With the aim of reducing national electricity consumption during peak hours by 5% from 1 December, Spain will have to find quick and effective solutions to comply with European law.
Although the objective seems ambitious and the deadlines very short, there is a solution to achieve this objective: opening the Spanish market to demand side flexibility.
This is what several energy market players, including Energy Pool, are calling for. They have published a joint manifesto on 22 September 2022, which can be read below:
If you want to join the initiative and become a signatory of the manifesto, please contact us at : noemie.costa@energy-pool.eu
Manifest for the development of demand side flexibility in Spain
The process of ecological and energy transition in which we are immersed is essential to address the climate emergency, and we believe that it must be a key lever to build a fairer, more sustainable and lasting economic recovery over time.
The signatories of this manifesto consider that 1) the development of a legislative and procedural framework that facilitates the deployment of demand side flexibility is a key element for a successful transition, in accordance with Directive (EU) 944/2019 on common rules for the internal electricity market and 2) it is urgent to incentivize the management of demand side flexibility because it can contribute to reducing the costs of the energy system for all consumers. For this reason, we request the regulators and government to develop a National Strategy for Demand Side Flexibility in Spain.
We understand demand side flexibility as the ability of consumers to reduce, increase or shift their energy demand, by managing their consumption, generation or storage, during a given period of time. Traditionally, the flexibility of our electrical system has been provided by large generation plants or pumping plants. Currently, the flexibility of demand has the possibility of playing an important role in various aspects such as the integration of renewable and non-manageable generation, the modulation of market prices, the provision of reserves to the system or the solution of congestion in the networks, as long as the right price signals are in place and the participation to all markets is allowed[1].
In the first place, the development of the flexibility of aggregate demand is a key element to achieve the decarbonisation objectives of the electricity system set out in the PNIEC, as well as the revised objectives of the European Green Deal[2]. The increased share of renewable generation and future electrification of the demand will require a greater volume of flexible resources to ensure the balance and security of the system in a sustainable manner. In this sense, the demand side flexibility and storage will be key elements. In fact, a study recently published by the IEA that analyzes a scenario of zero emissions by 2050[3], argues that the volume of flexibility in the electricity system will have to be multiplied by 4. In addition, it identifies batteries and demand response as the main sources of flexibility, replacing traditional sources such as coal, natural gas and oil.
Second, spot market prices increased in the last quarter of 2021 by more than 400% compared to the same quarter of 2020. This reality of high prices has been aggravated by the current war situation in Ukraine, resulting in record spot market prices never seen before, above €500/MWh. This price crisis has notably increased[4] the electricity costs of consumers, especially those exposed to the spot market, prompting some companies to stop producing in the industrial sector[5] and affecting the economy of Spanish families. Given this scenario, the flexibility of demand, especially the aggregate, becomes more relevant than ever as a tool to help reduce energy costs for consumers in three different ways: 1) allowing manageable demand to be adjusted to times with more renewable generation and more competitive prices, 2) adding value to the wholesale market, participating in the balancing markets but also all the electric markets,[6] and 3) moderating price volatility in the daily market.[7]
Thirdly, the high price of electricity is aggravating the effects derived from the covid-19 economic crisis on the competitiveness of the Spanish economy. The development of demand side flexibility not only contributes to improving energy costs borne by consumers, but can also generate a positive impact on the economy and job creation. The same United Kingdom Strategic Plan for Flexibility to 2050[8] published in 2021, calculates that the domestic market for the development of intelligent systems and flexibility solutions in 2050 will weigh more than £1.3 billion per year in the national GDP and will create more than 10,000 jobs.
Finally, it is important to highlight that the European Commission has sent a formal letter[9] to Spain, for being late in communicating the transposition of the Directive (EU) 2019/944,about the common rules for the interim electric market. The deadline to incorporate the Directive into national law ended on December 31, 2020, but to date, Spain has only partially transposed the Directive, opening only the balancing markets to demand side flexibility through a BRP.
For all this, the signatories of this document, we urge the regulatory and government bodies to accelerate the necessary changes to allow and promote the development of demand side flexibility according to the Clean Energy Package, developing a strategic and incentivizing framework to face all the above explained challenges. In this regard, we urge the regulatory and government bodies to develop a National demand side flexibility Strategy, which defines the current state of the sector, including an evaluation of its potential, the challenges it faces, the objectives to be they should achieve, as well as a specific action plan that offers a clear signal to the sector to help achieve them.
We are at the right time to raise this ambition. The National Plan for Recovery, Transformation and Resilience and the new plan Save Gas for a Safe Winter[10] offer an ideal framework to accelerate the development of demand side flexibility and incorporate this resource as a key element of the Spanish electricity system, favoring the participation of all consumers, as well as new actors in the energy transition such as the Independent Aggregator and the Energy Communities.
We remain at your disposal to be able to comment in detail on the points described in this Manifest.
Signatories:
- Axpo
- Bamboo Energy
- David Robinson – DRA – Consultores en microeconomía
- Energy Pool
- iet energy
- Km0 Energy
- Stemy Energy
- Sympower
- Voltalis
- Cuerva
[1] ACER’s report Final Assessment of the EU Wholesale Electricity Market Design. Pag. 75. Enlace
[2] Objectives included in the European Green Deal. Link.
[3] AEI (2021) Net Zero by 2050, IEA, Paris. Link.
[4] OCU (2021). Monitoring of the price of electricity. Link
[5] In January 2022, the electricity demand of the Spanish electricity system was 5% lower than the previous year, partly due to the stoppage of the industry due to the high prices of the wholesale market. Link.
[6] Currently, the demand side flexibility only can participate in REE’s balancing markets according to the conditions defined in the following CNMC’s report.Link.
[7] See study “Final results Study on the quantification of Demand Response (DR) benefits to electricity suppliers and consumers in Europe in 2030 on its way to achieve deep decarbonisation” by DR4EU. link
[8] (2021). Smart Systems and Flexibility Plan. Link
[9] Letter of formal notice Article 258 TFEU – Article 260(3) TFEU