Abstract
We describe how recent EU regulation affects demand response (DR) and highlight some of the remaining regulatory challenges from a legal and economic viewpoint. With the Clean Energy Package (CEP), the EU has opted for a fully market-based, consumer-centered approach for DR. The development of business models and products is left to a large extent to market forces. However, to enable the efficient development of those DR markets, network regulation has to adapt. (1) Network tariffs have to become more cost-reflective to provide correct incentives to market participants. The capacity tariffs have to increase, net-metering should be abolished, and optional tariff components for providing flexibility may need to be considered. (2) The regulation for distribution system operators (DSOs) may need to be fine-tuned to reflect their new roles. We present three scenarios: (a) a horizontal merger of unbundled DSOs under incentive regulation, (b) a DSO as a subsidiary of an integrated utility under cost plus regulation, (c) a transfer of some activities from DSO to TSO.
Highlights
Effective demand response (DR) can play an important role in future electricity markets
Reference [3] estimates that the monetary benefits of DR in the form of demand shifting for the Midcontinent Independent System Operator (MISO) are between $1 million and $17 million
Since the Energy Efficiency Directive (2012) (Art. 15), energy consumers have been treated as active participants, whose role has been further developed by the Clean Energy Package (CEP) [34]
Summary
Effective demand response (DR) can play an important role in future electricity markets Show that average prices decreased, but volatility increased with larger penetration of intermittent wind energy Those results may depend on the specific merit order of conventional power plants in Germany and the time frame over which volatility is measured. Reference [28] extensively reviews demand-side business models for energy efficiency and DR and identifies values related to ancillary services (frequency, interruptible load, operating reserve), capacity markets, and direct participation in the wholesale market. It considers synergies with the generation, transmission, distribution, and retail segments. Reference [29] compares the possible market design options for developing demand response, using a simulation model calibrated to the French power system. A straightforward implementation of cost-plus regulation might be insufficient
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