Source - Svk Kompensationsmodell Delrapport 1 (2024)

Document: Delrapport 1 – Kompensationsmodell aggregeringstjänster: Förslag till kompensationsmodell
Publisher: Svenska kraftnät
Date: 2024-09-02
Reference: Ärende nr 2023/2323; Government assignment KN2023/03647
Pages: 58

Svk’s analytical proposal for a compensation model for independent aggregation in Sweden, submitted in response to Government assignment KN2023/03647 (commissioned July 2023). Companion to Source - Svk Kompensationsmodell Delrapport 2 (2024), which contains the legislative text.

Summary

When an independent aggregator (FSP) activates a customer’s flexibility resource, the customer’s electricity supplier has an electricity procurement cost it can neither recover through the customer’s metered bill nor offset in balancing settlement. This is the structural reason an FSP needs a compensation mechanism to operate without supplier consent. This report proposes the design of that mechanism.

Key claims

Proposed role name change

Svk proposes replacing the current ellagen role “leverantör av aggregeringstjänster (LA)” with flexibilitetsleverantör (FSP — Flexibility Service Provider). The change signals that all flexibility is in scope — not just aggregation of small resources. The report uses FSP throughout.

Two models for independent aggregation

Svk analyses four models (drawn from DNV GL’s prior work for Ei) and concludes two are viable:

Model 3 — Flera leveranspunkter (multiple delivery points)
The flexibility resource is separated from the customer’s main electricity agreement and assigned its own delivery point. A new BRP2 takes balance responsibility specifically for that resource. No compensation between FSP and original supplier is needed. Advantages: clean accountability, no rebound-effect problem, no reference-profile uncertainty. Limitation: cost to establish a separate delivery point and metering may be prohibitive for small or infrequently-activated resources. Possible immediately with ellagen changes. Does not require the central information system.

Model 4 — Flexibilitet med kompensation
Customer keeps a single electricity agreement with the original supplier. FSP contracts with a BRP2 to take balance responsibility specifically for the imbalances its activations cause. The original BRP1 is obalance-adjusted (“obalansjusteras”) for the verified activation volume. Compensation is then due to the supplier. Already in ellagen (8 kap. 13 §) but not yet operational. Requires a central information system to administer at scale.

Svk’s recommendation: both models should be available — customer choice depending on which suits the flexibility resource. No model should be mandated exclusively.

Model 4 sub-models

Two variants for administering the compensation in Model 4:

• Alternativ A (central avräkning): BRP2 pays Svk, which pays the supplier. Currently in ellagen 8 kap. 15 § and 26 §. Requires a financial transfer system at Svk.
• Alternativ B (korrigerad faktura — corrected invoice): The supplier adjusts (“debiterar eller krediterar”) the customer’s electricity bill for the activation volume. The customer pays the supplier for the “lost” electricity; the FSP then pays the customer compensation for delivering the activation. Svk administers and verifies the volume centrally, but no financial transfer through Svk is needed. Recommended by Svk. Keeps the customer financially central; increases customer transparency; allows bilateral flexibility in compensation pricing.

Compensation price

Spotpriset (day-ahead spot price for the delivery period) is recommended as the compensation price — regardless of which market the FSP acts on. Rationale: transparent, easily verifiable, low administration burden, consistent across markets. The same price regardless of market avoids arbitrage distortions.

Alternatives evaluated and rejected:

• Obalanspriset (imbalance price): set ex post, creates unpredictable cost risk for FSP; does not correspond to supplier’s actual procurement cost
• Elleverantörens anskaffningspris: supplier’s actual procurement cost is commercial secret, not publicly verifiable, non-transparent for customer

For the day-ahead and intraday markets specifically: a spotpriset-based compensation means FSP revenue from selling flexibility ≈ compensation to supplier — no net margin for FSP on that market. Svk acknowledges this is a business-model constraint for FSPs on the day-ahead market, but prefers a single universal price for simplicity. Model 3 avoids this problem entirely.

Reference profile (baseline)

Verified activation volume = measured value minus reference profile (counterfactual consumption). Methods reviewed:

Reference profile design is deferred: Svk recommends waiting for NC DR guidance before standardizing. Cannot be specified within this government assignment’s scope.

Implicit flexibility: excluded

Implicit flexibility (customer responding to price signals without FSP intervention) does not involve an organized market, has no bid to verify against, and cannot be cleanly separated from normal consumption variation. A compensation model cannot be applied fairly. Conclusion: no compensation model applicable to implicit flexibility.

Markets covered

For the balancing market: the BSP role is required but not yet defined in ellagen. Svk explicitly declines to propose BSP legislation within this assignment — that is left to the elmarknadsutredningen (Direktiv 2024:12).

Scope: both demand reduction and increase, and production

Compensation applies to both reduced and increased consumption, and to production. When FSP increases customer consumption (e.g., controlled EV charging as upward flex): “omvänd kompensation” (reverse compensation) — the supplier credits the customer rather than debiting. The FSP pays the customer less (since the customer used more electricity it now doesn’t have to buy elsewhere).

Administration and central information system

Sweden currently lacks a central market data system. ~180 DSOs hold the customer–supplier link locally. To administer Model 4 at scale, a centralt informationssystem is required. Norway has Elhub; Denmark and Finland have comparable data hubs. Svk estimates 4–6 years from decision to operational system.

Transition arrangement: during the period before the central information system exists, only Model 3 (multiple delivery points) will be possible. Model 4 (korrigerad faktura) cannot function without the system. This is the explicit sequencing of Sweden’s path to independent aggregation.

Svk recommends the government designate an authority and assign responsibility for developing the central information system as the next step.

Evaluation planned

Svk recommends evaluating the compensation price choice and model selection after 3 years of operation — to learn from experience and adjust if needed.

Relevance to wiki

• Aggregation — fills in the “Swedish compensation model” gap; defines Model 3 / Model 4 / korrigerad faktura; explains why Model 3 is the near-term path
• Elmarknadshubb — compensation model requires the centralt informationssystem; reinforces why DHV/FIS is not optional but structurally necessary for independent aggregation
• Balancing Markets — BSP role analysis; compensation model per balancing product type
• Flexibility Market — LFM compensation model; spotpriset as activation-price basis
• Network Code on Demand Response — reference profile methodology deferred to NC DR; NC DR flexibility register will integrate with central information system
• Baseline Methods — reference profile methods reviewed here are closely related to the wiki’s existing baseline methods analysis