First Erasmus Energy Forum explores challenges of future energy business
All businesses have a role to play in a sustainable future; the energy business, which underpins all of them, is exploring opportunities and facing up to its own challenges. That was the resounding message emerging from the first-ever international Erasmus Energy Forum on Friday 15 June, organised by the Erasmus Centre for Future Energy Business, Rotterdam School of Management, Erasmus University (RSM). Leading academics, political leaders, and top representatives from major international businesses took part in presentations and vigorous panel discussions.
Delegates at the Forum identified that there was still much to discuss, and many benefits to be had from a regular Forum event; so much so that a second annual Erasmus Energy Forum is planned for May next year, in Rotterdam.
More than 100 participants from academia and business discussed changes taking place in the energy industry and what needs to be done to meet tomorrow’s demands for power supplies at this, the first event in Rotterdam.
After a welcome from Dean of RSM Prof. Steef van de Velde, the opening address from Rotterdam’s Deputy Mayor Alexandra van Huffelen – who has responsibility for sustainable development in the city – highlighted why Rotterdam is both at the forefront of sustainable action on a city-wide scale, and eagerly awaiting the kind of innovations from the energy industry under discussion at the Forum.
Next, the Erasmus Energy Forum was honoured to hear from German Ambassador to the Netherlands, Dr Heinz-Peter Behr. Germany has been called ‘the world's first major renewable energy economy’, and the Ambassador outlined the country’s energy policy.
An overview, followed by two technical presentations outlined major projects underway at the Erasmus Centre for Future Energy Business. First, Scientific Director Dr Wolf Ketter outlined the Centre’s work, followed by Dr John Collins from the University of Minnesota, who described Power TAC, a trading agent competition designed and co-ordinated by the Centre, which simulates the power market and the various players within it. Repeatable experiments mean that Power TAC can be used by business to test new ways of energy trading, specific customer models or see how people react to changes in their environment.
Dr Andreas Symeonidis, lecturer at Aristotle University of Thessaloniki in Greece gave a second research presentation. Dr Symeonidis is technical co-ordinator of the CASSANDRA project, which emphasises a consumer perspective, representing small industries, commercial centres and residential areas. Their consumption is significant – more than 30 per cent of total consumption in Greece, even bigger elsewhere in Europe and expected to grow to more than 70 per cent in 2020. The CASSANDRA project aims to model their energy use and trial incentives to changes in behaviour in order to inform decision-making and planning. Distribution system operators will be able to learn why peaks occur and work to reduce those peaks.
Dr Ketter then introduced the Forum’s expert panel: Dr Heinz-Peter Behr, German Ambassador to the Netherlands; Markus Bokelmann, Chief Financial Officer of E.ON Benelux; Dr John Collins, Lecturer in Computer Science at the University of Minnesota, USA; Pieter van Essen, Project Director for the Rotterdam Climate Initiative and Advisor to the Port of Rotterdam Authority board; Erik van der Heijden, Head of the Smart Grid Division of Siemens in the Netherlands; Alexandra van Huffelen, Alderman (wethouder) for the City of Rotterdam with responsibility for sustainable development in the city and its outdoor spaces; Baukje Oostenbrug, Manager for New Energy at Essent RWE; Dr Andreas L. Symeonidis, Lecturer for the department of Electrical and Computer Engineering at the Aristotle University of Thessaloniki, and a Research Affiliate with the Informatics and Telematics Institute in Thessaloniki, Greece.
The panel were asked specific questions, and the audience was invited to take part in question-and-answer session. Subjects under discussion ranged from stakeholder involvement and macro- and micro- perspectives of network orchestration, ‘smart consumers’ and ‘prosumers’, differentiated strategies to address different consumers, the role of regulatory frameworks and co-operations.
The Forum concluded with a networking lunch and an opportunity for delegates to discuss the Centre’s on-going projects with its researchers in an interactive ‘poster session’ in the lobby.
To keep up to date with developments, add to the debate, or find out how to become part of the transition for the energy business, log onto the Erasmus Centre for Future Energy Business website at www.rsm.nl/energy, or join the LinkedIn group.
Rotterdam - how can it be done?
Rotterdam’s deputy Mayor Alexandra Van Huffelen said the choice of venue for the Forum – Rotterdam’s floating pavilion in the harbour district – was particularly apt. “As a delta city, Rotterdam is confronted with the fact that climate change is happening. We are experiencing stronger river flow, and a higher number of fierce rainfall events during the year. Whenever the water comes, we can cope because this building floats,” she said, and described the city’s aim to develop the former port area into a floating city quarter.
She continued to describe the general image of Rotterdam is of an industrial city; not the cleanest nor the healthiest, and one where people might think there was little room for innovation, she said. “But that’s not what Rotterdam is. We are the biggest port in Europe with an enormous amount of traffic and transport, but we also have a vision to transform ourselves from being fuelled by fossil fuels to bio-energy by 2030.” The plan includes transformation of Rotterdam’s port and shipping from fossil fuels to bio-energy or liquid natural gas, she said.
The plan also includes addressing air quality, noise pollution, CO2, NOx gases and particulate emissions from the city and the port. The plans start with reducing the energy consumption of port-based companies and where possible, reducing waste streams and re-using heat and steam. Work has begun to use Carbon Capture and Storage (CCS) in the port as one of several measures to achieve a 50% reduction in CO2 emissions. The work was subsidised by grants from the European Commissions, she added, as was work to enhance the efficiency of oil recovery from oil fields.
One aim is to insulate housing, and produce power locally. “It’s not an easy task. You’ll talk today about the technical side,” she told delegates at the Forum. “The difficult part is changing consumer behaviour.” Another aim is to make transport and traffic cleaner using 1,000 electric vehicles linked to smart grids in the city and alternative fuels such as hydrogen or LNG in the port, within two years.
The discussion at the Forum was important, she said, because energy transition is a big step for consumers. The average Rotterdammer does not have a high income, with about 75% living in rented housing and high unemployment. Some are faced with energy bills that they can no longer afford. Air quality in parts of the city with the lowest incomes is poor. This, combined with poor lifestyles, means that life expectancy is lowered.
Implementing a smart grid system and reducing energy bills would bring between 4,500 and 5,000 jobs to Rotterdam alone, with a similar effect around the country, she said. Air quality would be improved and the initiative could be connected to others, such as urban farming, to improve the lifestyle of city dwellers.
“I would like you to think about how you can help these people, not just in terms of efficiency, and how it can be done,” she urged.
Germany's future energy policy
Germany has been called ‘the world's first major renewable energy economy’. The Erasmus Energy Forum was honoured to hear from German Ambassador to the Netherlands, Dr Heinz-Peter Behr, who outlined the country’s energy policy.
The media like to call it ‘the Change of Energy’ policy, said Dr Behr, but this is an exaggeration. In reality, it’s a reworded continuation of a policy decided by a previous government which promotes the production of renewable energy in Germany.
This is in line with UN programmes, with German ambitions, and with popular opinions and sentiments, he said. “We have had a green movement in Germany for 30 years. The Green party is a successful part of the political establishment and has been part of central government.”
Germany’s new energy policy has produced a transition that could inspire others. The policy already benefits German companies, but it also has the potential to benefit partners and neighbours with whom Germany co-operates closely, such as the Netherlands. “We can intensify our co-operation still further,” he said.
Germany plans to increase its use of renewable energy sources from 12 per cent to 18 per cent, with a reduction of greenhouse gas emissions of 40 per cent, he said, and aims to phase out nuclear energy by 2022. A federal agency will co-ordinate a 10-year development plan, and by 2050, 60 per cent of energy will come from renewable sources. These plans demand a large investment – billions of euros – but the overarching concern of the German government is to prevent an ‘explosion of costs’ for industry and for average energy consumers. Commitment to a social market policy is a core part of the policy, he said, and it is predicted that the plans will require energy subsidies.
With these concerns in mind, the country’s foremost challenges are fourfold; expanding and modernising the grid, real-time alignment of demand and supply (and how to attract investment for this, which would include exploring the role of private investors), plus developing and promoting energy storage solutions to synchronise supply and demand, a part of the project that requires innovation as well as demanding that legislators take a key role in planning for security, also an important concern for investors. In addition, the plans require consensus on additional targets, for issues such as energy efficiency. “We want to avoid asking too much of our citizens and losing ambition,” he said.
“Energy management will have a huge role to play. That’s you,” said Dr Behr, directing his concluding comment at the audience of delegates.
PowerTAC: Software agents trade on simulated energy markets
“The electric power enterprise is heading into uncharted territory,” according to Dr John Collins, lecturer in Computer Science at the University of Minnesota. As actors in energy markets face numerous new challenges, such as the limited availability of fossil fuels or the increasing market penetration of electric vehicles, the PowerTAC project – co-lead by Dr Collins and Dr Ketter – aims to help businesses and policy makers chart that territory.
PowerTAC (Power Trading Agents Competition) is a simulation in which researchers are addressing the changes in energy markets in an innovative way: through competitive simulations of those markets. “Simulations exist in the space between the real world and mathematical models,” explained Dr Collins. “We try to find a sweet spot where we simulate the interesting parts of the real world in order to answer certain questions.”
PowerTAC’s simulations include large energy suppliers; wind parks and fossil fuel plants; a wholesale market akin to various international markets; and bidding procedures. Also, “We have a population of households, businesses and industries,” Dr Collins explained, “and we include real-world weather data – so we have a weather server that serves up weather reports and forecasts.” Finally, a distribution utility runs a balancing market – it balances supply and demand, and makes sure that the individual brokers pay their share of balancing costs.
The organisers of PowerTAC provide everything except the traders themselves. They invite researchers and outside groups from all over the world to build the competitive traders in order to produce a wide variety of trading strategies that can be compared against each other in a competitive environment, providing a serious test of proposed market structures and rules.
The first international PowerTAC competition, with trading agents designed and programmed by 15 different teams, is already in progress. Dr Collins: “The competing agents are the aggregators –the energy brokers. These are the energy retailers that buy and sell energy in the wholesale markets and offer tariffs to customers.”
“If we understand what these agents are doing, we can see how they perform relative to each other,” says Dr Collins. “And they also produce very rich datasets, from which you can extract all kinds of correlations and conclusions.”
PowerTAC’s framework supports repeatable experiments. That way, the researchers can test the effects of specific changes in the model on the market.
Dr Ketter invited businesses to use PowerTAC’s simulations: “If you have specific customer models you’re thinking of building in the future, if you want to test our technologies, or you want to see how people potentially react to changes in their environment: we can implement these things in PowerTAC, create a population based on real-world data, and see how they react, and we can give advice.”
CASSANDRA: Modelling energy consumers
While PowerTAC is focused on the market side of the energy grid, the CASSANDRA project emphasises a consumer perspective, argues the project’s technical co-ordinator Dr Andreas Symeonidis, lecturer at Aristotle University of Thessaloniki in Greece.
Small industries, commercial centres and residential areas make up the consumer side of energy markets. Their energy consumption is significant – more than 30 per cent of total consumption in Greece, even bigger elsewhere in Europe and expected to grow to more than 70 per cent in 2020, but small-scale consumption is hardly ever modelled.
“The main problem is that we cannot really model small-scale consumer activities and small-scale consumer behaviour,” says Dr Symeonidis. But that is exactly what researchers are trying to do in CASSANDRA.
Using data from consumers with smart meters, researchers are trying to identify types of activities, and to group consumers according to those activities. Groups of consumers with shared characteristics can be incentivised to change their behaviour – for example to lower their energy consumption by turning down their heaters. What is more, consumer groups could also form social networks and negotiate better prices from aggregators.
For businesses operating in energy markets, CASSANDRA holds enormous potential. On one hand, aggregators and service suppliers will be able to model consumption and consumer responses to targeted incentives in order to inform decision-making and planning for novel products and services. On the other hand, distribution system operators will be able to simulate the network load at any point of the distribution grid, learn why peaks occur, and work to reduce those peaks. For policy makers, CASSANDRA could model and test consumption policies.
The tool provided by CASSANDRA will provide stakeholders with the ability to simulate the network, or segment and test specific demand and supply response policies, or test changes in the behaviour of consumers.
Stakeholder involvement and network orchestration
Dr Ketter asked how stakeholders are involved, and how the network can be co-ordinated.
Mr Van der Heijde, Head of the newly founded Smart Grid Division of Siemens in the Netherlands, noted that Rotterdam’s Alderman Alexandra van Huffelen focused on the prosumer, while German ambassador Dr Heinz-Peter Behr discussed the same topic from a macro perspective.
Pieter van Essen of the Port of Rotterdam explained that the port is overseeing a transition which takes the emphasis from ‘just cargo’ to ‘energy’, particularly as the Maasvlakte 2 project nears completion. As a centre for big companies and mega structures, Port customers and businesses need access to energy at low prices. The Port is also investing in renewable energy, for example in kite power.
Baukje Oostenbrug, Manager for New Energy at Essent RWE, said her company sees itself as an important stakeholder, and takes responsibility to make energy available, affordable, and sustainable. In particular, it is working on a bio-based economy, e-mobility infrastructure in Amsterdam, and energy management, which involves a simulation of 20 households in a smart grid. Essent is working with researchers to turn consumers into ‘smart consumers’.
Orchestration of the network
Dr Ketter noted that there are many stakeholders in the smart grid. He asked the panellists about their views on the orchestration of this network.
Erik Van der Heijden from Siemens said the development of a smart grid was not a goal but a means to make a sustainable future possible. Other steps include making efficiencies, investing in the network (‘putting copper in the ground’) to cope with peaks in demand and supply, and being clear about what economy of scale would make the plan feasible, he said.
Baukje Oostenbrug agreed, saying developing the technology is not the problem, and consumers must change. She gave examples of small business-to-business networks trading in energy consumption – especially in the Dutch horticulture sector.
Markus Bokelmann, Chief Financial Officer of E.ON Benelux said he didn’t think finding investors or producing new technology would be a problem. “In the future, the wrong decision will be NOT having a solar panel, but the problematic bit is the cost of the grid and back-up power,” he said. If customers become net producers, or become independent producers and disconnect themselves from the grid, there will be fewer people involved in the grid and the greater the problem of financing a grid that is little-used. Rebuilding and redesigning a grid to provide back-up power will be a challenge for policy-makers and regulators, he said.
Peter van Essen of the Port of Rotterdam predicted that solar power will gain parity with fossil power, and governments will miss the extra revenue, as will the grid operators, but if they should levy taxes on solar power, that would work against grid parity. “I wonder how the government will cope with that?” he said.
Erik Van der Heijden pointed out that ‘prosumers’ generating solar power could present a problem to the conventionally-designed grid; its cables are not designed as a two-way system. “Siemens is involved in a subsidy programme to cope with that, and we will need a smart device for it,” he said. “The demands we place on the grid are increasing. Who will be the owner of that problem?”
Opportunities of the smart grid
Dr Ketter asked the panel to identify opportunities related to development of a smart grid.
Baukje Oostenbrug said Essent was already working on developing smart services, such as an E-thermostat to control domestic heating; the system can be controlled from a distance using a smartphone app. “This is just a small first step,” she said. Essent is also developing a platform for more apps, including one for E-mobility, and the company sees the development of smart services as an opportunity to get out of the commodity trap by developing value-added services based on a smart grid and putting the customer in charge. Additionally, making the company’s value more transparent and appealing to customers is more complex and demanding for the supplier, but more interesting for customers.
Peter van Essen described the all-electric container terminal under construction in the Port of Rotterdam. The terminal will take electricity from the grid during off-peak hours and store it in batteries for use during peak hours. The issue of using clean electricity must be addressed so that customers are not punished by paying peak prices, he said, and it will be the role of the Port to stimulate the development of battery systems to a level where they can operate like this.
Returning to individual customers and small businesses, Dr John Collins argued that the smart grid holds the promise of providing customers with more information on their energy usage and prices so they can adapt their behaviour. But that might not be enough to adapt usage to availability and avoid ‘load curves’. A new level of automation might include electric vehicles, control of water heating, freezer, or laundry equipment integrated into the home energy mix and a whole range of opportunities – that are merely ‘glints in engineers’ eyes’ right now – could take smart energy usage to a whole new level, he said.
Dr Andreas Symeonidis advocated that companies should focus more on providing customers with more smart information for customers, and modelling their behaviour. Customers could also group together and negotiate price reductions.
Questions from the audience
1. Differentiated customer strategies
A member of the audience asked if companies will adapt differentiated strategies to address different consumers.Baukje Oostenbrug said Essent is preparing for ‘prosumers’ and already differentiating groups of people. But as consumers become smarter, their needs will change. Essent will give customers the choice to become active or not, she said.Erik van der Heijden of Siemens’ Smart Grid division said that on a macro scale, customer preferences differ per country, while on a micro scale, customers will group together. If companies are slow to respond, customers will create their own collectives.
2. Grid co-ordinators
Delegate Dr Alok Gupta from the University of Minnesota observed that centralisation of power generation requires decentralised distribution, but decentralised generation needs a centralised distribution. He asked the panel if their respective companies were considering playing a co-ordination role in the new smart grid.
Erik van der Heijden said Siemens has detected the gap between the traditional energy networks and private ‘micro grids’, into which it could step. Public-private partnerships might be the model for building, operating and maintaining grids of the future.
According to Markus Bokelmann, in many countries grid operators are not yet allowed to step into services. “It’s an ‘unbundled’ world,” he said. “The rules of the game not quite clear yet in this regard.”
From the audience, Professor Rainer Unland, from the University of Duisburg-Essen Institute for Computer Science and Business Information Systems (ICB), suggested grid operators might lose the role of producers and big grids might become obsolete as energy is produced and consumed locally.
Markus Bokelmann agreed old business models are under pressure, but stressed there is still a big market. He also suggested that the image of regional supply is too romantic – for example, Rotterdam cannot produce all the energy the port requires locally. Finally, private companies will need to run the energy grid under a regulatory framework, he said.
From the audience, Ritesh Gupta of ING Insurance Central Europe observed that businesses work together to produce devices, platforms and applications in the smartphone industry. Could companies in the energy market work together under a regulatory framework, or design a regulatory framework aimed at consumer solutions?
Baukje Oostenbrug said this was a valid point, but it was difficult to find co-operation in current circumstances. “Personally, I think it’s time to work together on the idea of hardware and platforms,” she said.
Dr Symeonidis suggested looking at the problem from the other way around: why not ask consumers to forge groups and push towards integration of infrastructure and services?
Erik Van der Heijden said companies are aware of the need to co-operate. Siemens and E.ON have already joined a Smart Energy Collective. No company can face the transition in the energy business landscape on its own, he said, and observed that companies must work in partnerships and with open standards, or set standards together. It will happen, as the market is changing and the traditional customer-and-contractor model is the old way of doing business, he said.
Dr Collins argued that, just like the computer industry from the 1970s onward, it is now time for the energy industry to move from individual strategies to co-operation. “We need a Steve Jobs or Bill Gates, and the time is now. The opportunities are wide open, and we don’t know who it will be but we’ll know it when we see it. These kinds of innovations are not generally produced by standards bodies or academics, he commented, and added that Google was an exception to this rule.
Advice for the Erasmus Centre for Future Energy Business
Dr Ketter asked the panel to give their advice to the Erasmus Centre for Future Energy Business for the coming year.
Baukje Oostenbrug from Essent emphasised the need for co-operation on open standards. “Make it possible to have all stakeholders working together,” she said.
Peter van Essen from the Port of Rotterdam said those working in the Centre should keep in mind where the computer industry got its standards; he referred to ARPANET –the world's first operational packet-switching network which was originally a USA project intended to solve a military problem. It became the core network on which the global Internet is based.
Erik van der Heijden from Siemens said he was pleasantly surprised by the simulations run by Dr Ketter and his colleagues at the Centre. However, he stressed that the actual grid infrastructure doesn’t move at the same speed. He thought the issue took the form of a traditional ‘golden triangle’ of government, industry and universities. They should ‘do it together’, he said. The view of industry was that ‘you have luxury of a bit of dreaming, but we can keep each other sharp, and learn from each other.’
Markus Bokelmann said the Centre should connect policy-makers to engineering and customers, using open standards and transparency, ‘with customer value at the centre of things’.