RTE and Carrefour's demand flexibility deal - why is it significant?

Supermarket giant Carrefour Hypermarchés has bid into France's new Capacity Market to offer demand response flexibility.

Carrefour has become the first company to contribute demand side response (DSR) capacity towards French transmission system operator Réseau de Transport d'Electricité’s (RTE) grid balancing services.

It is offering this much-needed demand flexibility to RTE with the implementation of a new demand response solution.

This now gives the French TSO the ability to unlock the flexibility of the retailer’s assets (electrical devices like fridges and HVACs) and it is doing this without impacting daily operations and food quality, a major point of concern for many retailers.

DSR optimising assets and securing energy supply

According to Hervé Duclos, Head of Energy Procurement and Sustainability at Carrefour, the DSR technology optimises the company’s assets across multiple revenue streams as well as the latest energy opportunities in France including the Capacity Market, launched this year. 

Jessica Stromback, Chairman of Joule Assets Europe AB, told Engerati that RTE has been working steadily towards simplifying technical requirements for market participation and that Carrefour’s participation is more than likely a reflection of its improved market design.

Stromback says that while DR does not impact the need for a French Capacity market (as this is based on supporting the national nuclear fleet and securing base-load capacity), the price variations in the other markets (such as the spot and intra-day markets) tend to become less dramatic when there is an easy source of subsidised generation available.

Basically, the prices flatten out. As a result, it is very important that the full range of players - including demand-side providers, which depend on pricing peaks and strong price signals, have clear and easy access to the Capacity Market or they will have an impossible anti-competitive situation.

The aim of the Capacity Market is to ensure generation adequacy and security of supply.

Electricity producers and demand response operators receive capacity certificates issued by RTE. The capacity mechanism rewards power producers for keeping sufficient generation capacity available and it also rewards demand response aggregators (like Carrefour) for reducing power demand.

The system will basically guarantee security of supply at the lowest possible cost.

This comes off the back of France’s demand levels nearly outstripping supply due mainly to prolonged nuclear power station maintenance. As supply margins tighten in France, industrial and commercial demand response becomes increasingly important.

Added to this is France’s ambitious renewable energy target of 23% of by 2020. The introduction of renewable energy to the grid will create system imbalances and this is where demand flexibility from the industrial and commercial sectors will come into play. Without this necessary flexibility, the operator will struggle to maintain grid balance in the future.

Oliver Grabette, RTE/ThinkSmart Grid Association, told Engerati in an interview that the importance of flexibility forms a major part of RTE’s company strategy and he draws a strong link to the necessary adoption of smart grid technology.

RTE report - demand flexibility learnings

When it comes to opening the market to DSR, RTE shares a number of lessons in its report, 'Opening markets to DR: lessons learnt from the French experience'.

Firstly that it considers demand response to be a reliable product to ensure security of supply and that it has added value both in capacity and energy markets. While it is useful during emergency situations, demand response can offer so much more especially when it comes to energy savings and asset optimisation.

It has become a credible economic alternative to generation in some cases and has a positive cost benefit for the system in the context of the energy transition.

Stromback says that not only does efficiency and DSR help to lower grid constraints, it also puts money back into the pockets of consumers and it lowers unnecessary fossil fuel consumption.

The commercial consumer that participates in the programme can look forward to earning (and saving) Euros, will be respected by society for acting in an environmentally responsible manner and the company will gain significantly more market power with their retailer as better prices can be negotiated.

However, allowing demand response to participate as a resource in the market requires the implementation of structural measures.

Commercial consumers require proper metering devices as well as appropriate communication and control technologies. They will also need to contract with an aggregator/retailer who can help them with the administrative requirements and ensure they are paid, explains Stromback.

In addition to the above, strong political and regulatory involvement is required for the DSR market to succeed. For this reason, it is critical that when developing a European framework, all stakeholders must be involved.

Another lesson learnt is that competition can only take place if DR and supply are fully unbundled. This ensures that consumers can choose the best supply and DSR offers. Most importantly, energy aggregators must be able to access consumers without supplier authorisation.

Finding flexibility resources and convincing consumers to participate are core business activities of aggregators and represent a significant cost, so confidentiality will be key to ensuring a fair marketplace. In France, the TSO has been elected as the third party, ensuring a high level of confidentiality.

With this new market in place, companies such as Carrefour now have the tools to play a critical role in creating a more robust supply margin for France as well as designing a new energy future where end consumers are given the opportunity to become active market participants and achieve demand response success