Demand Response in Europe’s Electricity Sector: Market barriers and outstanding issues Actuelles de l'Ifri, April 2015
In October 2014, Europe’s drive for sustainability has been further continued with the set objectives for 2030, aiming for 40% emission reduction compared to 1990 levels and at least a 27% share of renewable energy sources. For the longer term, the European Commission (EC) targets a zero CO2 emitting electricity sector in 2050. Those objectives for the electricity sector have a large impact on the expected development of electricity generation, but also on the evolution of demand. To meet those objectives, a larger share of electricity supply will come from intermittent sources like wind turbines and solar panels.
In an electric system that is largely based on renewable electricity sources, it is desired to have higher electricity consumption in moments when more renewable electricity is being produced, and a lower consumption in times of lower renewable production. Demand response is related to the adaptability of the electricity demand to the availability of supply. The development of demand response is rooted in the need for carbon emission reductions and for efficient use of installed generation capacities with the growth of power consumption. In addition to providing flexibility to the electric system, demand response could be a direct source of revenue to households and businesses. In 2013, in the United States, businesses and homeowners earned over $2.2 billion in revenues from demand response together with other avoided investment in grid infrastructure and power plants. This source of direct revenue could also be made available in Europe and would release financial benefits to local economies (SEDC, 2014).
The reliability improvements as well as the economic and sustainability potential coming from a more responsive electricity demand are fully acknowledged. However, demand response is still immaturely developed in Europe. If Europe wants to make a step forward to a more sustainable electricity sector, the development of demand response is an inevitable one. This paper provides an outline of demand response in Europe and identifies the major barriers for its further development in Europe.
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