Why is demand response not implemented in the EU? Status of demand response and recommendations to allow demand response to be fully integrated in energy markets

Panel: 2. Policy: governance, design, implementation and evaluation challenges

This is a peer-reviewed paper.

Authors:
Paolo Zancanella, European Commission, Joint Research Centre (JRC) Ispra
Paolo Bertoldi, European Commission JRC, Italy
Benigna Boza- Kiss, Central European University, Center for Climate Change and Sustainable Energy Policy
, Hungary

Abstract

The importance and benefits of Demand Response are well known, especially its contribution to the decarbonisation of the electricity supply. Despite the barriers remaining today, in 2013 Europe was almost entirely shut to Demand Response while today consumers in some Member States have the opportunity to participate in Demand Response programs. In particular, the Energy Efficiency Directive Article 15.8 establishes consumer access to energy markets by asking Member States to encourage Demand Response.

The paper summarise the status of Member States legislations, market rules and technical regulations to enable Demand Response. In reviewing Member States progress in enabling Demand Response and consumer load aggregation, it emerges that a significant portion of them have yet to begin their regulatory review with any seriousness. However those Member States who have looked to enable Demand Response are succeeding despite continued challenges. In successful cases, TSOs and regulators are using the deregulated and competitive market structures to empower providers and encourage market entry for consumers. Europe’s energy market is unique, and there is the opportunity to create unique solutions, combining competitive market structures with the decarbonisation agenda.

Finally the paper identifies and proposes regulatory initiatives that would significantly further facilitate this development. An important consumer enabler is to define and allow full Aggregation of Consumer Load. European market design should enable the participation of Demand Response and other distributed resources such as Virtual Power Plants, to the same degree they now facilitate centralized generation units. Design elements include frequent auctions, short time durations, small minimal bid sizes, and the acceptance of asymmetrical bids. There is now good knowledge of best practice concerning this market design and this should be implemented by all the Member States.