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Demand Response Market Snapshot: US vs. Europe

The past years have seen the demand response market grow worldwide – a trend that is expected to continue and accelerate. Global research firms expect the demand response market to grow to $9.7 billion by 2023, with the “enabling technologies” market projected to reach $475 million by 2020. In terms of capacity (GW), the forecasted DR market shows exponential predicted growth beyond 2020:

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NORTH AMERICA 

At the time of writing, the United States has the most developed DR market in the world. This dominance is due in part to a recent Supreme Court ruling that paved the way for players of all sizes to participate in wholesale electricity markets, which cover 60% of US power supply. 

Even though it has a higher rate of residential participation (around 90%), commercial and industrial customers make up the largest market share in terms of flexibility, incentives and savings. California is the most active state in US DR markets with 20% of the total Demand Response customers in the United States and contributing 20% of the total peak demand savings.

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 EUROPE

Though underdeveloped compared to the US market, Europe is on the cusp of a Demand Response breakthrough, partly thanks to R&D projects like RESPOND. In 2014, the total DR resource capacity in the EU stood at 2 GW, yet the European Commission’s winter package, Clean Energy for All Europeans, places the potential of activated demand response at 100GW. 

According to the Smart Energy Demand Coalition (SEDC), significant progress has been made in opening markets to demand-side resources. Currently, the most active DR participants within the EU are England and Switzerland, with expanding DR markets in France and Finland. 

According to a 2015 study by Sia Partners, the total DR potential in Europe amounts to 52.35 GW: 42% from residential applications, 31% from industry and 27% from the tertiary sector (HVAC and commercial refrigeration). 

The European countries that currently provide the most conducive framework for the further development of Demand Response have been identified as Switzerland, France, Belgium, Finland, Great Britain, and Ireland. Of these, only France and Switzerland have commercially active, agreements in place for independent aggregation, including standardised roles and responsibilities of market participants.

Demand-Side Management vs. Demand Response

What is Demand-Side Management?

Profound changes are disrupting the energy industry, bringing about new challenges for utilities, system operators and governments around the world: balancing intermittent generation, integrating renewables to meet climate goals, covering peak demand with increased flexibility. These drivers make balancing energy supply and demand more difficult and more expensive than it used to be. 

One of the most well-researched fields of electricity system flexibility is called Demand Side Management (DSM), which aims to improve flexibility on the consumer side. The implementation of DSM programs can range from improving energy efficiency with better insulation materials to fully autonomous energy systems that automatically respond to shifts in supply and demand. 

DSM can be implemented in two ways: through energy efficiency or Demand Response (DR). Since the RESPOND project focuses on the latter, this post will define and explain the concept of Demand Response in more detail.  

What is Demand Response?

 The key thing to understand here is that Demand Response (DR) and DSM (Demand Side Management) are not the same thing, even though they are often used interchangeably. 
 
Demand Response refers to programs that encourage participants to make short-term reductions in energy demand. These short-term “responses” are triggered by price signals from the electricity hourly market, or initiated by the TSO or DSO. DR activations can last from a couple of minutes to some hours depending on the DR program, and might include turning off or dimming lighting, adjusting HVAC levels, or shutting down a non-critical manufacturing process. On-site generation and storage systems can also be used to adjust loads drawn from the grid. 
 
The key thing to remember is that these are temporary, reactionary measures that keep the grid running optimally and automatically smooth out and peaks or valleys in power supply and demand. 
 
Demand Side Management (DSM) is any program that encourages the end user to be more energy efficient – so DR falls under this category, but so do longer-term or permanent energy efficiency measures such as lighting retrofits, building automation upgrades, and HVAC improvements.

Project News: RESPOND Kicks Off in Brussels

From 18-19 October 2017, the first official kick-off meeting was held in Brussels to launch the EU-funded project RESPOND: Integrated Demand Response Solution Towards Energy Positive Neighbourhoods. RESPOND aims to deliver a cost effective, cooperative demand response solution to different types of residential communities in order to boost their energy savings potential.

Demand Response: The Next Frontier in Energy Innovation

The term demand response (DR) refers to any initiative that offers electricity consumers the opportunity to intentionally shift their energy consumption either in response to price signals caused by peak demand or in exchange for an agreed-upon incentive. DR programmes, when combined with local renewable energy production and storage options, can significantly reduce peak demand, resulting in energy and cost savings for stakeholders throughout the energy supply chain.

While demand response schemes have been widely implemented in the industrial sector where energy demand is typically higher, such solutions in the residential sector are still in their infancy, despite a huge untapped potential for better operational management, behaviour change and savings. 

To exploit this untapped potential, the RESPOND project aims to integrate the benefits of flexibility with targeted load control actions, renewable energy sources and energy storage options with the aim of adapting user behaviour to better match energy supply and demand to the satisfaction of both end consumers and energy providers.

The RESPOND Consortium

To achieve these ambitious objectives, the project will be carried out by an interdisciplinary consortium committed to deliver EU-based capabilities, technologies and tools to the benefit of energy providers and consumers under the umbrella of demand response. The consortium led by Fenie Energia, a leading energy retailer created by the Spanish National Federation of Electrical and Telecommunications Installers (FENIE).

 

The project consortium consists of 11 partners from 5 countries: Czech Republic, Denmark, Ireland, Serbia and Spain. The consortium reflects a healthy balance of energy providers and technology suppliers on one side, with public research and academics on the other.

Project RESPOND will be rolled out over the next three years in three distinct pilot sites covering different climatic and socio-economic regions across Europe: a cooperative community on the Aran Islands in Ireland, a social housing complex in Aarhus, Denmark, and a private residential apartment building in Madrid.

Nearly a year after the initial submission of the winning RESPOND proposal, which resulted in a successful project funding of 3 million EUR,  the kick-off meeting presented the ideal opportunity for the project partners to meet and review project objectives and work plans, with a short overview of each project activity planned for Phase 1. As the official coordinating partner of the consortium, Fenie Energia invited all project partners to meet face-to-face over a two-day period in Brussels.

Day 1 Highlights

The highlight of the Day 1 meeting was a visit from the Project Officer and Financial Officer, who introduced the H2020 and EASME strategies. Following the visit, the first work package was introduced with an overview of the 3 pilots as well as a brainstorming session led by Project Coordinator Fenie Energia.

The meeting was followed by a delightful dinner in the city center of Brussels.

Highlights from Day 2

Day 2 was focused on partner presentations of relevant work packages, with follow-up discussions led by Project Coordinator Fenie Energia. Each session was dedicated to describing relevant work package objectives, introducing participating partners, prioritising activities, and determining next steps.

The next face-to-face meeting of the RESPOND project is scheduled to take place in January 2018 at the pilot project site in Aarhus, Denmark.