Which electricity market design to encourage the development of demand response?

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2015

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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.eap.2015.11.006

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Vincent Rious et al., « Which electricity market design to encourage the development of demand response? », HAL-SHS : économie et finance, ID : 10.1016/j.eap.2015.11.006


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Demand response is a cornerstone problem in electricity markets under climate change constraints. Most liberalized electricity markets have a poor track record at encouraging the deployment of smart meters and the development of demand response. In Europe, different models are considered for demand response, from a development under a regulated regime to a development under competitive perspectives. In this paper focusing on demand response and smart metering for mid-­‐size and small consumers, we investigate which types of market signals should be sent to demand managers to see demand response emerge as a competitive activity. Using data from the French power system over nine years , we compare the possible market design options which would enable the development of demand response. Our simulations demonstrate that under the current market rules demand response is not a profitable activity in the French electricity industry. Introducing a capacity market could bring additional revenues to demand response providers and improve incentives to put in place demand response programs in a market environment.

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