Abstract:Finland has a two-step organization for distribution of electricity.
Producers operate as wholesalers to the industry and to electric
utilities, which distribute electricity to end-users such as
households, public buildings, services and small-scale industry. The
sales are based on public tariffs.
There are some major pricing principles which have been generally
approved in Finland. They have also been included in the national
energy policy program. According to the matching principle, each
customer pays for the cost he has caused. In the principle of cost
nccurncy, tariffs must follow the famation of the produdion cost
structure and time fluctuation. The major goals in pricing are to
cover long-tern costs and to secure stable price development for
electricity.
Industry and electric utilities can supply their electricity by buying it
from the five Finnish wholesalers and/or by investing in their own
power plants. Imatran Voima Oy is the largest wholesaler in Finland
with a market share of 42% of the total consumption. The
wholesale pricing has to compete with the other alternatives of the
wholesale astomer.
Imatran Voima Oy's wholesale tariff system H/85 consists of three
partial tariffs, each of which is divided into demand and energy
prices. The partial tariffs have their cost background in the
production structure of the company. The base tariff is based on
hydro and nuclear power generation, the middle tariff on coal
condensing power generation, and the peak tariff on the gasturbine
power generation. The energy prices vary by winter and summer
and by day and night.
At present there are some 130 electric utilities in Finland.
Practically all of them have joined the Association of Finnish
Electric Utilities, which publishes distribution tariff
recommendations. The major tariff types are general tariffs, time
tariffs and demand tariffs. The general tariffs suit the smallest-scale
consumers, such as households. The energy prices are the same all
year round. The time tariffs are planned for middle-sized
consumers, such as households with electric heating. The energy
prices may vary by day and night and/or by seasons so that they are
lower during the off-peak periods. The demand tariffs are planned
for small industry whose amount of consumption and utilisation
time of subscribed demand differ from those of other amsumen.
The energy prices may be even 4-stepped and vary by winter and
summer and by day and night. Each consumer may freely choose
the tariff type which suits them best.
Electric utilities are independent in their pricing. Their tariffs
compete with the prices of other fuels like oil and gas. The
wholesale purchases form about 60% of the total costs of an electric
utility when it does not have any generation of its own, i.e. when it
purchases all energy from a wholesaler.
Writer(s):Ove S. Grande, Hanne Sæle, and Ingeborg Graabak
Publication Date:December 1, 2008
Publisher:SINTEF Energy Research
Abstract:This report summarizes the main results and contributions from the “Market Based Demand Response” project (2005-2008). The project has been organized in three work packages with the following focuses: WP 1: Measures to increase the demand side price elasticity, WP 2: Technology and quality improvements in the “meter value chain” from the meter to the electricity bill and WP 3: International development through participation in the IEA/DSM project “Demand Response Resources.”
One of the main aspects in this project was to encourage demand response to the marginal price in the electricity markets. Spot price energy products and Time of Day (ToD) tariffs have been used for both households and for larger customers. The principles and reason for the choice of tariffs are explained in the report. The following pilot tests involving households and medium sized customers have been carried out a) “Fixed Price with Return options” energy contract, b) Remotely controlled load shifting, c) “Smart house” control in housing cooperative, d) Low prioritized loads controlled by building energy management system (institution and shop) and e) Automatic Demand Response to the electricity spot price.
The Norwegian authorities have now decided that “smart meters” should be installed to all customers in Norway within 2014. Experiences from full-scale implementation of systems for automatic meter reading (AMR) have in this context been collected and described, and a specification of requirements for AMR systems is developed in cooperation with a group of network owners. Definitions of how to measure quality and availability of hourly meter data within the settlement period is proposed by the project.
The main recommendations from the project:
I) Temporary reduction in space heating and load shifting of water heaters are the most convenient demand response objects in Norway
II) Frequent metering is needed to secure that the responsive customers really get lower bills in periods with high prices
III) ToD network tariff combined with hourly spot price provide the customers with a dynamic price signal that gives incentives to needed investments and to load reduction in peak hours
IV) Rational implementation of remote and /or local control options should be considered as a part of the coming AMR projects
V) Quality requirements should be included in the directions from the regulator
VI) The requirement specification developed in the project is recommended as a basis for tenders
VII) Nordic cooperation in the Nordic AMR Forum should be priortised
VIII) The investments in AMR systems need to be followed up by dedicated programs with focus on how to respond to price variations, preferably combined with information about the environmental impact (CO2 emissions etc.).