Satu Viljainen

Smart use of electricity - How to get consumers involved?

More active demand side participation is promoted as a solution to various problems in the electricity markets and networks. Perhaps the most discussed option of increasing consumer participation is demand response. However, getting consumers to join programs that involve variable prices and/or direct control of consumer appliances may prove challenging. Consumers have doubts about how much of their consumption they can shift and direct control of appliances also raises many concerns (e.g. how the control system adapts to changes in consumers own needs). Microgeneration can target many of the same problems as demand response and it may also give clearer signals to change consumption patterns.

Electricity markets in Russia, the US, and Europe

An in-depth analysis of the restructuring processes in individual market areas requires knowledge of the initial physical and organizational state of the electricity markets. The differences in these initial states lead to a significant divergence in the restructuring processes between the different market areas. There are general textbook models for electricity market restructuring; however, more specific tools are required for a detailed analysis of the divergent market structures and restructuring mechanisms in individual market areas. To illustrate the differences in the restructuring processes, this paper provides a review of four different electricity markets; the introduced electricity markets include Russia, the Nordic countries, the France-the Netherlands-Belgium interconnection (known as the Trilateral Market Coupling area, TLC), and the Pennsylvania-New Jersey-Maryland interconnection (PJM). The Nordic countries and the TLC represent two different European market structures. Russia and the PJM market area in the US, on the other hand, are examples of different approaches in terms of pricing models and market structures compared with the ones commonly applied in Europe. In this paper, the development paths of the electricity markets in these target areas are analyzed taking into account the initial situation in each of these areas.

Investments in the benchmarking of the distribution network companies

This paper introduces a method by which investments can be taken into account in the efficiency benchmarking of the electricity distribution companies in Finland. It is studied whether distributed energy, network length, number of customers, present technical value and replacement value of the distribution network are suitable output factors when investments are included in the DEA-model. At the same time the suitability of DEA-method for efficiency benchmarking has been studied.

The impact of emissions trading on electricity spot market price behavior

Purpose – Under the Kyoto protocol, emissions trading was imposed upon the Nordic Nord Pool Spot market in 2005. The purpose of this paper is to identify and characterize an important side‐effect of emissions trading on electricity spot market price behavior by statistically comparing price behavior before and after emissions trading was introduced.Design/methodology/approach – The analysis is based on an analysis of the skill of regression models in explaining price behavior before and after 2005.Findings – It turns out that regression models based on background variables such as temperature, water reservoir levels, and even the price of emission rights themselves lose much of their skill from 2005 onwards. The histogram of the residual time series of an optimally calibrated regression model demonstrates a considerably more “fat‐tailed” behavior after 2005, with a much higher volatility and reduced amenability for regression by background variables.Practical implications – The results point to an increas...

The strategic activities of electricity network operators within changing electricity distribution industry

The electricity network business is facing new challenges due to deregulation and market changes, customer requirements, while at the same time current service markets are advancing. New, optimised business models are required to support the development of business processes, and there is a need to determine the core businesses for electrical utilities in order to know the direction into which the resources and capabilities in the organisations shall further be developed. In this paper, we examine the changing business environment of electrical utilities and assess the future challenges for the network operation business processes of electric utilities and service providers.

The role of investments in the regulated electricity distribution business in Finland

This paper focuses on the role of investments in the regulated electricity distribution business in Finland. It introduces a method to handle investments in regulation so that sufficient network investments are encouraged but overinvestments are limited. This means that electricity distribution companies are enabled to keep their networks in proper technical shape whereas the possibility of over charge investments on end-customers is limited.

Supplier relationships in regulated industries: longitudinal study on energy distribution

The article attempts to analyse the transformation of procurement management with Finnish electricity distribution network operators regarding the maintenance and construction of distribution networks. We aim to provide insights into their portfolio frameworks the dynamics of which are illustrated using a longitudinal case-based study. The case study is based on archival analysis and interviews. The article demonstrates how the competitive changes through regulation, supply market evolution and supply decisions are interlinked. The appropriateness of: 1) the strategic value of functions; 2) transaction risks; 3) the performance view of portfolio models is evaluated from a theoretical viewpoint. Our findings suggest that supply management changes along with relationship management on high strategic value, comparative performance and the transaction costs of externalised activities. Indeed, the study shows that procurement management becomes less sensitive to portfolio attributes if specialised service providers are able to build attractive offerings.

Capacity market as an incentive for demand response in Russia

Russian electricity market reform was accompanied with an implementation of a capacity market in 2008. The capacity market was designed to oblige and incentivize mainly the existing generators to invest in new generation. However, the current capacity market rules and the high capacity prices create an unintended incentive for industrial response in Russia. At present, especially the industrial consumers in Russia are facing rapidly increasing costs of electricity due to high network charges and capacity prices, while the electricity price for household consumers is regulated and subsidized. This paper discusses how industrial consumers can reduce their total electricity costs by investing in their own generation. However, if a large amount of this kind of unintended industrial demand response took place, the cost base of the current capacity market would break while the going forward costs of capacity (i.e. the payments to the generators) are locked for several years ahead with the Capacity Delivery Agreements between the generators and the Russian state.

Institutional analysis of wind power in Finland

Wind energy is the second largest renewable energy source of electricity (RES-E) generation in the EU. Despite the strategic energy plans, such as the new feed-in tariff scheme and other formal rules, Finlands installed wind power capacity (197 MW) and its share in the gross electricity consumption (0.5%) belongs to the lowest in the EU27. The paper investigates the reasons behind the sluggish growth by embracing approaches from institutional economics. After the analysis of formal rules on European and national level, three levels of institutions affecting the wind power in Finland are identified: legislative and executive, governance structure, and individuals. Further, informal rules are identified from five semi-structured interviews with key informants from governance structure and individual-level institutions. The findings, structured according to three institutional aspects: policy, technology, and economics reveal multiple implications about the industry structure, municipal and regional governance, and public acceptance.

Mapping future services: a case on emerging smart energy metering business

Recent regulatory amendments and other major trends in the electricity distribution business will change the business logics of the sector. The forces that drive restructuring can be put into three general categories. Those are: 1) a requirement for a more functional marketplace for energy; 2) combating climate change; 3) requirements for the security of energy supply. In this paper, we re-develop the business concept innovation process for applying it to smart energy metering services. Furthermore, we introduce how value flow based business system modelling can be linked with a market emergence model. The main argument of this paper is that including the customer needs in the innovation process and creating a business system based on value flows are the key elements of creating new business models in e-services. Indeed, bundling the roadmaps of intelligent home systems to correspond to converging customer needs is a crucial question for opening the service markets.