1.1 Introduction
Power systems are complex structures composed of an enormous number of different installations, economic actors, and – in smaller numbers – system operators. In the traditional approach, the system is dominated by economies of scale. This means that for steadily increasing consumption, a large power generation capacity is installed, mainly nuclear, coal- or gas-fired thermal, and hydroelectric. In order to guarantee the reliability of such a system, a meshed transmission grid at high voltage has to be installed, into which the generators feed. Underlying this transmission system, function of the distribution grid is to conduct the power flow at lower voltage levels to customers, at medium or low voltage. The described power flow is mainly unidirectional, from the generators to the customers, who are connected at medium or low voltage. Only a few customers are connected at high voltage, due to their high loads. Such a system is easy to control, as most of the players (the customers) are passive, only a few actors (generators and system operators) are needed to centrally control the system, and the interfaces are well defined. The most extended economic model in this context is the vertically integrated utility. However, some of the deep fundamentals on which this structure is based can be envisioned, moving from these vertically integrated utilities to the Smart Grid distribution system [1]:
- Economies of scale are no longer applicable to the power system generation, due to the dramatic growth of distributed generation.
- The costs of the various renewable energy technologies have declined steadily due to technological advances.
- Increased environmental concerns on the part of customers and legislators.
- Regulation is enabling the emergence of different players on the electricity market (retailers, energy service providers, etc.)
These fundamental changes are causing a shift from the vertically integrated approach with few control actors towards a system with a high penetration of renewable (and intermittent) generation and, as a consequence, a system that needs to be highly controlled at all voltage levels. The increasing use of renewable energy not only helps to alleviate fuel poverty, but also promotes decentralized power generation, thereby reducing the dependence on conventional grid-based energy sources. It provides electricity from small-scale generation and microgeneration; working towards reducing the increasing electricity consumption and supplying any surplus generation to the grid. Therefore, microgeneration is a key power generation trend for smart communities, both rural and urban. Distributed generation from micro–combined heat and power (CHP) installations and renewables such as small-scale wind turbines and solar photovoltaics (PV) plays a strong role in this ecosystem. New generation units from renewable energy sources must be established; however, as a result of stochastic generation, those energy resources are intermittent, and possible output fluctuations have to be balanced [2]. Energy storage applications will be used to cope with this problem [3]. All of this leads to the approach to make the grid intelligent: the Smart Grid. A Smart Grid is an electricity network that can intelligently integrate the actions of all of the users connected to it – generators, consumers, and those that do both – in order to efficiently deliver sustainable, economic, and secure electricity supplies [4]. A Smart Grid uses sensing, embedded processing, and digital communications to enable the electricity grid to be observable (able to be measured and visualized), controllable (able to be manipulated and optimized), automated (able to be adapted and to self-heal), and fully integrated (fully interoperable with existing systems, and with the capacity to incorporate a diverse set of energy sources) [5].
One prominent set of actors in modern power systems are “prosumers” (“proactive consumers”). Prosumers are common consumers who become active to help to personally improve or design the goods and services available in the marketplace, transforming both it and their own role as consumers [6]. The strategic integration of prosumers into the electricity system is a challenge. As prosumers are acting outside the boundaries of the traditional electricity companies, ordinary approaches to regulating their behavior have proved to be insufficient. The aggregated potential of flexibility makes the role of the prosumer important for energy systems with high and increasing shares of fluctuating renewable energy sources. To involve different prosumer segments, both utilities and policy need to develop novel strategies. The benefits for prosumers in modern power systems can be summarized as follows:
- Economic. The Smart Grid offers the possibility of involving customers, their flexibility being used as an instrument to shed loads and secure stability. It is assumed that customers will allow the distribution system operator (DSO) access to their home automation systems, and that a value chain that links households with the transmission system operator (TSO) via the DSO will be created in such a way that the flexibility can be used systematically, as can the compensation flowing in the other direction.
- Incentives. Incentives may attract customers into a demand–response regime and into distributed energy resources (DER) programs without the need for a proper compensation structure. Poor quality of supply can also be a trigger, especially when there is only one utility operating. Local DER solutions are thus a good option, although the levelized energy costs could be much higher than the supply costs from a centralized utility. Other incentives, such as environmental and social sustainability concerns, comfort, convenience, and so on, could also be drivers.
- Technical. Energy storage for electricity is the main key to assuring the stability of a system with intermittent generation, at least for short periods. Ownership models and options for placement in the grid will drive very different solutions. It will be possible for electric cars to supply to the grid (vehicle to grid), which will add to the additional power system storage capability. As long as the distribution operator is in control of, or owns, these facilities, they will be operated in a different manner than if the storage is owned and operated by the community or by a third party working partly on their behalf.
- The community. With DER and Smart Grid technologies, communities will gain substantial market power. Traditionally, the utility was in charge of upgrading the infrastructure in order to cater for a sufficient supply capacity and to assure quality. To build a community solution for local supply by means of Smart Grid technologies and DER seems to be the solution for future expansion, at least in rural areas.
- Market and trading. New local markets and trading will arise, based on real-time trading, in order to balance the system. The flexibility of customers, local generators, and storage systems will create value on the market to balance the intermittency of renewable generation.
- Social. A new form of social cooperation and commitment can be created. For example, customers could start to cooperate to assure that surplus energy that cannot be fed into the system is provided to neighbors and others who are in a position to benefit.
