per hour. An aggregator will easily exceed this limit and has to be licensed as an energy provider.

The second obstacle is the lack of trust in the energy market. As part of the project, the University of South-Eastern Norway surveyed early adopters of smart home technology [3]. The results showed that the early adopters wanted full control of their energy production and consumption and were unlikely to transfer control to an external entity. Based on the results, we discussed possible remedies from organizational models where the prosumers own the aggregator as a cooperative. Regulatory measures include self-regulation to make the energy market more transparent to achieve the necessary trust among the prosumers. Also, technology can be used to increase trust. Our research also pointed to blockchain technology as a possibility to achieve full transparency about pricing and settlements.

4.3 The aggregator as a storage provider

In the smart grid, the intermittent and random output of solar energy has brought challenges to the balance of demand, supply, and grid stability. As to prosumers, solar energy is stored for self-consumption in most cases. While from the perspective of energy efficiency and management efficiency, storing energy by the aggregator will be a more feasible solution [24], as shown in Figure 7.

In storage service, prosumers store energy mostly for self-consumption. Even if they make a profit out of the outrage of storing produced energy in the battery and selling energy at peak time to maximize their own profit, this could be inefficient when taking many prosumers as a system. Scale effect also works with aggregation of many prosumers than respectively. For prosumers, it is not only the cost of batteries but also the additional hardware to handle the charging and discharging of the batteries and the installation cost that need to be considered when investing in battery storage. If an aggregator supplies a storage service, the aggregator could use a larger facility and not be overly concerned about the compactness of the installation [25].

In addition to achieving the outrage goal, aggregators storing electricity is also a key mechanism for supplying electricity reliably, increasing security and economic value, and decreasing carbon dioxide emissions. Aggregator storage also plays a significant role in keeping a balance between supply and demand, avoiding electric fluctuations, contributing to the stability of the low voltage DSO grid, and making the DSO grid system more efficient, especially for the weak low voltage grid in Norway [24].

5. Electric Vehicles in the Smart City – Norway as a Case Study

Electro-mobility is an important exponent of smart city strategies. Considerable investments in electric vehicles are being made worldwide, and supporting infrastructure not only offers the potential to reduce road transport emissions but also unlock other smart city opportunities. This includes new solutions for mobility, energy use, public services, residential and commercial buildings, wider urban systems, citizen engagement, and behavior change. Accelerating the adoption of electric vehicles, and realizing the associated smart city benefits, requires coordinated action among all stakeholders [26].

One case for smart energy use in smart cities is the adoption of electric vehicles. Electric vehicles reduce the environmental footprint by reducing CO2 emissions and other air pollutants. Norway has the highest adoption rate of electric vehicles worldwide. This result is due to the Norwegian government’s determination and effective measures.

The Norwegian Parliament has decided on a national goal that all new cars sold by 2025 should be zero-emission (electric or hydrogen). By February 2022, there were more than 470.000 registered battery electric cars (BEVs) in Norway. Battery electric vehicles held a 64 % market share in 2021. The transition speed is closely related to policy instruments and a wide range of incentives [27].

Five years ago, Oslo, the Norwegian capital, had some serious problems with air pollution caused by certain meteorological conditions. In January 2017, Oslo was closed for diesel cars for a short period. The city council considered raising traffic tolls on days with high pollution levels. The uptake of electric vehicles has significantly reduced the pollution problems seen earlier.

When electric vehicles are considered to contribute to smart cities for energy storage and green transition. Tesla Powerwall is the pioneer with its battery based on lithium iron phosphate (LiFePO4) chemistry. With the development of green energy, battery technology is also undergoing a significant transformation. According to BloombergNEF’s research, lithium-ion battery pack prices were above $1,200 per kilowatt-hour in 2010 and fell 89% to $132/kWh in 2021 [28].

Therefore, soon, electric vehicles are expected to meet the EU zero-emissions goal, serving as one part of smart energy and a role of energy storage in the smart grid.

6. Conclusion

Smart energy is an important part of smart cities. Smart cities need to be energy efficient. The role of prosumers refers to buildings and households that can produce renewable energy. The aggregator is a new role in the energy ecosystem. The aggregator can represent a group of prosumers dealing with the energy market. The aggregator may also offer additional services to help its prosumers achieve more energy efficiency. While fulfilling the balance between the energy demand and supply, especially for load shifting and peak shaving, energy storage is an important component. Prosumer storage is efficient for self-consumption mode, but from the perspective of scale effect for many prosumers, storage provided by an aggregator is more feasible and sustainable. New business opportunities for the aggregators have been identified, and aggregators will play a significant role under the EU framework to achieve the green transition goals. Electric vehicles will also contribute to smart traffic and smart energy when their worldwide adoption increases.

The function and role of aggregators in a smart city need more investigation, such as the social acceptance of aggregators in the energy market, the interaction and collaboration with other stakeholders, and creating business models for aggregators. The fundamental role of aggregators in the European power market and distributed energy resources will become clearer.

Acknowledgments

This work was supported by the Manu Net scheme Grant number MNET20/NMCS-3779 and funded through the Research Council of Norway Grant number 322500 with the project title “Cloud-based analysis and diagnosis platform for photovoltaic (PV) prosumers.” It builds on results from the ERA-Net Smart Grids Plus scheme Grant number 89029 with the project title “Multi-layer aggregator solutions to facilitate optimum demand response and grid flexibility,” funded through the Research Council of Norway Grant number 295750.