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SMARTAND MICRO GRID:

MARKETAND ECONOMICANALYSIS.
ASSESSING OPPORTUNITIES FOR LOCCIONI COMPANY
Master Applicant: Giovanni CIALDINO Supervisor: Prof. Lino CINQUINI
The 3
rd
of March 2020 European Commission adopted a 10 years strategy for the advancement of
economy of the European Union. This strategy, called Europe 2020 aims at smart, sustainable and
inclusive growth with greater coordination of national and European policy.
Among the main Europe 2020 target there are the so-called three 20s:
Reduce European greenhouse gas emission of at least 20% compared with 1990 levels;
Increase share of renewables energy consumption to 20% of total energy;
Achieve 20% of energy efficiency.
In order to achieve these European-level goals, national goals have been set for each country. Targets
are different from country to country, reflecting its national situations and circumstances. For example
Italy has a renewable energy target of 17% and an energy efficiency target of 27.8%.
Starting form 2011 countries such as Italy, Germany, Spain and Denmark started a strong policy of
promotion of renewables, increasing significantly their share of production for non-forecastable
renewables. However European national grid were designed to have a mono-directional flow of energy
and a forecastable production. Differences between traditional and renewable generators contributed to
a significant increase in grid instability.
Grid with Traditional Energy
sources
Grid with Renewable Energy
Sources
Forecastable production Non Forecastable production
Mono-directional Energy Flow Bi-directional energy flow
Producer and Consumer Producer, Consumer and Prosumer
All protection systems in European grid were in fact designed for a mono-directional flow of energy,
while introduction of renewables and distributed generation allows bi-directional flow of energy.
Furthermore since production become less and less forecastable it is more difficult to perform grid
balance and to match demand and supply. Another relevant problem is that often renewables generators
are located in remote, poorly connected areas with weak grid conditions, therefore energy that they
produce cannot always be dispatched. Grid instability has been increasing so much that many of
biggest blackout in human history happened in the very last years.
Smart-Grid are one of the possible solution to these problems. Smart Grid challenge is about
re-thinking traditional national grid, undertaking relevant investments toward the definition of a new,
more flexible one. However, these investments take a long time to be implemented therefore countries
are not willing to invest money in this direction since it is not certain whether better technologies will
emerge in the meanwhile. Solutions that most countries are considering concern introduction of storage
for grid support and coupling electric grid with a proper ICT infrastructure.
Microgrid, on the other hand deals with increasing the amount of energetic independency for local
communities and might give another relevant contribution to reduce grid traffic and blackout risk. They
are systems made of production centers, consumption centers and smart energy control systems. Three
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different kinds of microgrids are possible: on-grid (i.e. connected to the main grid), off-grid (i.e.
isolated from the national grid) and mixed (which can be isolated or on-grid depending to the
condition).
The goal of this work is to asses potential business opportunities for business integrators in the field,
with a special focus on Loccioni company (Italian International company willing to play a major role in
the business). The path followed to achieve this goal has been to study literature and law on the topic
and to spend a four month period within Loccioni in order to understand which of their competences
which could be leveraged in these new markets. Interesting applications have been identified through
interviews to Loccioni management, Italian Energy Authority (AEEG), Terna (Italian TSO), RSE,
ENEL, A2A, Politecnico di Milano, EirGrid (Irish TSO), TEIAS (Turkish TSO), TenneT (German
TSO). After identifying a potential opportunity, legislation for several countries has been analyzed.
Since financial estimation relies very much on country legislation and regulation, rather than providing
detailed computation and simulation, which would vary from case to case, the work has been oriented
in providing frameworks of analysis under which several business opportunities in the smart and micro
grid sector have been identified.
In the Smart Grid sector the most relevant identified application has been Primary Frequency
Regulation and its performance through EESS (ie batteries). Depending on the country, producers of
energy or utilities might find convenient or safer to use EESS for Primary Frequency Regulation
services rather than traditional technologies. Therefore a framework of country analysis has been
provided. The framework provides two different analysis strategies for countries having mandatory and
voluntary regime. In each case understanding or local regulation is a pre-requisite. In the voluntary case,
service price has been considered to be the main variable, while in the mandatory case analysis is
focused on the opportunity cost, and, therefore,focused on the national energy price and presence of
renewables providing Primary frequency regulation services.
The second opportunity in the smart grid sector, Demand Response, has a developed market in USA,
while some countries in Europe are starting to consider introduction of these services. Italian market
might present relevant normative innovation and need to be monitored.
In the Micro-Grid sector most relevant identified opportunities are microgrid development for
companies in countries with poor grid conditions, and companies in country islands suffering from
high electricity prices. In the former application, benefits are mainly due to higher power quality and
consequent reduction of risk of damage in equipment while in this latter application economic return
from electricity savings can be relevant. Other potential customer interested on microgrids could be
utilities in small islands belonging to European countries, since their electricity generation cost is also
very high. However government incentives have the effect of subsidizing inefficient production and
removing economic motivation to innovate. Introduction of stricter subsides regulations might open a
relevant market in Europe. Along with these opportunities Italian RIU and Turkish industrial areas
might present a good environment for market implementation of energy management system and
internal Demand Response.
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Figure 1: Schema summarizing the most interesting business opportunities which have been
identified and the path to reach them