Unicorn is easing digitalization, electricity market entry for new players

Electricity transmission system operators or TSOs need tools to exchange data with lower-level market segments down to individual devices participating in the power market, including heat pumps and freezers. Prague-based Unicorn Systems has extensive experience with its software solutions throughout the spectrum, in a range of European countries. We spoke to Chief Commercial Officer Jan Konrád about the role of emerging factors and activities such as flexibility aggregation and demand response.

Reducing the interval of electricity trading from 60 to 15 minutes implies transmitting four times more data and making calculations four times more frequently, Chief Commercial Officer of Unicorn Systems Jan Konrád pointed out in an interview with Balkan Green Energy News. His company, which participated in this year’s Belgrade Energy Forum, develops software that helps integrate the entire system from TSOs to the new market players such as aggregators that are officially entering the scene through the European Union’s latest legislation.

Your company has a substantial presence in the European energy market. How did you start and what were the main milestones?

Unicorn was founded in 1990. In the beginning it developed software mostly for financial institutions. The first projects for the energy industry started in the late 1990s. One of the most important moments was the start of the liberalization of the European energy market in 1999, when the first European liberalization package was passed.

The Czech Republic was one of the first countries to start unbundling – separating generation, trading and transmission. New entities emerged and one of them was the independent Czech Transmission System Operator (ČEPS). We built its first solution for organizing the open energy market. It was a market for ancillary services at the time, which gave the name to one of our major energy products – Damas, an acronym of day-ahead market with ancillary services.

It became very successful as we now have it installed at 24 transmission system operators in Europe. Of course, the current, third-generation Damas has a much wider scope of functionalities than the original one.

Unicorn has been upgrading its Lancelot products for energy traders and other market participants for more than ten years

Another milestone was our participation in a project called eTrace, built on the Damas platform. It was the first coordinated auctioning system for cross-border electricity transmission capacities, for six countries in the region of Central and Eastern Europe (CEE). Rolled out in 2005, it was the first regional or international platform for European electricity trading. Later it was replaced by a solution provided by the Luxembourg-based Joint Allocation Office (JAO), which is still one of our biggest customers.

Given that we were organizing the markets on the European and national levels, working for TSOs, power exchanges and international institutions, it was only logical to introduce a solution for energy traders and other market players. In 2013 we acquired a small company that was developing the Lancelot platform and we have been expanding and upgrading it since.

The electricity market is changing, with new needs and new types of players such as flexibility aggregators. It is a segment that we are now able to cover with products like Lancelot and Flexigy. We are reaching into aggregation, demand response and end devices. We can control them physically and organize them into virtual power plants. With a smart control system at your home, your heat pump and refrigerator can also participate in the market and, for example, provide balancing services.

What are your plans for Southeastern Europe?

We see good potential in the region. There are a lot of new players and traders entering the market. We have important customers there, for example we work for the TSOs of Greece, Serbia and Romania. Damas now also has a gas option. The market principles are the same, so what we do in electricity we can do in gas, too. We have two big clients in your region: Gastrans and ICGB.

Energy traders are very interesting to us. We want to deliver solutions from our Lancelot portfolio, namely the Lancelot ETRM product for electricity trading and Lancelot FMS for precise forecasting – if you want to buy electricity for your customer portfolio, then you must know what the consumption is going to be.

There is also Lancelot GDS (Generation Dispatch System). When you are a company that has a production portfolio, you want to organize and optimize this portfolio, to be able to cover your predicted consumption and sell on the markets with maximum profit. This is the generation dispatch or production unit commitment, as it is also called.

We are watching the region closely. We have experience from our country and other countries that are a little bit ahead in the development of the energy market and we are ready to bring this experience to the region.

The company is developing solutions for a range of emerging market segments, many still being shaped by legislation in the European Union and individual countries. What does it mean for small market players like the ones joining aggregation platforms, owners or electric vehicles or just neighbors sharing locally generated electricity?

Unicorn is developing enterprise solutions. We aim at bigger companies and players in the market. We do have some other activities, like the ChargeUp Group, the part of Unicorn providing solutions for managing charging infrastructure for electric vehicles. It includes an application for owners of the chargers, but also, of course, for end users, the drivers that are served at the charging stations.

We take a big advantage from synergies here. For example, we have a pilot platform with the Czech TSO that covers end devices including EV chargers. It uses their flexibility to balance the grid. But end users will not be our customers – we are interested in their aggregators and suppliers.

TSOs seem increasingly blind to what’s going on at the micro level and within distribution areas. Their reports can show a drop in consumption even though it’s just prosumers producing and using more of their own electricity. Is that a concern for forecasting and system stability?

When an independent aggregator is pooling a set of devices, for instance to provide balancing services, it is very difficult for the TSO to control how the devices actually respond to its commands. A TSO using ancillary services needs to measure demand response and evaluate it. If it is left to aggregators, TSO does not have control that is precise enough.

It is very difficult for a TSO to control how an aggregated bunch of devices actually respond to its commands

Platforms are emerging that unify the way that these devices are physically controlled, how the signals are transmitted and how the response is measured. We standardize this communication.

If solar power production is isolated, like within a household, the TSO does not need to handle it. But of course their electricity supplier and distributor does care as it greatly changes the traditional consumption patterns. The modern forecasting systems like our Lancelot FMS are able to reflect it.

When it comes to electricity sharing, there must be a platform measuring it, a centralized data hub settling these transactions. In this case, our customer will be that data hub. In some countries it is organized by a special entity, and in the others by the TSO.

Just how complex is the electricity system becoming from the point of view of operators, compared to the old ways, especially with tens of thousands of battery and photovoltaic units big and small getting plugged in?

Here, I would first go back to your question about what we offer to small companies. Many want to enter the electricity market. In our country their number is constantly increasing.

A few years ago there were only a few providers of balancing services to the TSO and now there are several times more. Our Lancelot platform is a swift and cheap solution for firms that want to utilize their distributed generation and enter the market quickly.

But besides the increasing number of market players, the electricity system’s overall complexity has increased in many ways for the last 20 years and is currently accelerating.

Intermittent generation resources are reaching a threshold where it is difficult to keep control over the grid. In the Czech Republic, coal makes up 50% of electricity production and it is planned to be phased out by 2030. It is a huge change, replacing it with renewables. Balancing must shift from big coal power stations to batteries and to the flexibility of devices on the low-voltage level.

More complex systems tend to be less reliable, which means more IT investments are necessary as the necessary IT solutions for their control also must be more sophisticated

The complexity of control is increasing. In the EU we are shortening the trading period from one hour to 15 minutes. There is talk of cutting to five minutes. But it could become even shorter, as for intermittent sources even five minutes is long, if a cloud comes and photovoltaic output drops.

When you are switching from one hour to 15 minutes, there is four times more data to transmit and you make calculations four times more frequently.

It requires completely new IT solutions and communication standards, as I said before. With increasing complexity, we need to think about reliability as well, as our civilization depends on electricity.

More complex systems tend to be less reliable, which means more investment is necessary, because necessary IT solutions also must become more complex. The question of cybersecurity also arises. It is good news for companies like ours, but not as much for households and other electricity users, because of the costs.

What are the next stages of the development of the market on the macro scale and for prosumers and active buyers and how will Unicorn Systems contribute?

Member states need to align their legislation with the EU’s new electricity market design, covering energy storage, independent aggregation, electricity sharing and other elements and implement it all. European countries have a lot of work on their hands. Then, of course, comes feedback and possibly some corrections.

It is an opportunity for us because we are developing solutions for the new market players, to make the transition easier.

Almost every industry report and initiative points to grid bottlenecks as the biggest obstacle. What are the main requirements, in power transmission and distribution hardware, for digitalization and decentralization?

From our point of view, if there were no grid bottlenecks, there would be no need for our congestion management solutions. If you were able to transmit any amount of power from any place in Europe to another, a lot of our solutions would not be necessary.

More sophisticated control and software are the way to overcome the shortcomings in infrastructure, in grid hardware.

Nevertheless, we are more and more concerned about the physical aspects of the grid. Trading is moving closer to real time. Intraday trading is more and more important. With some solutions, we are now trading just 15 minutes before the actual delivery.

If you want to activate some flexibility that is not connected to the transmission system, but within the distribution grid, you must look at the conditions – can you do it without disrupting power or voltage parameters in a particular grid node? Therefore the trading is more and more dependent on the physical state of the grid.

Unicorn’s activity includes predictive tools. How significant are they becoming? Are they anything like AI and algorithmic trading in stock and bond markets, where they can cause a crash or another major event within milliseconds? Traders entering the intraday market are increasingly relying on algorithms.

Lancelot FMS, Forecast Management System, does various types of forecasting, like for wind and solar power production. But more important for us are predictions of customer portfolio consumption.

It is one of the most important aspects for any supplier. Unicorn is oriented toward clients who have customers, and not quite those who just speculate. The risk management aspects of such trading are different from what we are doing. Of course we use artificial intelligence in our prediction models. And our trading system is able to identify an open position and optimize the proposal how to close the position. But it is not a purely algorithmic machine that speculates. We leave this to others.

I believe this particular aspect of the market will have to be regulated sooner or later. Because it is really dangerous when thousands of machines are trading based on algorithms. Certain feedbacks or loops based on mutual dependencies could bring about major disruptions to the market with potential to damage the physical delivery itself. And everything now depends on electricity.