Things you need to know about UVAM

1. What are UVAM and what are they used for?

One feature of every electricity system is the need to guarantee a constant real-time balance between the energy demanded by consumers (households and businesses) and the energy generated by power plants. Terna guarantees this balance through a highly technological control system, using a special market where the “services” required to constantly ensure the continuity and security of the electricity supply are purchased. Today, the main suppliers of these flexibility services are large fossil-fuel power plants. With the progressive decarbonisation of production facilities, in future, new, flexible resources will also be required (such as industrial production plants, electric vehicles, residential boilers and heat pumps) to guarantee the adequacy and security of an ever broader and far more complex electricity system. Four years ago, Terna launched its pilot projects with the aim of initiating this process and testing the new resources. One of these is the UVAM (Mixed Enabled Virtual Units) project which, since November 2018, has enabled consumption units (tertiary and domestic sectors), production units and storage systems in the same aggregations for the services market. Virtually Aggregated Mixed Units (UVAMs) are now enabled to provide services such as congestion resolution, balancing and secondary and tertiary reserves.

2. How does remuneration work?

The economic regulation of UVAMs differs from that of large plants because it involves not only ordinary remuneration linked to energy activated (€/MWh), but also remuneration for resource availability (fixed fee, €/MW). The decision to adopt availability remuneration is motivated by the fact that the participating resources on the consumer side are mainly represented by industrial production plants, which are prepared to reduce their own energy withdrawals. In order to provide flexibility to the services market, these parties must bear fixed investment costs for the installation and calibration of the equipment required to develop the service, as well as annual operational management costs (e.g. establishment of energy management rooms).

3. How many UVAM are there in Italy?

In December 2021, there were more than 220 Virtually Aggregated Mixed Units qualified with a power of approximately 1280 MW and 1072 PODs (points of delivery) involved. Specifically, during 2021, storage systems were also qualified for the first time, including both stand-alone and small-scale systems combined with domestic photovoltaic equipment. Following the auctions, in December 2021, 17 different BSP (Balancing Service Providers) had been assigned capacity and were responsible for providing services traded on the services market.

4. Outlook

Enabling flexible resources and their use by TSOs to meet their requirement for services will progressively assume a structural role on a global level. It is estimated that, in 2050, demand response from industrial, tertiary, residential and transport sectors (essentially due to the development of electric vehicles) in Europe may reach 150 GW.