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Electricity marketization includes the sale of electric energy and its related services to meet the needs and expectations of individual and business users. Similar to the market on the power generation side, the sale of electrical energy is not subject to government control in France: from July 1, 2007, the French electricity market is open to all users. In order to meet the needs of all users, the entities involved in the operation of the grid (generators and retailers) must develop a power supply plan that adapts to the temporary load needs of users.
For a grid operator that integrates power generation and retail business, because of its own power generation capacity, it can sell all or part of the power to users. For non-integrated retailers, they can only secure their electricity sales through the electricity market, such as bilateral contracts or over-the-counter negotiations, buying standard electricity products from the futures market, and buying and selling on the spot market.
Regardless of the procurement strategy adopted, the capacity and cost of power procurement will be constrained by the following factors:
1) Electricity supply is limited by climate and economic conditions. For example, the electricity demand of residents who use electric heating depends on the ambient temperature, and the electricity demand of industrial users depends on the relevant risks in the production process (such as equipment failure, economic conditions, etc.) or market conditions (arbitration between customers in the spot market).
2) The purchase cost of electricity depends on some actual market conditions (price and supply) at the time, especially for pure electricity retailers who cannot generate electricity. Operators that combine power generation and retail operations also have certain risks, mainly generation risks (eg, availability of power plants, capacity of intermittent energy sources, etc.).
Faced with these uncertainties, it is very important for generators/retailers to reduce procurement costs and control market risks.
The transfer between peak and off-peak loads can be achieved through the operation management of the energy storage system. This means that when electricity demand is the greatest and often the price of electricity is the highest, the energy stored in the previous period of low electricity consumption and cheap electricity can be used to obtain the maximum profit.
Thus, the energy storage system can become a lever for power suppliers to reduce operating costs. In order to perform this role and profit as much as possible from the peak-to-valley electricity price difference, the energy storage system should be able to meet the cycle demand for dozens of hours and be large enough (hundreds of megawatts). Large-capacity energy storage technologies such as pumped hydro storage (STEP) and compressed air energy storage (CAES) are good technical routes.
It is worth noting that some special electrical loads (such as electric water heaters) can also transfer electrical energy to a certain extent. Therefore, both the marketization of electricity and supply management (such as price incentives) may affect operating costs, and together they form a regulatory lever similar to energy storage systems, which can effectively transfer electricity and reduce procurement costs for suppliers.
2. Using energy storage to reduce the risk of procurement costs
The backup formed by energy storage can reduce the occurrence of various unfavorable situations that may be encountered in the procurement process, such as high electricity prices and insufficient market adjustment capacity, high marginal cost of power generation, or low safety margin for cost control.
In this sense, energy storage is a tool for price and capacity risk management, which is very important for retailers in their procurement process.