Despite continued high-level efforts on the part of policy makers, a positive business case and millions spent on pilot projects, the development of demand response programs in Member States has been slow to non-existent.

This is due to purely regulatory barriers.  “These barriers probably make up the strongest, most consistent regulatory block of an environmentally beneficial program in Europe today” Says Jessica Stromback the Executive Director of the SEDC “And they are in stark contrast to the EEGI Smart Grid Roadmaps, and 20-20-20 objectives, etc.” The reasons for this seems to be historical – Demand Response is a form of balancing capacity, balancing supply and demand – but electricity regulation is written assuming generation resources (not demand side resources) will be providing additional  capacity. 

The SEDC therefore welcomes the strong support of Demand Response in Claude Turmes’ report within the Energy Efficiency Directive. “The amendments by Mr. Turmes provides practical and effective steps toward making these programs a viable reality throughout Europe.  It is very exciting to think the EED might finally make Demand Response real here”  Says Ms. Stromback. 

Demand Response increases the efficiency of the electricity system without large public investment and is a central tool in decarburization. The majority of revenue from DR programs flows to end users, and stays within the local communities and builds local businesses. Chris King, SEDC Chair, said, “The SEDC estimates that €3.5 billion a year could be earned directly by consumers, residential, commercial and industrial.  The Demand Response market in the USA is already generating approximately €4.6 billion in annual direct revenues for local businesses, industry and households as well as enabling avoided investment costs.”  

The Amendments of Mr. Turmes 

The amendments proposed by Mr Turmes would go far to lower these barriers by requiring Member States to promote access to demand response measures and providers' participation in energy markets. In particular, he says EU states should "treat… providers, including aggregators in a non-discriminatory manner" (article 12).

Another amendment calls for national demand response roadmaps and action plans "which shall include detailed information on how demand response resources will be integrated, in so far as appropriate, into the regional electricity markets, especially but not limited to the tertiary reserves markets and the capacity markets".  

As has been demonstrated in a few EU countries such as the UK, France, Ireland and Finland, regulatory barriers are unnecessary and can be overcome – with immediate results. Experience shows that as soon as market entry is possible, third parties begin offering services and creating demand response programmes for consumers, creating a robust investment cycle for further deployment of energy efficient technologies.  “Utilities are also able to expand their own portfolios of services, spurring green technology investment. This is good news and demonstrates the value and potential within Europe when active, equal, competitive market regulations are put in place.” Says Mr. King  

Benefits and Definition of Demand Response 

Demand Response brings several important environmental and financial benefits within today’s electricity markets. Environmentally: it acts as an effective GHG free balancing resource for wind and solar generation,  it lowers the need for fossil fuel intensive peaking generation, it lowers network losses, and it also increases rollout of improved energy management automation technology in homes and buildings. Financially: Demand Response substantially reduces the need for investment in peaking generation by shifting consumption away from peak hours, it reduces wholesale energy costs, and it decreases the need for network investments, as it shifts consumption away from peak hours, in regions with tight network capacity. 

Demand response delivers these benefits through providing consumers; Residential, Commercial1  or Industrial with information, control signals, and financial incentives – often in direct payments –  to lower or adjust their consumption at strategic times.