European member states should accelerate the roll out of smart grids and smart metering in order to promote demand response deployment, a recent Communication from the European Commission says.

The potential of the demand side in markets in Europe is currently underutilized and the potential is enormous – able to reduce the EU’s peak demand by 60 GW, or approximately 10%.

The Communication, which is focused on harnessing public intervention towards the delivery of the internal electricity market, makes the case for developing the demand side alongside the supply side, and positions the demand side, i.e. demand response and end-use energy efficiency, as the “first alternative option” for public intervention.

“Putting demand side response action on an equal footing with supply is the most promising tool for better matching supply and demand through market mechanisms while offering consumers the possibility to lower their electricity bills,” reads the Communication. “Synergies with the ICT sector can provide cost effective and efficient demand response management systems.”

In terms of guidance on demand response, the Communication says that tariff elements that hamper active market participation as well as the development of dynamic pricing should be removed. If properly implemented, the demand response framework provided in the Electricity Directive and in the Energy Efficiency Directive will enable and promote technologies which allow the aggregation of the energy consumption of many individual consumers' on a voluntary basis.

However, further policy and regulatory work may also be necessary at the member state and EU level. Appropriate tariff design and making sure that dynamic intraday tariffs are available to end-user customers should facilitate billing consumers based on wholesale prices and not on consumption profiles. It is recommended to remove price controls, strengthen the price signals and develop further rules for coordination and interaction of different actors in the market, including in particular the role of distribution companies in local balancing as part of smart distribution networks. There is also a need to identify and promote good practices for demand response across member states.

In parallel, it is essential to bring the enabling technology into the market through the rollout of smart metering systems with the appropriate functionalities and together with the creation of the necessary framework for the broad introduction of smart and efficient appliances and control systems under Ecodesign, Energy Labelling and standardization. Such smart technologies and solutions should be deployed urgently whilst respecting legal considerations on data security and protection, consumer privacy, and the protection from harmful intrusion.

Read the Communication HERE.

By Jonathan Spencer Jones

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