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The energy market faces significant challenges, especially with increasing electrification and the volatility of renewable energy sources such as solar and wind. This makes the balance between energy supply and demand increasingly difficult to maintain. Improving this balance and reducing associated costs requires innovative solutions. Smart Energy Management Systems (EMS) can play a crucial role in this. But how exactly does this work?

I wrote this article in response to two questions we often get from partners:

  1. What is the difference between the Tibo EMS that of third parties?
  2. Why does an EMS contribute to imbalance?

But before we get into how smart EMS solutions work, it is important to understand what imbalance and imbalance costs are and why they are a problem in our power grids.

Imbalance and imbalance costs: what’s the deal?

The physical nature of electricity is that it needs balance: the electricity we use must be generated, and generated electricity must be used. Without this balance, a power grid will change the electrical voltage (Volts) or frequency (Hz) and possibly exceed agreed limits, causing devices to malfunction or break down.


What is imbalance anyway?

With electrification, we are also going to use more and more electricity. As long as we replace fossil fuels with that, that’s a good development. But the balance is increasingly off. Our network is set up so that we have designated responsible parties to do this job. We call this a“Balance Responsible Party,” or “BRP. These are the energy suppliers.

By properly predicting what supply and demand (read: consumption and generation) will do, the imbalance can be kept under control. But power generation from solar and wind still seems very challenging. If a difference arises between the supply and demand previously predicted by a BRP, the BRP must take responsibility.

They can sometimes solve this themselves or they can turn to the“Balance Service Provider” or “BSP. But the BSP doesn’t do that for free. Balancing the power grid is a complicated and cost-intensive job. Consider deploying large battery storage systems, turning off wind turbines or turning on or scaling up gas turbines. Due to market forces, it also means that a larger imbalance at the BRP has a higher price at the BSP to correct. There are other roles in our energy grid, but I’ll stick with these two basic roles for now so as not to overcomplicate things.

In The Netherlands, energy suppliers such as Eneco, Greenchoice, Vattenfall and Essent are major players and are all BRP. They issue an expectation of their customers’ energy needs per quarter hour, and producers can bid on it and organize the delivery of the energy. At the same time, these players are also often BSP. I personally wonder if it wouldn’t be more ethical to split these two roles better, but we’ll talk about that another time.

How does imbalance affect total energy costs?

A BRP is responsible for matching generation and usage of its customers. As long as this is neatly balanced, the cost is low. If the BRP has imbalance, the BRP can primarily prevent it itself. The means used by the BRP include price: this can be used to incentivize use or generation. The cost is then average. If the BRP cannot resolve it itself, the BSP can take care of it. Because the BSP incurs higher costs for this and passes them on to the BRP, energy costs become high.

BRPs (energy suppliers) have a keen interest in keeping imbalances between supply and demand as low as possible. Indeed, a BRP, as an energy supplier, is trying to 1) make a profit and 2) provide a competitive price for its customers.

How can ‘smart EMS solutions’ reduce imbalance?

Let’s start by defining what we mean by a “smart energy management system.

Smartness, I have learned, is not in reactive ability but in anticipatory ability.

By definition, a smart EMS must be able to anticipate. What is the difference? A reactive solution can never work optimally. The cleverness of humans is that we have an anticipatory capacity (although I sometimes question this, looking at what we do to our earth).

By anticipating, we optimize our reactive decisions. We are going to start saving for a trip we want to take next year. Moreover, we are already booking this trip a year in advance because we figured out that airfare is cheaper then. With only reactive power, we would buy far too expensive airline tickets on the day we want to leave and have no money to do so.

An EMS (Energy Management System) can react, but a “smart EMS” by definition must be able to anticipate. A truly smart solution is able to make detailed calculations and make measured decisions to most efficiently achieve its goals.

You cannot call an EMS that does not anticipate demand, supply and price “smart.

A smart EMS contributes to the energy transition in several ways, increasing green (cheap) energy and reducing imbalance. By exchanging data with a BRP, this contribution becomes significant resulting in substantial energy cost reductions.

  • A smart EMS anticipates dynamic energy prices (day-ahead) and optimizes its energy consumption and costs, moving with the supply and demand of energy markets. By anticipating within the service area of the EMS, a smart EMS is able to make pure energy predictions. By communicating this data with the BRP, the BRP can provide a higher quality estimate of supply or demand. The more EMS systems do this, the greater the effect. Imbalance costs will decrease as a result.
  • A smart EMS is capable of overcoming its own imbalance by deploying its own flexible power to make corrections in the event of an erroneous forecast. Of course, an imbalance between supply and demand and lack of flexible capacity can also occur within EMS’s own service area. The imbalance can then be passed on to the BRP (by taking off more or less energy than previously transmitted). The BRP will therefore charge the imbalance cost to the EMS owner.
  • A smart EMS knows when and how much room there is to respond to any requests from a BRP to contribute to balancing the public grid. By also better exchanging data with the BRP, both parties can benefit. For the EMS owner, being able to handle imbalance requests by the BRP is a nice side benefit.

Imbalance in an energy network is a mismatch between supply and demand that must be eliminated. The cheapest solution is to prevent imbalance. All users connected to the power grid contribute to the balancing of the grid to a greater or lesser extent. Smart EMS solutions can help improve balance. Data exchange between smart EMS and BRPs creates even more opportunities and smart EMS solutions can contribute even more to lower imbalance and imbalance costs.

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