Market Access for Demand-Side Flexibility

Indirect discrimination is particularly difficult to address. On the surface, the same rules apply to everyone. In practice, however, such rules can play out in favour of larger, centralised generators and other incumbentsincumbents Market leading entity, often long standing with inherited customers or assets following privatisation/unbundling. It may also hold market power. while introducing barriers to new entrant demand-side resources and demand response focused business models. It is especially important that aggregators, other demand-side resources and consumer groups stakeholders are included in the process of policy development. National and European policy makers, regulators and system operators should be under an explicit duty to seek, hear and investigate concerns over demand-side inclusivity.

Larger bid sizes present a significant and unjustifiable barrier to demand-side resources, even with aggregation. The EU’s Electricity Regulation requires that minimum bid sizes for day ahead and intra-day markets be 500 kW or less, but does not impose equivalent requirements for other platforms, such as capacity mechanisms. The European Power Exchange EPEX Spot SE has reduced its day ahead and intra-day minimum bid size to 100 kW, which is consistent with U.S. markets that have succeeded in facilitating US.

In addition, longer lead times (of more than a year) between auctions and payment, e.g. in capacity mechanisms, may be too long for active customers and demand response aggregators to get a return on investments, especially when relying on debt financing. Cash collateral or credit cover requirements can impose a barrier for new demand-side market entrants, while incumbents can easily provide them. Derating factors — discounts on revenue related to perceived availability limitations — should not discriminate against time-limited resources in situations, where calling upon such resources on a rolling basis is a cost-effective and viable option. Time-bound services, including short, product-length options (minutes or hours), should be available where appropriate so that active customers are not required to be available for an unlimited or unspecified periods of time.  Low-carbon generation, storage and demand-side technologies should also be able to bid together as Clean Energy Portfolios.

Active customers are not generators. They have a unique and valuable contribution to make to power system flexibility. Markets and services must quickly evolve in order tap into this potential. There is an urgent need for a robust, consolidated evidence centred on market barriers to demand-side resources in Europe. Based on these findings, the anticipated EU Network code for Demand-side Flexibility would seem an apt place to set out updated, binding requirements to ensure best practice.