Could German PV energy communities participate in the balancing market?

The RWTH Aachen University has simulated 27 scenarios of energy communities participating in the balancing market in Germany and has found that the business model behind an energy community is only feasible if battery storage is available.

Researchers From Germany's RWTH Aachen University have analyzed the economic feasibility of PV energy communities in the country's energy exchange and balancing market. Their analysis was based on a novel simulation model relying on real-world data and 27 different scenarios that account for various regulations, prices, and components.

“This paper introduces a market model for prosumers which is merged to energy communities within today's German market conditions,” said the academics. “Calculations are based on real market data and designed to optimize the financial result in favour of the energy community participants. Furthermore, the resulting business models create added value to society by offering electricity and capacity to the balancing market when available.”

The team's model focuses on the net cash flow (NCF) generated by the community, which is part of the net present value (NPV). Input factors for the NFC include cost values such as energy prices, taxes, levies, and grid costs. On the revenue side of the NCf, factors include market prices on the balancing market and the energy used by the community.

“The simulation model used is based on real data of the solar radiation in the German city of Aachen,” the group said. “It is assumed, that each household provides a 10 kW PV system and a 10 kWh battery system. Furthermore, every household is assumed to consume 3500 kWh of electric energy per year. The solar radiation is based on the average value for the five years from 2013 to 2017.”

The simulation provides three sizes of energy communities – 100 households, 150 households, and 200 households. In Germany, an energy community must have at least 1 MW of PV system capacity, and therefore, no smaller communities were analyzed. Each community size was analyzed under three variations.

“Variation A considers the energy community as a comprehensive business model with all restrictions as well as taxes and levies. Variation B excludes VAT and levies, such as grid costs for electricity exchanged in the energy community. This is the case respecting current legislation for other constructs,” they explained. “The third variation C, has the business model with all restrictions, includes taxes and levies but excludes any battery storage. This variation is created to exclude the high initial costs for battery storage and to see how storage influences the market participation of the energy community.”

To each of the nine combinations of community size and variations, one of three specifications is added, resulting in a total of 27 scenarios. In the first specification, there is no compensation for PV and battery systems, no trading license costs, and no consideration of balancing power; the second has all costs and losses considered but free electricity to the members of the community, while the third includes all costs and losses considered, plus 0.20 Euro ($0.21)/kWh fixed energy price per kWh consumed in the energy community.

“In general, the results in all cases have the same tendencies and allow to derive some general conclusions,” the researchers noted. “If battery storage is not available, the results show that the business model of an energy community is not financially feasible in any constellation. In addition, the bigger the energy community, the better the financial outcome of the energy community in total. Also, VAT and grid costs for internally exchanged electricity in the energy community are not the main cost drivers, hence these costs are no substantial barriers to promote energy communities.”

The analysis was presented in “Commercial energy communities participating in the balancing market a market simulation for energy communities operating by PV- and battery systems,” published in Sustainable Futures.