Demand response aggregation in Europe

USEF is developing models for Europe's demand response aggregation market.
Published: Mon 25 Jul 2016

Energy flexibility and demand side response (DSR) are essential for modern energy markets with the need to manage demand in order to use energy more sustainably and to integrate increasing levels of intermittent renewable energies.

But it brings with it the need for a new market role, the flexibility aggregator, which in essence bundles volumes of generation or load, or ‘flex’, into tradeable volumes whose value can be maximized.

Demand response aggregation - Europe

In the United States, where demand response was pioneered and is most widely practiced, the concept of the energy aggregator is well understood.

However, in Europe with its diversity of markets across the EU member states, the situation is different. In only six countries has demand response market reached the level of commercial viability, according to the Smart Energy Demand Coalition’s (SEDC) latest mapping. In most of the countries, the development of demand response is “seriously hindered” or even remains illegal. 

Industry bodies across Europe are united in the view that there is a need for further development of demand response in the region and that a coordinated approach is necessary, led by the European Commission – a task that the Commission is expected to address in its forthcoming Winter Package.

As input to this work activity the USEF Foundation has set up an Aggregator Workstream, from which the interim findings are now available.

USEF was founded as a Dutch industry initiative initially to develop the Universal Smart Energy Framework for flexibility in integrated markets. Among its activities the Foundation is collaborating with the OpenADR Alliance on the utilization of demand side flexibility.

Energy aggregator models for Europe

Explaining the background to this Workstream in an interview with Engerati, Hans de Heer, principal consultant Smart Energy at DNV GL, says that in focusing on how demand response and flexibility markets should work in practice there are many unsolved questions on how the aggregator role should be implemented.

“In most countries in Europe, the energy aggregator role doesn’t exist, formally at least. While the need is clear at the policy level, the regulatory aspects are less clear and it was these that USEF set out to understand.”

To this end a work group was set up to discuss the issues with representatives from the relevant stakeholders, i.e. TSOs, DSOs, suppliers, aggregators and balance responsible parties (BRP), and with an initial focus on four markets – Belgium, Denmark, Germany and the Netherlands.

“We felt these countries reflected the main differences in market design and from the feedback received, we decided to adopt an ‘engineering approach’ rather than to come from the policy angle,” says de Heer. He adds that the final outcomes will be applicable to all European countries.

The outcome of these discussions, which are presented in an interim review, are a set of seven aggregator implementation models. These are ordered on whether or not there is a contract between the aggregator and supplier’s BRP and whether there is a single or dual BRP, both of which impact on the extent and complexity of the regulation required.

“These are intended as a complete set of models to cover the various market complexities and with the definitions we are finalizing, should put all parties ‘on the same page’ when it comes to implementation."

Implementing energy aggregator models

De Heer comments that these models indicate that there is no “best single model” and that the model selected must be based on the market model and “what works best” for that market.

Indeed, in any market it is possible to have multiple aggregator models, although the larger the number the greater the complexity introduced. In particular different aggregator models might be expected for different customer classes such as residential and commercial and industrial. For example, in France, which is the most advanced in Europe in terms of regulation, three aggregator models co-exist -  contractual, corrected and central settlement.

“One needs a balance between the number of models and the complexity.”

De Heer notes that details of the models, such as on baselining, transfer of energy, rebound effect and measurement and validation, are still under discussion. These will form part of the final project deliverable, which will include recommendations for regulators.

However, USEF won’t make recommendations on specific models, nor on whether the roles of aggregators should be taken by for example a new entrant or an incumbent.

“We expect the EC to enforce the concept of the aggregator but we don’t expect the EC to select aggregator models and rather to leave that to national regulators.”

In conclusion de Heer says that the aggregator concept is a “a tough topic that many parties are struggling with.”

“As an independent organization USEF aims to provide a common understanding with impartial recommendations towards the implementation of processes associated to aggregation and demand side flexibility in general.”

The final report is scheduled for release in mid-November at European Utility Week 2016.

Further reading

USEF: Towards an expanded view for implementing demand response aggregation in Europe

 

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