Snap shot of demand response in Europe


Brussels, Belgium — (METERING.COM) — November 1, 2011 – A repeated pattern of regulatory barriers stretching across most of the European Union is effectively halting the establishment of demand response programs and the ability of third parties, such as aggregators to enter the electricity markets, as well as also severely limiting the programs which can be developed by incumbent players, such as suppliers and network companies, according to a new study from the Smart Energy Demand Coalition.

So far three member states, Great Britain, Ireland and France, are making measurable progress in overcoming the regulatory barriers, and Germany and the Nordic markets have also taken some steps. However, over 20 out of the 27 member states have residual historic regulation inhibiting the development of demand response, commercial, industrial and residential, the SEDC’s Demand Response Snap Shot finds.

The study was undertaken to establish why despite continued high level efforts on the part of policy makers in Europe and millions spent on pilot projects, the development of demand response programs in member states – with the potential for billions of euros in financial benefits for businesses and households – has been slow to non-existent.

According to the report, the barriers fall largely within the two areas of tender requirements, which have been written to suit generators rather than demand side participants, and the lack of capacity (and reserves) markets or access to existing capacity markets. Thus, there is no need for widespread subsidies or public investment in technology to establish demand response within the markets where it is otherwise viable.

To address these barriers, the SEDC proposes that additions should be made to the Energy Efficiency Directive article dealing with transmission and distribution regulation. The European Commission also should supervise a review of the need for strengthened capacity mechanisms in order to allow appropriate investment and establish a clear set of market rules.

The report comments that the current phase of development of the European electricity market is timely for the implementation of demand response programs, so that they can be built as an integral part of the new system.

The report also notes that in the U.S. electricity market, which is just slightly larger than Europe’s, demand response is now generating approximately $6 billion per year in direct revenues for businesses, industries and households, as well as enabling avoided investment costs.

Demand response is also an important strategic objective for Europe to achieve its 2020 greenhouse gas reduction targets.