The Multimart is enabled by a number of technologies which are becoming more affordable quickly – storage, distributed generation, and the smart grid.
Electricity markets around the world continue to grapple with an ever increasing share of renewables. There is a vast amount of literature criticising the inflexibility of existing markets, renewables’ impact on grid operations and that the existing marketplace is too complex for prosumers to realise their business opportunities. While a paradigm shift in designing electricity markets is needed, this cannot be achieved without having an even more revolutionary mind-set shift away from the existing rules and regulations around today’s electricity markets: centralised scheduling and dispatch, electricity pool pricing and ancillary services. In this paper, we discuss the inadequacy of the power pool to cope with all sorts of trades. The concept of a Multimart is described, where many markets can co-exist serving different types and sizes of players. Asia is the ideal region for demonstrating the Multimart as electricity markets are only now emerging in many countries - this, together with the increased proliferation of renewables, presents opportunities for leap frogging legacy market structures.
East versus West
It is widely agreed that rapid improvements in low carbon, demand-response and storage technologies can lead to a smarter and more efficient and more secure system. The electricity market of the 21st century power systems needs to take account of a variety of price signals, and needs to provide flexibility and adequacy. Developed markets in America and Europe relate this reform process to be complex, in particular in ensuring reliability of supply. Traditionally developing markets in Asia have looked upon the west for solutions spanning from manufacturing, commerce, fashion to education. The challenges of developing a 21st century electricity market without the encumbrance of legacy infrastructures put Asia at an advantage over the West drawing parallels to the emergence of mobile phone networks without landlines.
The combination of both developed and developing markets in Asia poses different priorities, physical and regulatory landscapes from that of the developed markets in the West. While Western nations see the emphasis in designing electricity markets more as a mechanism for balancing and demand side management, ASEAN has its emphasis on providing a wide variety of mechanisms for electricity access.
A number of technical, economical and institutional constraints within which electricity markets were designed in the 1990s are significantly different from the conditions today. Today, more consumers have the option of also being producers of electricity. The state has a less restrictive role on how electricity can be bought and sold. Decisions taken in the past regarding electricity market design have an impact on the available paths which can be taken in the future. This legacy makes implementation of market changes difficult and complex. Asia on the other hand has less legacy issues to contend with hence has more potential in pioneering the new market designs.
The new market design emerging in Asia
Based on the trends that are already observed, there are alternative approaches for a model appropriate for Asia. These approaches take into account the special needs such as affordability, accessibility and a relentless growing demand for energy.
The new market provides an opportunity for entrepreneurs to become new players in the energy supply chain. These new players require a variety of means to procure and provide electricity. We call this the Multimart. Evidence of its emergence can be seen in the examples following.
China and Southeast Asian countries host a large number of electric motor bikes. Owners of these bikes can charge their batteries and pay for them by minute as opposed to kilowatt hour. Payment can be made in cash or using vouchers available at convenience stores. This has happened without the need for an extensive network of charging points to become available.
Another example is found in the solar photovoltaic (PV) presence in some rural areas of China and Southeast Asia. PV installations and batteries are sold in local shops together with instructions for their connection. People in rural areas have taken advantage of a simple PV and battery setup to power their homes and even sell or share any excess with their neighbours.
These examples illustrate the dynamic innovation that has propelled the development of new markets in the absence of legacy infrastructures. The new marketplace – the Multimart embraces this innovation whilst allowing all market forms from power pool to corner shop to co-exist. Up until now the only way electricity can be purchased is through the grid. This explains why traditional power markets evolved based on the concept of central management. The technical challenges of the past are less relevant today in an increasingly distributed energy environment. The case to design new marketplaces is growing.
A key feature to the successful development of the Multimart will be the emergence of technical and regulatory standards for connectivity and control. DNV GL can contribute to these standards and the certification necessary to enforce them. DNV GL is currently working with a group of European utilities and service providers to create new standards for transacting flexibility among prosumers. For the context of Asia where market rules and electricity markets are under various stages of development, this model is not applicable, hence providing an opportunity to define a market which is appropriate to the diverse requirements of Asia.
The Multimart is here to stay
The Multimart is enabled by a number of technologies which are becoming more affordable quickly – storage (e.g. electric vehicles, batteries of different scales), distributed generation (e.g. PV, wind of different scales), and the smart grid. As seen from the examples above, Mulitmart’s emergence will provide flexible access to electricity and facilitate rural electrification. A proper formalisation of this process through the use of standards and certifications can help more businesses to enter the electricity markets easily. Increased competition will in turn promote innovative business models to better serve the market. Information and communication technologies for instance will better match flexible generation to different demand profiles. The Multimart provides a real solution to meet Asia’s priorities and help pioneer new market designs in the 21st century.
This article is the first of many articles to come on the Multimart concept, and other power market and system issues facing Asia. Please look out for our next instalments on more details about the Multimart concept.
This article was republished with the permission of RECHARGE