Across Europe, there’s an understanding that more demand-side resources need to be integrated into the power grid to enable the renewable energy transition and facilitate more demand response events. This is not yet happening at pace – and that means those resources are missing out on new opportunities.
Transmission and distribution system operators (TSOs and DSOs) have proposed solutions to help more distributed energy resources (DERs) to participate and get connected, as laid out in a draft network code on demand response.
This guide on the draft network code covers:
- What is demand response?
- What is the demand response network code?
- How will the code help integrate more renewable energy sources with the grid?
- How could system operators be encouraged to procure flexibility?
- How will the code help ensure power system security?
- How will the code help make competition fairer for DERs in the internal electricity market?
- How will the code affect flexibility service providers (FSPs)?
- When will the network code for demand response come into force?
- Where can you learn more?
What is demand response?
Demand response is a form of energy flexibility, where demand-side energy resources are rewarded to turn up or down energy consumption. This is to help balance the grid and avoid congestion on the electricity network.
This activity is vital to help integrate new demand-side electricity loads and renewable energy generators in the grid, in a cost-effective way.
Read our guide to the different types of flexibility market, including demand response
What is the demand response network code?
Network codes give network or system operators a system of rules to follow.
The network code on demand response aims to help more demand-side flexibility resources integrate and connect with the energy system.
According to the latest proposal supporting document, the code aims to:
“Establish a European legal framework that facilitates the creation and development of local markets to solve congestion and voltage issues by enabling demand response and distributed energy resources while ensuring interoperability with the existing markets.”
The code will apply to all system operators, at both transmission and distribution levels, across the EU. Those system operators will need to coordinate plans and exchange necessary data.
How will the code help integrate more renewable energy sources with the grid?
The new rules would help encourage more flexible customers (or flexibility service providers (FSPs)) of renewable energy to participate in electricity markets, making it easier for them to get involved.
To enable this, the proposed code will:
- Help integrate technology-neutral demand-side flexibility
- Set principles for the development of harmonised rules across the EU
- Define market-based processes for selecting the most cost-efficient resources
System operators will need to coordinate to provide efficient congestion and voltage options. That coordination will also help address the integration of new generation, storage, and loads from renewable sources cost-efficiently.
Renewable energy resources will therefore be able to connect and provide their flexibility services to the grid more easily.
All solutions will need to be assessed to connect more customers within national rules.
How could system operators be encouraged to procure flexibility?
Within the draft network code, there are certain articles that point to how system operators may be encouraged to take a flexibility-first approach.
Notably, for resolving congestion and voltage issues, systems operators will likely be mandated to choose “the most efficient and effective solution”. This can include the procurement and activation of local flexibility services, if that is the most economical solution.
System operators will also need to conduct regular assessments to determine whether local flexibility services can be procured more efficiently through market setups. This implies that if market-based procurement is more effective, system operators must choose this option.
A market platform, such as ElectronConnect, can then be deployed in this instance to help launch, coordinate and scale those markets for flexibility procurement.
How will the code help ensure power system security?
The code will help make sure energy is available at the right time and place. Local markets will ensure system operators use that electricity most effectively, to maintain stable grid operation.
System operators will therefore be able to choose between more markets and market-based services to help ease congestion, according to certain “effectiveness and efficiency criteria,” in a transparent and coordinated way.
The draft code also suggests a system for digitalisation following secure data procedures. This will give system operators the tools they need to balance supply and demand in a rapidly changing grid and network.
How will the network code help make competition fairer for DERs in the internal electricity market?
EU-wide standards – covering data infrastructure, markets, platforms – are essential for unlocking the full potential of those flexibility markets. These standards can help create more liquid markets, which will help reduce friction through asset conflicts.
The draft network code includes common rules to facilitate aggregation of resources, demand response rules, and energy storage across the European Union.
As the code will focus on interoperability and standardisation, it aims to ensure technological neutrality. The code is intended to apply to all Distributed Energy Resources (DERs), including load, storage, and generation – whether or not they’re aggregated.
This means more flexibility service providers can participate, helping them access all applicable electricity markets. That includes wholesale markets, from balancing and local services to day-ahead market and the intra-day markets.
For tech providers, it aims to continue to drive innovation in the field. This is so “new technologies could be developed and implemented to facilitate the delivery of the European objectives related with the energy transition.”
How will the network code affect flexibility service providers (FSPs)?
The code aims to provide increased opportunities for flexibility service providers, facilitating value stacking, market coordination, and efficient trading volumes.
The rules to participate will be streamlined, including pre-qualification and grid qualification, with financial and ICT requirements.
For storage providers, the code directly addresses the integration of more energy storage facilities and clarifies where public consultation may be required to help boost participation from existing energy storage facilities.
When will the network code for demand response come into force?
In May 2024, system operators across Europe submitted a proposal for the EU-wide network code on demand response.
The European Union Agency for the Cooperation of Energy Regulators (ACER) will consult on this proposal in autumn 2024 and submit it to the European Commission by March 2025.
National enforcement is expected to be in March 2027, pending issues.
The two-year implementation period is a common timeframe stipulated for EU regulations and directives to ensure member states have sufficient time to incorporate the new rules into their national laws and regulatory frameworks.
This period is standard for allowing adequate adaptation, planning, and coordination at both national and regional levels.
However, the exact implementation period for the Network Code on Demand Response will be confirmed in the regulation or directive text once published.
Where can you learn more?
You can find the consultation documents relating to the draft network code on Acer’s website.
Acer will also be running a webinar on 1 October 2024 to present the code, its objectives, and the next steps in the process.
