Regulators advice seeks to unlock the demand/consumer side of electricity markets
Brussels, 26 June 2014
• Demand-side flexibility can contribute to increased penetration of renewables • Demand-side flexibility means avoiding or reducing network and generation investments • Consumers should be empowered with the right information, tools and regulatory framework
Advice launched today by the Council of European Energy Regulators (CEER1) aims to help consumers change their electricity usage from their normal consumption pattern in response to market signals (so called “demand-side flexibility”).
Demand-side flexibility means empowering consumers The advice, launched today at CEER’s Sustainable Energy Week (SEW) event (which was part of the EU’s 2014 SEW High Level Policy Conference), is an important contribution to implementing the Energy Efficiency Directive3. Demand-side flexibility can offer a clear path towards increasing consumer participation in the electricity market. CEER is at the forefront of developing competitive retail markets in which consumers can engage and exert their power of choice4.
CEER President, Lord Mogg, stated “CEER proudly focuses on the role of consumers and regulators in unlocking the demand-side of the electricity market at our 2014 Sustainable Energy Week event. Demand-side flexibility, if enabled, has the potential to bring significant benefits to consumers, both in terms of controlling their energy use and bills, and in terms of the avoided cost of generation and network investments.”
Demand-side flexibility means avoiding or reducing generation and network investments Martin Crouch, Chair of the CEER Electricity Working Group added “Demand-side flexibility delivers benefits for the energy system as a whole. It can reduce peak demand, contributing to system adequacy, and reduce balancing costs, helping to support increased penetration of renewables.”
Consumers need the right information, tools and regulatory framework As an outcome, regulators want to unlock the value of demand-side flexibility for the provider/customer. This requires
ensuring consumers are fairly rewarded and can opt in/out of demand-side flexibility services/products
removing legal barriers
clarifying roles and responsibilities of all involved actors consistent with a level playing field 5
ensuring prices/incentives reflect market value
examining the role of Distribution System Operators (DSOs) in an evolving market
The CEER advice is the result of extensive consultation with stakeholders6. The advice, to policy makers and regulators themselves, is an important contribution to implementing the Energy Efficiency Directive. Later this year, CEER will publish its position on the role of the Distribution System Operators (DSO), followed in 2015 by a benchmarking study on demand-side response and energy efficiency.
Ends (see Notes for Editors)
Notes for Editors:
The Council of European Energy Regulatory (CEER) is the voice of Europe’s national energy regulators. Its members and observers, from 33 European countries, are the independent statutory bodies responsible for energy regulation at national level. Visit www.ceer.eu.
The CEER Advice on Ensuring Regulatory and Market Arrangements help deliver Demand-Side Flexibility firstly defines demand-side flexibility (DSF) and outlines the potential benefits throughout the energy system. CEER’s definition of demand-side flexibility (DSF) is the ability for end-use consumers to change (increase or decrease) their electricity usage from their normal / current consumption pattern in response to market signals (for example, in time of use electricity tariffs or incentive payments) or through the consumers bid (alone, or via aggregation) to sell their flexibility on energy markets. Such demand-side flexibility has a value and so can potentially be traded between parties as an alternative to investing in new generation or network reinforcement (i.e. DSF value for network purposes). DSF also has value for market purposes (e.g. as a flexible tool for balancing, or for ensuring adequate generation capacity) and complements, and potentially increases, energy efficiency measures.
The Energy Efficiency Directive (2012/27/EC) entered into force on 4 December 2012 and most of its provision must be implemented by Member States by 5 June 2014. Article 15 of the Directive provides a role for National Regulatory Authorities in encouraging demand response to participate in wholesale and retail markets (including balancing and ancillary service markets).
A variety of different parties interact to provide demand-side flexibility. These parties include TSOs, DSOs, suppliers, aggregators and customers (domestic and industrial), and signals can be price-based (e.g. time-of-use tariffs, critical peak pricing) or incentive-based (e.g. direct load control, interruptible rates, capacity markets).
Use of DSF across the electricity system [Source: adapted from Creating the Right Environment for Demand-Side Response, Ofgem 2013].
Inspired by the Energy Efficiency Directive, CEER ran a public consultation in November-December 2013 (and held a stakeholder workshop), seeking views from stakeholders on issues such as current and future arrangements for demand-side flexibility; opportunities and barriers; implications of the Energy Efficiency Directive; market and regulatory roles; and cost effectiveness. The CEER Consultation paper itself contains a series of detailed case studies on current demand-side flexibility arrangements across Europe. The 39 responses to the consultation provided a range of evidence and views on the barriers and opportunities for DSF. The Evaluation of Responses received to the CEER public consultation and a Citizens’ Q&A memo are also published today alongside the “CEER Advice on Ensuring Market and Regulatory Arrangements help deliver Demand-Side Flexibility.”
Council of European Energy Regulators (CEER) Cours Saint-Michel 30a, box F 1040 Brussels www.ceer.eu