Regulatory revision and assessment of demand initiatives in Spain, France, Great Britain, New York and California
Resumen
The present document is aimed to review the regulatory and practical status of different
Demand Response initiatives carried out in different States as it is considered to be a pillar in
the future development of the power sector. The study will help to understand what are the
main issues to be solved in the years to come in each system to let demand-side participants
hold a more important and active role in the wholesale electricity markets.
This Master Thesis has been developed at the department of ‘Energy Policy and
Regulation’ at Iberdrola S.A. The main motivation of this project was to have a clear feedback
on how demand response programs are likely to evolve in the studied areas and how energy
policies regarding demand-side management may be developed from a regulatory point of
view to benefit the power sector itself. Thus, the conclusions of this study will help Iberdrola
to have a basis on how to face high-level regulatory discussions on this topic and to be ready
for new changes with respect to the introduction of new forms of demand response programs.
The States selected for this study are Spain, France, Great Britain, New York and California as
they are part of Iberdrola’s businesses area and they represent different stages of
implementation of demand-response mechanisms attending to diverse operational and
contextual conditions.
The methodology followed consists on a preliminary revision of the main available DRP
options used worldwide. Then, each State has been categorized according to its generation
mix, networks status, former experiences on DR, etc. so that a firm framework is given to
better understand the decisions made on each country. Later, the main initiatives available on
each State have been analyzed in detail following a four-criterion qualitative methodology,
which is aimed to rank the main points that are understood to be crucial to achieve a proper
and equitable implementation of demand response in the electricity markets. The previously
mentioned procedure grades each State from A (best) to D (worst) attending to the extent
customers are involved and the legality of figures like the aggregator; the variety of demandresponse
products offered and their general requirements; what are the measurement and
verification procedures; which are the financing options and how risks are supported by each
agent. This method shows the real grade DR is active on each State so that it is easy to
identify the main points to be improved and also to compare the situation within the
aforementioned regions. To conclude, each State will be assessed with the main potential
enhancements to better involve demand-side participants on existing and future demand
response programs.
As an advance, this study has identified that the grade of implementation of DRPs
strongly depends on the operational and technical characteristics of each power system, going
for instance from Spain where DR is barely deployed due to overcapacity in generation and
overinvestment in networks to States as California where the variety of products is huge as
cheaper ways to manage imbalances are needed and a large amount of renewable resources
requires to be accommodated in an efficient way. On top of that, it has been perceived that
programs as capacity markets, neglect the differences between supply and demand in the
design process so that very few capacity is allocated to demand response agents. Finally, in
those States where DR enjoys better legal conditions and wider variety of products,
educational campaigns are crucial to increase the still low number of participants, warning
customers about the benefits DR encloses. However, policymakers need to keep in mind that
freedom of choice and final decisions should always depend on end-customers, as this is the
only real way to empower consumers.