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Copenhagen Energy holds the balance

Accuracy in forecasting amounts to cost savings in delivery

Fortunately, it is extremely rare for there to be a major power failure in Denmark. However, when it does happen, as it did in September 2003, when the whole of Eastern Denmark went black together with Southern Sweden, there are repercussions. On that occasion the fault consisted of a fall-out in a Swedish power station in Oscarshamn which, together with a breakdown at a switching station, caused a power failure of major proportions because the production was less than the consumption.

Electricity is traded in a free market as a commodity, but electricity cannot be kept in storage. It must be used at the same moment it is produced, otherwise the surplus product effectively goes up in smoke. On a daily basis, Denmark must maintain the balance. In Eastern Denmark, it is the Elkraft System that has the overall responsibility for the electricity supply. Elkraft has 16 partners responsible for balance. Every day of the year, the partners must report planned consumption and production of electricity – including wind turbine power – to Elkraft. This forms the plan for anticipating power consumption and producing the right amount of electricity, hour by hour over a 24-hour period.

As of 1 March 2004, Copenhagen Energy (Københavns Energi) was approved by Elkraft as a balance partner. From now on the Copenhagen-based energy company will predict the next day’s consumption of electricity hour by hour. The balance between consumption and the purchase of electricity reflects directly in the baseline because any imbalance will be expensive and, in the worst case, the supply reliability is threatened.

Financial incentives for accuracy
"There is always equilibrium in the plan that is drawn up, for no balance partner is permitted to report anything other than precisely the consumption that matches their buying of electricity," explains Market Manager, Lene Sonne of Elkraft System. In practice, however, Elkraft has a safety margin available in case consumption and production do not match the predictions.

Elkraft is responsible for keeping the current stable and monitors the consumption round the clock. Because those responsible for the balance as a whole have consumed less power than notified, if imbalances do occur, then Elkraft buys the surplus power and sells it on to other buyers. Or, if necessary, Elkraft ensures that a power station with which Elkraft has a prior agreement, reduces the production. Alternatively, the power station can increase the production of electricity if the consumption is greater than anticipated.

Control of the variations
"We are highly dependent upon the predictions of those who are responsible for maintaining target levels. Therefore, being responsible for balance is quite a demanding position. We use financial incentives to encourage them to predict as accurately as possible. In principle, it costs the balance partners more when they deviate – positively or negatively – from what they predicted," Sonne points out.

When the accounts are settled, the balance partner finds out the financial implications, as Elkraft checks and measures on an hourly basis to see whether the predictions for the day have been correct. Any departure impacts on the account in one way or another. When Copenhagen Energy became a balance partner on 1 March 2004, they did so with a brand new, advanced SAS system for forecasting electricity demand on the part of all their customers in Zealand.

"We conducted a wide range of tests on historical data and tried out parallel forecasts before we implemented the SAS solution, and each time the outcome was impressively close to the actual figures," explains Energy Market Manager Mikael Gynther, of Copenhagen Energy.

But even before that there was time allocated to developing a flexible model that is able to take almost all factors into consideration. The basic model is based on historical data pertaining to electricity consumption, but new input is constantly being added regarding movements in the customer population and the weather. In the same way, new and one-time events can easily be added to the calculation model when, for example, there are moveable public holidays, national sporting fixtures, cultural evenings, crown-prince weddings and countless other parameters that affect energy consumption.

Quickly recouping costs
Utilizing SAS technology for demand forecasting, Copenhagen Energy quickly recouped their investment because the new forecasting solution is faster, better and less expensive than the previous system, which involved external forecasting services. In fact, the solution was up and running in just 2 months and forecasting accuracy has doubled.

"It is of great advantage for us to handle forecasting internally. We expect the costs in connection with the precise predictions to be able to be reduced by up to 50 percent. So it is a matter of considerable savings," says Gynther. Annually, Copenhagen Energy handles up to three terawatt hours, corresponding to three billion kWh, or approximately 10 percent of Denmark’s annual electricity consumption.

However, he is especially satisfied with the fact that the investment costs of the solution amounted to only about a quarter of what the energy company had originally expected when it decided to go in for a state of the art solution.

"This is a ‘ray of sunshine story’ on top of an especially successful project. It was finished in time. It is flexible and has a great commercial potential, and has also afforded us strategic opportunities that we have not had before. At the same time it strengthens the supply security. In a nutshell, it is everything we had hoped for," says Gynther.

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Copenhagen Energy

Challenge:
Accurate forecasting of energy demand for minimal loss
Solution:
SAS doubles forecasting accuracy, offers cost savings of up to 50 percent and supports stable, reliable delivery of energy to consumers 

We expect the costs in connection with the precise predictions to be able to be reduced by up to 50 percent. So it is a matter of considerable savings. 

Mikael Gynther

Energy Market Manager

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