Shaping Up for Deregulated Energy Markets

Almost overnight, the deregulation of the global energy markets has given many providers the opportunity to become part of the utilities industry. Even private households are now able to feed their self-generated electricity – for example, from solar panels or cogeneration systems – into the grid.

In Europe, this move from oligopolistic to polypolistic market structures is monitored by regional regulatory authorities applying a tight framework of legal requirements.

Complying with regulators’ requirements

“Software solutions for the utilities industry used to be deployed to calculate and bill energy quantities only. However, such solutions no longer meet the growing demands of deregulated energy markets and the strict requirements of the regulatory authorities,” says Clemens Schröder, solution manager at the UCC in SAP Custom Development. “That’s why communication with market participants such as electricity suppliers and grid operators is paramount, as is energy data management.”

SAP Custom Development

In these global hubs, experienced software architects, project managers, and developers create customer-specific software. As well as tailored software development, the portfolio includes maintenance and adaptable custom solutions.

To ensure that consumers have an uninterrupted energy supply, all processes must be seamlessly dovetailed – from distribution logistics, through communication between market participants, to reporting to the regulatory authorities. With IDEX (Intercompany Data Exchange Extended), which complements the SAP Intercompany Data Exchange application, utility companies have a software that is precisely geared toward meeting these requirements.

The UCC – experts from the energy industry

With the UCC, SAP is well placed to meet the manifold challenges of the industry. Its team of experts from various areas of the energy industry analyzes deregulation and new regional legislation. The team’s bundled industry expertise – combined with the experience of customers – shapes the development of the IDEX solutions.

In Germany, IDEX-GE (German Electricity) and IDEX-GG (German Gas) have so far been launched on the market. IDEX-GM (German Metering) is currently under development, and will cater to the demands of deregulated metering.

“The UCC aims to position IDEX as a standard-like solution in the energy markets. But that’s only possible if a customer consortium can be set up in the market concerned. IDEX-GE, for example, is shipped with the standard, and maintained and extended in a similar way. However, it can also be developed specifically for a customer, with separate agreements. And all variations in between are possible, too – which is actually what has happened already,” Schröder says.

Roughly 120 customers use the UCC solutions. Among them are E.ON, the Dutch company Essent, and Energie AG from Austria. Currently, 11 European IDEX country solutions are available, including for Spain, Switzerland, and the Czech Republic.

Processes for changed requirements

The Industry Business Unit Utilities at SAP is responsible for developing the SAP for Utilities set of solutions. It builds standard software solutions for energy companies on which the market-specific IDEX solutions are then based.

“IDEX solutions are specifically designed for the European energy markets. They are based on SAP industry standards and enable utility companies to implement processes that meet the changed requirements in terms of market communication, logistics, metering, and reporting,” Schröder says.

For example, IDEX-GE supports the forms and strategies of enterprise unbundling in the German electricity market with preconfigured and easy-to-implement business scenarios.

Transparency ensures smooth electricity supply

IDEX hands utility companies numerous advantages: The solution ensures that processes are transparent and maps the deregulated business processes as required by law.

The core process here is usually the switch from one supplier to another. Not only can energy companies trace and document their own processes in detail, but they can also comply with all the reporting requirements of the regulatory authorities.

Automatic communication between all market participants enables end-to-end energy distribution. In many European markets, the UN/EDIFACT standard has become established for such communication – from consumption forecasts, through meter reading results and master data, to billing and payment advice notes.

In the future, the rapid spread of advanced metering infrastructure (AMI) will enable all households and commercial customers to have their meters read remotely. This will, in turn, enable utility companies to get to know their customers’ consumption patterns better, ultimately resulting in optimized grid logistics and energy portfolios.

A winning combination: Trained partners and close customer contact

The UCC’s main customers are large energy companies. However, small and midsize companies are increasingly joining forces to form regional or national energy consortia, so that they can play an active part in shaping an IDEX solution.

“But this requires all the members to sit down together with the UCC experts, even though they are still competitors. This worked very well in Austria and Germany. But in contrast, none of the energy companies in Great Britain were prepared to work more closely with the competition,” Schröder says.

Trained implementation partners implement the IDEX solution at the energy company.

“Even after the implementation, we stay in close contact with the companies. Their practical experience and their knowledge of legal changes on the market are very valuable for us, because, after all, one of our goals is to enhance each of the IDEX solutions to meet legal requirements in time,” Schröder says.

In each country, different parameters have to be taken into consideration. But it’s very difficult for the UCC to keep track of all the changes in the various markets.

“We want to still be able to adapt our solutions appropriately, and that’s why we learn about changes in the markets and the industry by staying in regular contact with the utility companies. Because only with their feedback can we provide tailored products, and then modify the products to meet changing circumstances,” he says.

The energy market of the future

The future has many challenges in store for the UCC.

“The energy market is developing at a tearing speed – and the software deployed must keep pace. Just think about alternative power generation such as wind turbines or solar power: Within a few years, the technology has become so advanced that private households can afford solar panels to generate energy,” Schröder says.

“The gas market will also have to deal with new sources of energy – because great potential is still to be tapped with biogas production in agriculture. And that’s only the beginning.”

And then, of course, there is water. The UCC has already started to investigate what many say is the planet’s most important resource.

Utilities Competence Center (UCC)

The UCC was set up in early 2007 and operates under SAP Custom Development. The global team works closely with customers to develop compliant software solutions for the deregulated electricity and gas markets in Europe.

The UCC-developed market-specific add-on IDEX can be seamlessly integrated with existing processes in the energy market and enhances SAP Intercompany Data Exchange, an application from the SAP for Utilities solution portfolio. Currently, more than 140 SAP employees work in this relatively new competence center, most of them having prior experience in the energy industry.