Adapting energy markets in Europe to integrate industrial demand response

Abstract

Demand Response has been considered over the last years as one of the possible solutions to further integrate variable renewable energy sources in future energy markets and to reduce the costs of the system. An easy way to capture most of the existing flexibility without negotiating with all the electricity consumers is to focus on industrial consumers. This group of consumers is rather limited and typically covers between 20 and 50 of the total electricity demand in most member states of the EU (except for Iceland and Cyprus). Within this group of industrial consumers, a number of industries and processes were identified that can provide the most flexibility to the system. The next step is to activate this flexibility within the current regulatory framework. The electricity markets were analysed for three European countries and this analysis pointed out what the main barriers are that limit demand-side participation. The last step is to design a model to evaluate those different types of flexibility under different regulatory frameworks. This works provides the objectives of the study we will conduct, the methodology that will be followed and the motivation why this topic was chosen. The latter is directly related with the results of the literature, as we found that there are no existing models that capture the complexity of the industrial processes and the different markets designs in Europe. The main objective of this thesis therefore to estimate the value of industrial demand response under different European market designs. This will be done by developing a model that is able to capture different market designs for energy and ancillary services. From the results of this model, some policy recommendations will be formulated on how future markets should be designed.