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Glossary

Welcome to our glossary! Here you will find common terms in the field of energy and Virtual Power Plants.

Access point The access point is the physical location in the transmission and distribution grid where electricity can be taken off and/or injected.
Aggregator An aggregator is a market participant that links several decentralized production and demand units. In this way, the aggregator can operate the integrated systems in a coordinated manner and provide the same services as a large central power station. This also gives smaller units access to markets (reserve engines and electricity markets) that they could not enter on their own. In addition, the TSO can offer system services that support the entire network operation and the integration of renewable energy sources.
Ancillary services Ancillary services are all actions of grid users that help the grid operator Terna to maintain the balance of the transmission grid. Most important ancillary services are reserve products (R1,R2,R3), voltage regulation and black-start capability.
Area control error (ACE) The net difference between real imports and exports into and out of a control area in correlation to the contracted imports and exports.
Balancing Responsible Party (BRP) or Utente di dispacciamento (UD) All access points have to be assigned to a so-called “Utente di dispacciamento" (UD) or Balancing Responsible Party (BRP). The BRP is responsible for (quarter-)hourly balance between injections and offtakes.
Balancing Service Provider (BSP) A legal entity that offers the flexibility of a unit or load in the reserve market to parties that request flexibility services. In the Italian Electricity Market, all so-called “enabled units” (unità abilitata) are obliged to provide their flexibility to the TSO Terna through the Dispatch (MSD) Market.
Clearing price In power exchange markets, the market operator will aggregate all supply and demand bids to form the supply and demand curves. Consequently, they will clear the market. When supply and demand meet, they form the price and size of the traded volumes, respectively known as the clearing price and clearing volumes.
Clearing volume In power exchange markets, the market operator will aggregate all supply and demand bids of both the supply and demand curves. Consequently, they will clear the market. The intersection of supply and demand forms the price and size of the traded volumes, respectively known as the clearing price and clearing volumes.
Combined Cycle Gas Turbine (CCGT), Steam and Gas (STAG) A gas turbine (i.e. a turbine that is driven by the exhaust gases of the combustion of some kind of fossil fuel) cycle that generates electricity, where the remaining heat is used to generate steam in a heat recovery or heat exchanger. The steam is used to drive a steam turbine. The overall energetic efficiency of such a combined cycle can be as high as 60%. CCGTs are one of the most flexible conventional power plants, and are able to deliver fast reserve power products like R1 and R2. Due to the relatively high marginal costs, CCGTs take the role of a peak power plant in the normal electricity market.
Control Area A control area is the geographical area in which a TSO operates and has the final responsibility for the instantaneous balance between demand and supply.
Day Ahead Market (DAM) in Italy MPG The power exchange market organized the day before the actual delivery of the energy commodity. In Italy the day-ahead (MPG) market is run by GME. Demand and supply bids can be made until 12pm on the day before delivery. The market will then be cleared, meaning that the clearing price and volumes are determined. Trading volumes are on an hourly basis.
Daily Products Market (MPEG) The Italian Daily Products Market is part of the Spot Electricity Market (MPE) operated by GME. Its daily products are listed in a continuous trading mode, happening in two sessions, two days and one day prior to delivery. There are products based on a unit price differential and a full unit price; each of them being offered in a baseload and peak load profile.
Distribution System Operator (DSO) The DSO maintains, reinforces, expands and operates the distribution grid. The distribution grid brings the electricity from the transmission grid to end users down to household level. They are also responsible for public lighting, provide the green certificates to end-consumers with e.g. a photovoltaic installation and other tasks. In Italy there are 135 DSOs (e.g. Enel Distributione S.p.A, A2A, ACEA, IRIDE, DEVAL and HERA).
Energiewende The German energy transition (Energiewende) is a long-term energy and climate strategy towards a low-carbon energy system based on developing renewable energy and improving energy efficiency (source: Agora Energiewende 2015)
Futures markets [In the context of energy] the future market is an exchange market, where people can trade standardized futures contracts. This concerns volumes of energy to be delivered at a given point in the future, at the contracted price for a determined period. Both energy producers and consumers use futures contracts for risk hedging.
Imbalance tariffs The grid operator Terna uses the imbalance mechanism to incentivize BRPs to keep their balancing group in balance. For each hour or quarter of an hour (depending on the connected unit) an imbalance price is determined taking into account the costs that Terna has for activating reserves in order to restore the balance of the system.
Inframarginal rent The difference between the market clearing price and the marginal cost of certain generation unit is known as the inframarginal rent. Inframarginal rents are needed to recover fixed generation costs, like capital and overhead costs.
Intraday Market, in Italy Mercato Infragiornaliero (MI) The Italian MI (Intraday) Market allows market participants to adjust their bids from the Day Ahaead (MPG) Auction. It is structured into 5 MI sessions (MI1 – MI5), happening between 12:55 pm on day ahead and 11:15 am on delivery day.
Marginal Decremental Price (MDP) The price of the last activated downward regulation reserve bid in the merit order curve.
Marginal Incremental Price (MIP) The price of the last activated upward regulation reserve bid in the merit order curve used in the imbalance market.
Market coupling Integration of two or more national electricity markets, as long as there is sufficient transmission capacity available. This will lead to convergence of electricity prices. For example, the Belgian, Dutch, French, UK and German day-ahead markets have been coupled since last years and have shown convergence in price. Typically, implicit market coupling is meant. In this case, the cross border interconnection capacity needed for the physical transfer of energy is included in the auction. The national market platform directly integrates the available cross-border capacity in the market coupling algorithm. When there is explicit market coupling, interconnection capacity is auctioned separatly.
Merit order curve A curve that ranks the bids of different electricity generation technologies according to price and together with the volume of the bid. The price theoretically reflects the marginal cost of generation, such as fuel costs, but not the capital or overhead costs. The intersection of the merit order curve and the demand curve will determine the clearing volume and price.
Prosumer [In the context of energy systems] prosumers are households or companies that both inject and take off electricity from the grid. They are consumer and producer at the same time.
R1 (also primary reserves or frequency containment reserves (FCR)) Kicks in automatically in a matter of seconds after the deviation from the reference frequency (50Hz in Europe). Its aim is to contain the deviation to avoid system collapse.
R2 (secondary reserves or automatic frequency restoration reserves (aFRR) These reserves are controlled centrally by TERNA to restore the frequency back to its reference value. The reserves are active in a time frame of 30s to 15 min.
R3 (tertiary reserves or manual frequency restoration reserves (mFRR)) The replacement reserves are meant to free up the R2 reserves after the frequency has been restored. They are controlled manually and activated locally. They are important to solve important imbalance and congestion problems, active in a time range from minutes to hours. R3 needs to be fully activated within 15 min.
Regulator Independent instance that monitors the natural monopoly of the grid operators. They assure free competition in production and supply. For example, the TSOs and DSOs have to apply the same tariffs for all producers and consumers, who want access to the grid. In Italy, the National Energy Regulator is AEGGSI (Autorità per l’energia elettrica, gas e il sistema idrico).
Residual demand The demand of the consumers minus what is locally produced by wind, sun or other distributed generation
Retail market [In the context of electricity] the retail market is the market, where suppliers compete to sell electricity to end-consumers. More specifically, they offer supply contracts.
Security of supply The ability of the power system to provide electricity to end-users with a specified level of continuity and quality in as a sustainable manner (definition by Eurelectric). Typically, one distinguishes between short- and long-term security of supply. The former one is the ability to cope with sudden disturbances like short circuits or lightning strikes. The latter one is the ability of the system to meet the demand of the end-consumers at all time, taking into account possible outages of generation plants or grid infrastructure.
Transmission System Operator (TSO) The operator of the high-voltage transmission grid. In Italy this is Terna S.p.A. The TSO maintains, reinforces and expands the high-voltage grid that transport large volumes of electricity over longer distances. Furthermore, the TSO is responsible for a secure grid operation and has to make sure that demand and generation are always in balance. Since they are natural monopoly, they operate under supervision of an independent regulator. In Italy this is the AEGGSI (Autorità per l’energia elettrica, gas e il sistema idrico).
Virtual power plant A virtual power plant is a pool of decentralized assets (consumers or producers). The combination of several types of flexible production and consumption units, controlled by a central intelligent system, allows for valorizing the flexibility of the facilities at its best.
Wholesale market [In the context of electricity] wholesale markets are the place, where large producers, suppliers, traders and industrial consumers trade electricity. Suppliers will resell the electricity to small end-consumers on the retail market.
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