Demand response can help the EU become carbon neutral by 2050

The pressure on European countries to decarbonise recently increased even further, with the European Parliament giving its backing to a new, ambitious climate law. The ruling states that countries must cut greenhouse gas emissions by 60% compared to 1990 levels before 2030, plus achieve carbon neutral status by 2050.

This vote sets the parliament’s position as it enters into negotiations with Europe’s 27 member states and the European Commission. Existing legislation dictates that emissions should be reduced by at least 40% by 2030, while the commission had previously proposed increasing this to 55%. This significantly increased ambition should be welcomed, as it clearly shows that there is a desire for a more significant cutback. This will help progressive countries to lead the charge towards full decarbonisation. 

Out with fossil fuels, in with renewables

If the 60% emissions reduction target is to be achieved, more renewables will be needed in the energy mix. According to Eurelectric, the share of renewable energy in the EU’s power generation mix rose to 40% during the first half of 2020 and could reach as high as 60% by 2030. With this number of renewables already in the energy mix, demand response is essential to avoid having to curtail significant amounts of renewable energy.

The energy market needs independent aggregators

However, for demand response technologies to become more prevalent, the market entry of independent aggregators must be supported and improved. Independent aggregators provide flexibility services without links to an electricity supplier or balance responsible party and offer an essential route into European electricity markets for owners of flexible assets. They also enable suppliers that would otherwise be too small to participate.

Various studies, such as SmartEn’s Enabling independent aggregation in the European electricity markets paper, have shown that independent aggregators offer multiple benefits. One of the main reasons is the choice that independent aggregators provide to consumers. Signing up with a non-independent aggregator means that people become tied to one energy company, restricting market competition and stopping consumers from being able to pick their preferred energy company of choice.

Regulations are there, but they need to be implemented

Without the right regulations in place, there is no route to market for independent aggregators, and they simply cannot operate – as is the case in most EU countries currently.

Despite EU directives and regulations being in place to easily allow independent aggregators into electricity markets, they are not being implemented effectively by member states. Generally, policy changes are slow at this level due to the influence of traditional energy companies, which push back against independent aggregators as they see them as a threat to their business model. 

Another reason that policy changes take time is that it requires extra work. The mindset of both TSOs and distribution system operators is to keep things as they are if they are working. This thinking needs to change, and innovative technologies be actively encouraged rather than blocked.

Energy security and supply is not a problem

Independent aggregators are often associated with a fear that energy security and supply could be negatively affected. However, if we look at countries and regions which have already allowed independent aggregators to enter the market, such as the UK and France, we can see that are no issues with energy security or supply.

More independent aggregators need to enter the market to help shape the electricity systems of the future; they just require some help along the way through regulatory changes and a move away from the status quo. Not only will independent aggregators play a vital role in increasing flexibility participation and ensuring a successful energy transition, but they will help Europe to achieve its decarbonisation targets.

Get in touch with us to find out how we can help you unlock new revenue streams by maximising the value of flexibility