With increasing shares of decentralized and variable renewable energy sources, flexibility becomes even more important for an efficient, stable and cost-effective European energy system.
The role of customer-empowerment is also moving to the foreground; thanks to advances in technology development and digitalization, people are starting to take an active role in the energy system: to make savings on their energy bill, to improve comfort
or to contribute to the energy transition.
Demand Response is ideally suited to respond to these new challenges. As a key source of flexibility, it can provide effective system services to the electricity grid, replacing more expensive and polluting backup capacities. More than that, it also contributes to competition and effective price formation in a market that is increasingly dominated by renewable energy sources: in times of low renewable energy output, Demand Response contributes to balancing supply and demand and in time of high renewable energy generation, it makes effective use of excess generation, thus improving the business case for renewables. Finally, Demand Response gives consumers the choice to engage in the electricity system by selling their flexibility, usually with the help of an aggregator, or
to react directly to dynamic market price signals.
According to a study by the Imperial College / NERA, a high implementation of flexibility would reduce the integration costs for renewable energy sources by £8 billion per year in the UK alone.
According to the European Commission’s Impact Assessment, as much as 160 GW of flexible capacity could technically be accessed through Demand Response by 2030, avoiding the need to build new generation capacity. Enabling a dynamic market with strengthened shortterm markets, improved use of interconnections, and the inclusion of Demand Response and Distributed Energy Resources can lead to significant annual savings in wholesale supply costs of €50 billion in 2030. This would be expected to reduce the unit generation costs paid by consumer by more than 15%, “the largest part of which is attributable to the participation of demand response in the market”.