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Which electricity market design to encourage the development of demand response?

Vincent Rious, Fabien Roques and Yannick Perez
Authors registered in the RePEc Author Service: Yannick Perez () and Fabien Roques ()

No 2012/12, RSCAS Working Papers from European University Institute

Abstract: Demand response is a cornerstone problem in electricity markets under climate change constraint. Most liberalized electricity markets have a poor track record at encouraging the deployment of smart meters and the development of demand response. In Europe, different models are considered for demand response, from a development under a regulated regime to a development under competitive perspectives. In this paper, focusing on demand response and smart metering for mid-size and small consumers, we investigate which types of market signals should be sent to demand manager to see demand response emerge as a competitive activity. Using data from the French power system over the last 8 Creation-Dates, we compare the possible market design options to allow demand response to develop. Our simulations demonstrate that with the current market rules, demand response is not a profitable activity in the French electricity industry. Introducing a reserve and/or capacity remuneration could bring additional revenues to demand response providers and improve incentives to put in place demand response programs in a market environment.

Keywords: Market Design; Demand Response; Capacity Market (search for similar items in EconPapers)
Date: 2012-02-24
New Economics Papers: this item is included in nep-ene
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Related works:
Working Paper: Which electricity market design to encourage the development of demand response? (2016)
Journal Article: Which electricity market design to encourage the development of demand response? (2015) Downloads
Working Paper: Which electricity market design to encourage the development of demand response? (2015) Downloads
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