What clients does AleaSoft have and what clients should be interested in AleaSoft services but may not be aware of the importance of your work?
Major and medium-sized energy generators, retailers, large customers, system operators, banks, investment funds, developers of wind and photovoltaic farms, traders, consultant firms, and others are among our clients in the electrical sector. More and more electrical firms are realising that they can’t undertake a future analysis without accurate forecasts, ranging from months to 20 years. The future vision is crucial, especially given that we are witnessing a technological shift with the explosion of renewable energy sources, primarily photovoltaic. If you have a good vision of the future, it is a transformation that brings numerous opportunities.
Artificial intelligence is fashionable. Which part of artificial intelligence does AleaSoft use in its models and since when?
It’s astonishing how artificial intelligence has crept into everything in recent years, as if it were a novel discovery. We use hybrid models in AleaSoft, with a portion of them coming from artificial intelligence, notably recurrent neural networks. These models have been in use since the company’s inception 20 years ago. In practically all European markets, we currently have 400 forecast models in operation. These models, which are based in part on artificial intelligence, are used to anticipate electricity market prices, demand, and production of various technologies such as wind and solar energy over a wide range of time horizons.
What exactly happened on May 7?
Several circumstances coincided. An unscheduled outage of a combined cycle plant, a high demand that was not forecasted by the system operator or retailers, wind energy forecasts that failed to produce less than expected, and the system operator had to resort to some near-real-time adjustment services, such as secondary and tertiary regulation, to keep the system running. There was insufficient supply since the required demand values were exceptionally high, and high values were matched in secondary regulation, in the authorised limit, which are offered precisely so as not to match. One positive aspect of this unique incident is that it has served to highlight the complexity of the electrical infrastructure and market. The electricity system operator’s job is to make sure that during the year’s 8760 hours, exactly what will be used is produced.
Would it have been avoided with the AleaSoft forecasts?
As I already stated, numerous things influenced the outcome, not just a faulty forecast. The electricity grid is controlled using advanced planning. Obviously, as forecasts improve, the deviations and penalties for agents who make mistakes decrease. Combining diverse models produces the finest forecasting systems.
Why are the long-term forecasts important for a PPA?
A PPA must have two points of view, one from the electricity generator and the other from the electricity user. At first appearance, a PPA appears to be nothing more than a promise that the money would be returned to the bank or investment fund by the developer of a wind or photovoltaic farm. However, for a large consumer or merchant, a PPA is a critical instrument for securing a portion of long-term consumption at a fixed price. Both the generator and the user lower their risks with a PPA.
If both sides share the same vision of the future, a key component, price agreement, can be readily accomplished. If one of the two parties makes a bad price prediction, it can lead to considerable losses over time.
What does a large consumer need to lower his electricity bill?
We advocate combining the various mechanisms available to obtain power, such as futures markets, bilateral contracts, PPAs, and the spot market, with the use of trustworthy electricity market price forecasts as a guide. We are currently providing advising to large users to assist them in lowering their electricity bills.
If the investment director of a renewable energy company looks for a consultancy company to make forecasts, what characteristics should the methodology have?
First and foremost, it must be based on scientific principles. The main principles of the Box – Jenkins technique must be considered while developing a time series forecasting methodology. To forecast electricity market prices, it is required to understand that the market is in equilibrium between supply and demand, and that the competing actors have a strategy. Depending on the balance achieved, this method changes. With the offering curves of 2018, you can’t make pricing predictions until 2030.
What differentiates AleaSoft from other firms that provide similar services?
We have 20 years of expertise forecasting in the energy sector, working for some of Europe’s largest firms. We have a scientific forecasting process that has been validated by hundreds of models that have been running for years. Our forecasts are consistent and reflect the market’s core.
Should the current marginal market change? Does it work correctly?
The current marginal market is functional. It has been operational for almost two decades. It is linked to the European market and follows the same rules. If changes are made, they should be done gradually and transparently, without changing the fundamental rules, without affecting the agents who have invested, without interventionism, and always in accordance with the rules of the European market, which require all agents to compete on an equal footing.
What is your opinion of the renewable energy auctions?
The auctions are held to encourage a technology that is not profitable on its own to compete in the market. “The production of power with solar technology is profitable without premiums,” UNEF has said several times.
When it comes to auctions, many potential investors may regret investing because if certain producers receive premiums but others do not because they have previously invested, a comparative grievance is produced. The most comfortable and sensible posture for a potential investor is to wait for the auctions before investing.
The auction situation is extremely complex and delicate. It has no bearing on the market. It’s an issue that’s brought up with good intentions but might have the opposite impact, discouraging investment.
Is there a floor in future prices with the entrance of renewable energies?
There are multiple levels. We may go from being net energy importers to exporters by having a renewable resource, particularly photovoltaic, that is more efficient than that of our neighbours. The export of power is on the first floor.
A second floor is the rise in electricity demand. When the price of electricity decreases, demand rises. New applications, such as the electric car, emerge, as well as applications that are promoted. When prices are high, some businesses leave, reducing national consumption; when prices fall, businesses flock to take advantage of the opportunity.
Another source of increased demand is the substitution of gas with electricity, which results in a third story.
The fourth storey, possibly the most important, is dedicated to hydrogen production. In all modes of transportation, hydrogen and electricity will replace fossil fuels. It is environmentally friendly and renewable. If the price of electricity falls, it becomes more cost-effective to produce hydrogen with excess photovoltaic energy rather than putting it on the grid. Demand will rise as a result of the large production of hydrogen.
We have seen that AleaSoft is in Intersolar, the most important fair in the sector. How is it going?
We are now attending Intersolar Europe and will be there through May 17th. If you wish to come see us, come to stand C4-617. As you mentioned, it is the most important yearly solar trade show. Forecasting is crucial when it comes to making investments. There are numerous visits and consultations. Many businesses aim to benefit from the photovoltaic revolution.