EU demand response plans ‘incompatible’ with market principles

Consultants warn draft directive could distort the energy retail market

Draft EU plans for demand response are “incompatible with market principles”, a new study has warned.

The study by consultants DNV GL claims the commission’s new draft electricity directive could cut the “economic efficiency” of demand response and distort the energy retail market.

The draft director aims to stimulate the adoption of demand response by creating a framework for a new player in the electricity value chain, dubbed the aggregator, who will combine customer loads and generated electricity for trading on the energy market.

But the study warns in its current form, the directive would rule out any financial compensation to stakeholders for the economic disadvantages caused by freeriding aggregators.

It also claims the director would limit the economic effectiveness of demand response.

Instead, the study recommends the directive be amended and resolve the bulk energy issue by fully compensating the supplier, allowing member states to set the most appropriate rules at national level.

“The EU is right to encourage the establishment of independent aggregators to enable more people to benefit from demand response” said DNV GL’s executive vice-president for central Europe and the Mediterranean, Andreas Schröter.

“Yet by disadvantaging players affected by aggregator-triggered demand response actions, the draft directive effectively makes it possible for aggregators to get a free ride at the expense of others. This could mean consumers are faced with higher tariffs for demand response, limiting its attractiveness and uptake.”