Navigant Research Blog

Europe Is Next Frontier for Demand Response

Marianne Hedin — September 26, 2013

Europe is showing signs that it has the potential to become a major demand response (DR) market.  The regulatory environment, which has so far represented a serious obstacle to the implementation of DR programs that have remained illegal in the majority of European Union (EU) member states and in most of the wholesale and retail markets, is becoming supportive of the participation of demand-side resources.  A handful of the 28 member states have already created new regulations, along with payment and contractual structures, that support DR.  Other countries, such as Austria, Belgium, Finland, and Switzerland, have begun to review their national regulations.

Although it will take time before all regulatory barriers are removed, there are a number of driving factors that will facilitate DR deployment across Europe. The key drivers are:

  • The Energy Efficiency Directive, established by the EU Commission in 2012, which stipulates that national regulatory authorities should encourage demand-side resources
  • The EU’s Climate and Energy Package, which targets three key objectives:
    • To reduce carbon emissions by 20% from 1990 levels
    • To raise the share of energy consumption produced from renewable resources to 20%
    • To improve the EU’s energy efficiency by 20%
  • The adoption of intermittent renewables, such as wind and solar power, which are putting pressure on utilities to rely on DR capacity to balance the fluctuating supply and demand of electricity on a continuous basis
  • Smart meters, which are a critical element of the EU’s energy goals, as well as a cornerstone to DR deployment (Navigant Research projects that smart meters will have penetrated almost 90% of the electricity metering market in Western Europe by the end of the decade)
  • The growing use of electric vehicles (EVs), which, like intermittent renewables, will put a strain on the grid, requiring DR to address the unpredictable demand for power from EV charging

Navigant Research estimates that the total load curtailment from DR programs in Europe will reach 8,655 MW in 2013.  More than 56% of this will be generated by the industrial sector, and more than 28% will be generated by the commercial sector.  About 15% of total load reduction will come from households, primarily from those participating in time-of-use (TOU) programs.  Today, the largest load curtailment is contributed by Italy, mainly because of a large interruptible load program for the commercial and industrial (C&I) sector.  But as the load opportunity improves in both France and the United Kingdom, especially in the C&I sector, France will take the lead in 2017 with Europe’s largest DR load reduction, followed later by the United Kingdom.  Because of its slow start, Germany will trail the other nations, but will gradually catch up in 2020.

DR Load Curtailment by Major Country or Region, Europe: 2013-2020

DR blog chart(Source: Navigant Research)

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