The Story Begins
“Together with my colleague Professor Maria Kopsakangas-Savolainen we have been studying the energy and especially the electricity market for some time. We have studied the efficiency and regulation questions related to transmission and distribution. The production and distribution activities of the utilities must be unbundled so that cross-subsidization is not possible. Production has been opened for competition but distribution firms are local natural monopolies. This is why they need to be regulated and we became interested in the question how should the differences in endowments be reflected in regulation models. We estimated stochastic frontier efficiency models and developed an incentive compatible regulation model that solves both adverse selection and moral hazard problems.
System level costs
Then we wanted to look at the role of real time pricing in the Nordic electricity market Nord Pool. Based on our simulation model we showed how increasing role of real time pricing indeed enhanced efficiency in the production structure but the effects can be very different for different sides of the market. We could not find a solution that was at the same time CO2 emissions decreasing and economic welfare increasing. We have summarized and presented these studies in our book Modern Energy Markets published by Springer.
This made us understand that there are system level costs related to increasing use of renewable energy sources (RES) like wind and solar in the electricity system. These costs relate to profile costs, balancing costs and grid costs. Profile costs are created because the supply from RES many times does not correlate well with the load peaks. This is why the role of rapidly dispatchable technologies increases and the question of the capacity market opens up. Balancing costs relate to forecasting uncertainties that inevitably increase with increasing use of RES. This is why the role of more precise weather forecasts becomes very important. The grid costs relate to the fact that the best RES are often located outside current grids.
So we understood that this is a genuinely interdisciplinary problem and very suitable for the call of the Strategic Research Council of the Finnish Academy. In the consortium we have five partners and seven research teams. The partners are The University of Oulu, The University of Helsinki, Finnish Environment Institute, VATT Economic Research Center and The Finnish Meteorological Institute. In the research teams we have besides economics expertise from electrical engineering and ICT communication (CWC), software programming, weather forecasting and knowledge management and scientific communication. These teams are described in their own sides in this web page of BCDC Energy.
In these pages we are going to tell you about our project ‘ Cloud computing as enabler of large scale variable distributed energy solutions: Bright Clouds – Dark Clouds (BCDC)’ that the Strategic Research Council decided to finance in the years 2015-2017. Join us to this adventure, follow us and give us ideas and feedback.”