Demand side flexibility access to Europe’s wholesale markets still in infancy, smartEn finds
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smartEN’s 2024 wholesale electricity market map reveals that most EU countries are yet to introduce legislative changes to enable demand to actively bid into wholesale markets.
The report points to Great Britain as the only country where both explicit and implicit access to wholesale markets is well advanced in Europe.
Other high performers are France with regards to explicit access but weak on implicit access, and Spain, where the roles reverse, with a well-developed dynamic price contract but no participation of independent aggregators in wholesale markets.
Michael Villa, Executive Director of smartEN, comments that reducing both wholesale energy prices and the energy bill for consumers is a prerequisite for industrial competitiveness and an inclusive clean energy transition.
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“Active consumers hold the key to support the achievement of this strategic objective, although most of the time they are still perceived as passive players that should only benefit from reduced prices that the system would offer them.”
Demand side flexibility key
Demand side flexibility is recognised as key for the energy system of the future to facilitate the integration of intermittent renewables and managing energy costs.
One of the main ways to unlock all the benefits comes from participation in wholesale electricity markets, which can play a crucial role in reducing consumers’ energy bills through implicit participation such as dynamic price contracts or explicit participation such as direct trading.
smartEN’s study finds that participation of demand side flexibility in European wholesale electricity markets is almost exclusively reduced to implicit through dynamic electricity price contracts, although the offer of such tariffs varies wildly by country and with most having at least one offering.
Countries that stand out are Norway with 93% of residential supply contracts being dynamic, Denmark with 69%, Finland with 30% and Latvia which stands out for 52% of its commercial customers contracts being dynamic.
Explicit participation on the other hand is only possible in Belgium, France, Great Britain, and Greece – the main reason being the lack of an independent aggregator framework that would formally recognise them as a balance responsible party, and would define the terms and conditions for their participation.
Market maturity
Overall in terms of market maturity the report finds that wholesale markets are at an infant stage with regards to participation of demand side flexibility and again very much linked to the incomplete implementation of the EU regulatory framework to allow demand side aggregation to participate.
In general no limitations on paper were observed that prevent any technologies, including demand response and storage from bidding into the wholesale market.
But what was observed was a generalised lack of transparency preventing gathering information of the volumes of electricity traded and the assets providing it, seriously limiting the assessment of flexible resources participating and the potential benefits to participation.
In the case of implicit participation, overall the deciding factor for high numbers of offerings and participation is the penetration of smart meters that facilitate their use, and the countries that stand out in addition have the highest deployments of distributed resources such as heat pumps and EVs.
However, the lack of smart meter deployment in many countries remains a significant barrier to broader adoption and needs to be advanced.
An alternative would be a service provider issued submeter, but these are not yet available or accepted in many countries.
Dedicated measurement devices also could be allowed for explicit participation in wholesale markets, in cases where the smart meter is not deployed or where the dedicated measurement provides better information for the measurement of explicit demand response, e.g. when it can isolate the activity of a specific flexible asset like an EV.
