Facilitated flexibility trading with baseline methods

Increased electrification and a changed production mix entail new challenges for electricity network companies. A new report shows methods and principles for evaluating flexibility in an efficient and transparent way.

On behalf of the program Elnäten's digitalisation and IT security, Yalin Huang and Lucas Thomée at DNV have produced recommendations for several different baseline methods, i.e., methods for quantifying flexibility.  

An established baseline will lead to flexibility buyers, suppliers, and owners having greater security and consensus on the quantification of delivered flexibility. This way, society gains greater insight into the compensation process which will lead to increased efficiency of the flexibility market. 

A so-called “baseline” is often used when trading with flexibility to determine whether the agreed amount of flexibility has been delivered. In Huang and Thomée’s project, a baseline is defined as a forecast of how the flexibility provider's production or consumption would have been if the flexibility service had not been activated. A well-thought-out choice of baseline method can enable the owner of a flexibility resource to evaluate their flexibility. 

The report presents learnings from existing studies and applications of baseline methods. It also contains a description of an evaluation method, and it is applied to some of the most relevant baseline methods for four Swedish flexibility products: FCR, mFRR, ShortFlex, and LongFlex. FCR and mFRR are two of Svenska Kraftnät's products for managing frequency. ShortFlex and LongFlex are two products developed in the pilot project Sthlmflex to redress local capacity shortages.  

The six baseline methods evaluated are: nomination, meter-before-meter-after (MBMA), historical baseline without adjustment, historical baseline with adjustment, control group, regression model, and calculation model. 

In the evaluation, each baseline method is reviewed based on the assessment criteria developed by DNV together with a reference group. The assessment criteria differ depending on products or markets. When grading, consideration product parameters, activation frequency, typical delivery period, and parameters related to the method, such as complexity and data volume, are assessed.  

The ambition is for the report to be used as support when stakeholders are to choose which baseline method to apply, says Yalin Huang at DNV: 

- A well-thought-out choice of baseline method can enable the owner of a flexibility resource to, possibly with the help of the aggregator, evaluate his flexibility quantitatively. It also helps to reduce uncertainty for flexibility buyers and to increase transparency in the settlement. 

Yalin Huang thinks that one of the most important results of the project is the methodology developed to evaluate baseline methods for different markets of flexibility: 

- Another important result is the recommendations for baseline methods that we have developed according to information we have received from flexibility actors, including flexibility suppliers, marketplaces, and flexibility buyers. 

Lucas Thomée continues:  

- The most important result I see in the project is that the report can help different actors to choose the right baseline method based on their resources and the market where the flexibility resource is to be sold. 

Several companies have pointed out the importance of the report. The recommendations are important because they provide a common view and quantification of the baseline: 

- The reference group consists of flexibility suppliers, marketplaces, and flexibility buyers which have all been involved in the project. We have received input from those involved in the development of the grading system for different assessment criteria for evaluating baseline methods and flexibility methods, says Lucas Thomée. 

Did you get any aha-experiences when you worked on the project, something you did not expect to find?  

- Throughout the project, we talked to some experts in baseline who have worked for other flexibility markets, for example in the US and the UK. According to their experience, other countries consider it important for a flex supplier to use one and the same baseline method for all its facilities instead of having different methods for different types of production, or that a baseline method is always used for one market. That is not the case in Sweden. Here, it’s more acceptable to use different baseline methods for different facilities and services, says Yalin Huang. 

Lucas Thomée concludes: 

- There is not as much discussion about "gaming" here in Sweden compared to other countries. Maybe because the flex markets are not as mature in Sweden. Differences in culture might be another reason. I hope that these baseline methods can be useful for the development of the flex markets here in Sweden.