Europe’s energy system is starting to undergo a profound transformation with the large-scale integration of intermittent renewable energy sources and smart grid, opening up the potential for a range of demand response activities.
Since its formation in late-2010 the European cross-industry group, the Smart Energy Demand Coalition (SEDC) has played a leading role – and can take much of the credit – in the development of demand response in Europe. The SEDC’s first mapping of demand response in Europe, released earlier this year, revealed slow but positive growth, but still the presence of restrictive regulatory barriers in the majority of countries. [Engerati-Demand Response Grows Slowly In Europe]
Demand response action plan
To find out the next steps in demand response development, Engerati spoke to the SEDC’s executive director Jessica Stromback. The European Union’s Energy Efficiency Directive requires access of demand response to markets, and the SEDC has developed an Action Plan setting out guidelines for policy makers and regulators to opening markets to consumer participation.
“We have had a lot of comments and the response has been positive,” says Stromback on the Action Plan, commenting that it “gives a good idea of what the industry views as necessary for markets to function.”
Stromback describes 2014 as an “in between” year, with an outgoing and new incoming European Commission. She says the SEDC is using the time to work closely with national regulators, and also the organization has been refining its own policies in the light of experiences gained over the past year.
Dialogue with regulators
“Now we go to the next step of getting more detailed information to regulators. But it is getting more challenging because instead of saying obvious things like demand response should be legal, we need to dig a little more into the market structures and program requirements the customer needs to be able to participate,” says Stromback. “We are looking to have a holistic position that’s well-grounded and understood by the more advanced regulators at least, with which to go into the next round of parliament. That in turn should lead to further European level policy.”
Stromback notes also harmonization of the Advice on Demand Side Flexibility from the Council of European Energy Regulators (CEER), which was released in June. This document contains a set of principles and recommendations for regulators and policy makers.
“We were grateful for the engagement of CEER and they outlined good principles, which represent a measurable step forward for European regulation,” she says, noting that as a regulator-developed document it should be useful for guidance.
Demand response players
One of the points highlighted in the SEDC mapping as crucial for progress in the development of demand response in individual countries is dialogue between the relevant players, and Stromback says it can sometimes be a challenge to find the right people to engage.
“We tend to work with national groups, particularly those who have the most to win and lose, such as large consumer groups. The problem is the demand response industry does not have a strong voice in any given member state, with a few exceptions, such as France.”
But even an individual company can play an important role, if able to establish a relationship with the regulator and the transmission system operator (TSO). As an example Stromback cites the Austrian demand response solution provider cyberGRID, which “managed to convince the TSO and regulator to change significant parts of the regulation.
“Similarly in France a few companies managed to get through quite a bit of significant regulation. Of course the process is very slow and there needs to be long-term financial backing for the company while they negotiate.”
New market developments
Commenting on market developments since the release of the mapping, Stromback says there have been both positives and negatives.
“Austria and Belgium are opening up their capacity markets this year following successful pilot experiences. France is expanding the number of markets in which consumers can enter and Finland is doing the same.
“Spain has had a significant market development in that they now require dynamic pricing for all customers. However, while the Spanish population pay the spot market price, they are billed according to a profile rather than what they actually consume. This means that even if they lower consumption during high priced hours, they are not paid. This will remain true even after the introduction of smart meters.
“And the GB market has had setbacks and may slip back to a ‘partial open’ rating in the next SEDC mapping. Legislation has changed the balancing market rules, making it harder for consumers to participate in this market, and legislation that would have enabled customers to participate in the wholesale market has been squashed. So one market that was open is to all intents and purposes not open and another market that could have opened didn’t. The new capacity market regulation also does not enable consumer participation.”
Finally, Stromback says activity is also starting up in Eastern Europe, in countries such as Slovenia, Czech Republic and Estonia. But market deregulation is just beginning in that region so changes will be slow in coming.
With these developments the SEDC’s next mapping will provide a significant update – and Stromback promises that also it will be expanded to include financial information on the value of the markets.