EURELECTRIC OUTLINES MARKET MODEL FOR DEMAND-SIDE PARTICIPATION

In its new paper “EURELECTRIC Views on Demand-Side Participation: Involving Customers, Improving Markets, Enhancing Network Operation”, EURELECTRIC sets out its vision for active demand-side participation and identifies the main features of the future market for smart grids and flexible loads. The document recognises the key importance of clarifying the responsibilities of suppliers and distribution companies (DSOs) to ensure that customers benefit from proper market functioning, for instance through innovative offers, smooth processes, and a secure and reliable electricity supply.

Demand-side participation, the paper stresses, consists of two parts: active and engaged customers (demand response) and, where appropriate, measures by utilities to ensure an even supply of electricity by smoothing out peaks (demand-side management). Together, these components will bring benefits for consumers, suppliers and distributors alike. The paper sets out how to get there and explains how to adapt Europe’s electricity system to the increased penetration of intermittent renewable energy sources (RES) and changing customer needs.

 “With the development of demand-side participation solutions, customers will be encouraged to be more responsive to price signals and hence more flexible in their electricity consumption”, while suppliers will package new products based on customers’ preferences, the report reads. However, customers cannot be expected to participate in retail markets if price signals remain blurred: wholesale and retail markets should be better synchronised to ensure that well-functioning and integrated wholesale markets promote a ‘level playing field’ at the retail level. In addition, phasing out regulated end-user prices – currently present in 19 out of 27 Member States – is essential.

Furthermore, demand-side participation should be underpinned by an upgraded and strengthened infrastructure: DSOs must be incentivised to invest in smart grids and manage their networks more intelligently. However, the current regulatory framework in most Member States provides few economic incentives to invest in innovative solutions such as smart meters, supervision and monitoring devices, and network automation.

In summary, the report therefore identifies four key issues that policymakers should address to enable the take-off of demand-side participation:

• develop a clear market model for smart grids and demand-side participation that clarifies the roles and responsibilities as well as the interactions between suppliers and DSOs;
• remove regulated prices for customers (or make them market-reflective) and ensure grid tariffs reflect actual costs;
• improve the linkage between wholesale and retail markets; and
• define who is responsible for the roll-out of smart meters and how the costs of this roll-out should be recovered.