CEER final report: Advice on the take-off of a demand response electricity market with smart meters
EXECUTIVE SUMMARY
With this Advice on the take-off of a demand response electricity market with smart meters, CEER aims at enhancing the implementation of demand response with household customers and small and medium sized businesses. We seek to describe the roles and responsibilities for different market actors in order to realise demand response. We also list what we regard as prerequisites to be in place to perform demand response. Customer awareness and participation is key, therefore CEER has chosen to focus on the retail market and its most important actors.
The document can be used as a basic checklist for the take-off of demand response with smart meters. The main target groups for the checklist are the seven market actors we have chosen to pin-point: customers, micro generators, metering operators, DSOs, suppliers, ESCOs and NRAs. Since European countries differ in market design with reference to the roles for DSOs and metering operators, we have chosen to separate the two. This is reflected throughout the recommendations, where we describe the different roles for the two actors. In practice, in many countries these two roles are to be found within one body, the DSO.
CEER recognises that the increase of renewables in the grid and an increase in the level of demand response will require the development of new models for system management. It is likely that a large amount of energy will be used when the price is low. This can cause constraints in the local network. Each regulator has to consider this in relation to the network tariff-regulation and bearing in mind not to create an overly complex electricity market for the customer. CEER sees a number of ways of managing this, among others to offer:
- a flat non-flexible network tariff; or
- capacity-oriented network tariffs, semi flexible, a limited number of predictable tariffs; or
- highly flexible and innovating pricing formulas for network tariffs.
CEER defines demand response as the following:
- Changes in electric usage by end-use customers/micro generators from their current/normal consumption/injection patterns in response to changes in the price of electricity over time, or to incentive payments designed to adjust electricity usage at times of high wholesale market prices or when system reliability is jeopardised. This change in electricity usage can impact the spot market prices directly as well as over time.
CEER recognises that there are some key points in the market structure that need to be in place to facilitate the take-off of demand response (in addition to the recommendations outlined in the GGP on smart metering):
- Customers’ understanding of information on the electricity market;
- Customers’ offered easy ways of becoming aware, through new contracts etc.;
- Customers’ trust in the market and thus wanting to participate;
- A non-conflicting grid tariff; and
- The absence of price regulation.
In this Advice, CEER sets out four recommendations, as a basis for the take-off of demand response:
- Customer trust: Service providers should aim to give customers appropriate information on offers, with the goal of creating customer awareness of how changes in lifestyle or occupancy can impact on household consumption patterns and therefore their final electricity bill;
- Privacy and security: When making a decision to install smart metering systems, privacy and security measures have to be guaranteed;
- Offers reflecting actual consumption patterns: Specific roles and prerequisites need to be in place for the market actors to be able to reach full potential of offers reflecting actual consumption patterns (table 1 below);
- Interface with the home: Specific roles and prerequisites need to be in place for the stakeholders to be able to reach full potential of the interface with the home (see table 1 below).
The table below illustrates the specific roles and prerequisites needed to be in place for each market actor in order to be able to reach full potential of offers reflecting actual consumption patterns and interface with the home.
Table 1: Summary of recommendations on Offers reflecting actual consumption patterns (for instance) and Interface with the home.
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