France and Great Britain lead demand side flexibility in Europe

The EU Demand Side Flexibility Market Monitor 2020 finds activities to varying degrees in the 21 mainly western European markets assessed.

Other markets found to be exhibiting higher levels of demand side flexibility activity are Ireland, Germany and the Netherlands.

The new monitor from the smartEn business association and research consultancy Delta-EE finds since the last report that more ancillary services have opened to demand side flexibility, with DSO specific products emerging.

Currently France, Great Britain, Ireland and Belgium have the most open and accessible value streams for demand side flexibility.

France and Great Britain as well as Germany also show participation across many value streams with ancillary services as the most open value stream and capacity mechanisms topping the list.

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Notably in France the market grew by about 0.6GW in 2020 as a result of a near doubling of tender prices and consequent procurement increase.

In terms of asset diversity, industrial loads and distributed generators remain the most commonly used assets for demand side flexibility and industrial customers are the most engaged. However, residential and electric vehicles have become increasingly active in the past year.

In Finland for example, a significant development in the small industrial segment with loads below 1MW was the installation of batteries in shopping centres and the growing popularity of greenhouses.

Aggregators and energy suppliers are typically the main market creators and dominate the large stakeholder landscape. For example in Britain, there were about 50 players with relatively high value stream accessibility driving an increasing number of players accessing multiple value streams.

Electricity market design

The monitor also assesses the electricity market design and finds that this encourages both TSOs and DSOs to procure flexibility from decentralised energy resources to avoid or defer investment in grid reinforcement.

However, while in most countries distributed resources can participate in some way to electricity markets, significant limitations still exist, in most cases due to a partial implementation or the use of exemptions. For example, balancing markets across Europe still have significant limitation with some countries such as GB having no proper markets, while others such as Spain limiting the participation of independent demand side aggregators.

In day-ahead and intraday markets across the region, minimum bid sizes are still 1MW even though the regulation sets the limit at 500kW.

In most countries independent aggregators still need prior consent from the consumers’ supplier to engage with them. No country takes into account the overall system efficiency benefits of demand side flexibility when calculating the compensation to suppliers.

Consumer access to real time price signals is another issue and is one of the aspects that has had a more uneven development, with some countries excelling and others lagging behind significantly. For example, dynamic price contracts linked to wholesale and spot market prices are available in Finland, Italy, Spain and GB. Network tariffs with a dynamic component are only fully available in France, Finland and GB.

Another issue is that while smart metering is a key component to the development of efficient price signals and most European countries are very advanced in the rollouts, in many cases these are first generation smart meters that don’t fully comply with the market design measurement requirements.