Explicit Demand Response in Europe. Jayson Dong Lucerne, 6 July 2017

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1 Explicit Demand Response in Europe Jayson Dong Lucerne, 6 July 2017

2 SEDC Membership Executive Members Associate Members

3 Demand Response Potentials in Europe 160 GW Theoretical demand response potential in GW Theoretical demand response potential today 20GW Demand response activated today Source: European Commission

4 Increasing Interactions with Grid (OpenADR & Smart Grid) Value for all markets Resources Sold Back to Grid Daily Energy Efficiency Service Levels Optimized Daily Time-Of- Use Energy (TOU Rates) Dynamic Peak Load Management (Dynamic Rates) Time of Use Optimized Scheduled Demand Response Real-Time Demand Response (Ancillary Reserves) Service Levels Temporarily Reduced Regulation (Ancillary Services) Wholesale Hedging & capacity products Balancing & ancillary services Local congestion management Increasing Levels of Granularity of Control Increasing Speed of Telemetry

5 Scope of the report Regulatory framework for Explicit Demand Response across a wide range of markets day-ahead, intraday, balancing, capacity mechanisms covering 18 European countries!

6 Methodology Information gathering Expert interviews (TSOs, DSOs, retailers, aggregators, technology providers, consulting firms, research organisations) Desk research Review by national market participants the findings reflect the experience on the ground Country assessment according to four key areas 1. Demand-side resources access to the markets 2. Service providers access to the markets 3. Programme requirements 4. Measurement and verification, payments, and penalties

7 1. Demand-side resources access to the markets Credits: brincadeira89.wordpress.com

8 Demand-side resources access to the markets This area assesses to what extent demand is allowed as a resource within the different national electricity markets (i.e. wholesale, balancing, ancillary services, capacity mechanism, etc.).

9 Demand-side resources access to Markets in Europe Opening of markets is progressing, but by far not completed. In FR, DE, and GB Demand Response can participate in almost all of the markets with a few exceptions For instance, in DE and GB there are still some significant barriers to participation in the wholesale market Capacity Mechanisms exist in FR, DE, and GB however there are still some major concerns regarding the full involvement of demand response In the Nordics, strategic reserves are prominent with fewer issues surrounding the participation of aggregated DR in countries in FI, SE, and NO.

10 2. Service Provider Access Credits: Smashbrand

11 The role of aggregation

12 Service Providers access to the markets This area assesses the ability of independent service providers (e.g. aggregators) to offer services to the consumer and access markets, without prior consent of the consumer s retailer

13 Service Providers access to Markets in Europe Activity (almost) everywhere, but mostly not concluded by closing of this report. FR has introduced detailed frameworks for independent Demand Response aggregators. BE, DE and the Nordics are in the process of discussing or establishing their own frameworks to enable independent aggregation. In GB the model allows independent aggregators direct access to consumers for most ancillary services and capacity products, but they are unable to utilise the energy for wholesale market purposes.

14 3. Viable Product Requirements Credits: pinterest.com

15 Product requirements This area refers to the requirements of the different products/programmes (e.g. minimum bid limit, symmetric bid, maximum number of activations, notification time, duration, etc.), assessing whether these enable demand-side resources to participate on equal footing with generation.

16 Product definition Source: EnerNOC

17 Product requirements Progress has been made, but slowly. Generation-biased product requirements continue to block demand-side resources. However, several changes into the right direction have been made. GB, DE, and FR have recognised the need to reduce minimum bid sizes or to shorten balancing product durations. In FR Demand Response operators need to be certified only 1 year ahead of the delivery year. BMWi, launched a formal regulatory proceeding to stipulate the auction rules for balancing capacity in order to permit new, flexible providers to participate In GB, the main area of DR participation, the STOR Product, requirements are still challenging for consumers.

18 4. Measuring output and Ensuring fair payment

19 Measurement, Verification, Payments, and Penalties This area looks at the definition of baseline methodologies, possibility of using pools to meet the requirements (instead of individual assets), and looks at whether payments for providing demand-side flexibility are fair, transparent, and attractive.

20 Measurement, Verification, Payments, and Penalties Much more standardisation needed, in particular to unlock commercial and residential DR potential. In GB, FR, and CH pooled loads can be prequalified as aggregate, while in DE, AT NO, and IE, individual units must still fulfil all requirements. In FR activation payments for the activation of Secondary control reserves is made at the generator s obligation. Integration of DR is only possible through the secondary market, and with cooperation between generators and consumers. In DE, DSOs can block consumers from particpating in DR. While not all the products in the ancillary services provide availability payments.

21 Mapping Demand Response in Europe 4 key areas on which the progress was measured are: Demand Response Access to Markets Service Provider Access Product Requirements Measurement and Verification, Payments and Penalties

22 Explicit DR 2015

23 Explicit DR 2017

24 Explicit DR Map 2017 Conclusions 1. The regulatory framework in Europe for Demand Response is progressing, but further regulatory improvements are needed 2. Restricted consumer access to Demand Response service providers remains a barrier to the effective functioning of the market 3. Significant progress has been made in opening balancing markets to demand-side resources 4. The wholesale market must be further opened to demand-side resources 5. Local System Services are not yet commercially tradeable in European countries

25 Appropriate price signals Allow real price signals (incl. scarcity prices, full cost of balancing) Reduce blunting effect of taxes, charges and levies Right-size capacity (assessments), include demandside flexibility Avoid perverse incentives (e.g. certain grid charges) Credits: tachlistalk.com

26 Jayson Dong Policy Advisor Rue d Arlon 69-71, 1040 Brussels, Belgium