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

Author

Listed:
  • Vincent Rious

    (E3S - Supélec Sciences des Systèmes - Ecole Supérieure d'Electricité - SUPELEC (FRANCE))

  • Fabien Roques

    (LESIA - Laboratoire d'études spatiales et d'instrumentation en astrophysique - UPMC - Université Pierre et Marie Curie - Paris 6 - INSU - CNRS - Institut national des sciences de l'Univers - Observatoire de Paris - CNRS - Centre National de la Recherche Scientifique - PSL - Université Paris Sciences et Lettres - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)

  • Yannick Perez

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Vincent Rious & Fabien Roques & Yannick Perez, 2016. "Which electricity market design to encourage the development of demand response?," Post-Print hal-01660295, HAL.
    • Handle: RePEc:hal:journl:hal-01660295
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    Cited by:

    1. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.
    2. Claire Bergaentzlé & Cédric Clastres & Haikel Khalfallah, 2014. "Demand-side management and European environmental and energy goals: an optimal complementary approach," Post-Print halshs-00928678, HAL.
    3. Després, Jacques & Mima, Silvana & Kitous, Alban & Criqui, Patrick & Hadjsaid, Nouredine & Noirot, Isabelle, 2017. "Storage as a flexibility option in power systems with high shares of variable renewable energy sources: a POLES-based analysis," Energy Economics, Elsevier, vol. 64(C), pages 638-650.
    4. Claire Bergaentzlé & Cédric Clastres, 2013. "Demand side management in an integrated electricity market: what are the impacts on generation and environmental concerns ?," Post-Print halshs-00839116, HAL.
    5. Reihani, Ehsan & Motalleb, Mahdi & Thornton, Matsu & Ghorbani, Reza, 2016. "A novel approach using flexible scheduling and aggregation to optimize demand response in the developing interactive grid market architecture," Applied Energy, Elsevier, vol. 183(C), pages 445-455.
    6. Zeng, Bo & Wu, Geng & Wang, Jianhui & Zhang, Jianhua & Zeng, Ming, 2017. "Impact of behavior-driven demand response on supply adequacy in smart distribution systems," Applied Energy, Elsevier, vol. 202(C), pages 125-137.
    7. Bert Willems & Juulia Zhou, 2020. "The Clean Energy Package and Demand Response: Setting Correct Incentives," Energies, MDPI, vol. 13(21), pages 1-19, October.
    8. Michaelis, Anne & Hanny, Lisa & Körner, Marc-Fabian & Strüker, Jens & Weibelzahl, Martin, 2024. "Consumer-centric electricity markets: Six design principles," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).
    9. Franziska Klaucke & Karsten Neuhoff & Alexander Roth & Wolf-Peter Schill & Leon Stolle, 2025. "An Advanced Reliability Reserve Incentivizes Flexibility Investments while Safeguarding the Electricity Market," Discussion Papers of DIW Berlin 2127, DIW Berlin, German Institute for Economic Research.
    10. Cédric Clastres & Olivier Rebenaque & Patrick Jochem, 2020. "Provision of Demand Response from the prosumers in multiple markets," Working Papers 2008, Chaire Economie du climat.
    11. Barbero, Mattia & Corchero, Cristina & Canals Casals, Lluc & Igualada, Lucia & Heredia, F.-Javier, 2020. "Critical evaluation of European balancing markets to enable the participation of Demand Aggregators," Applied Energy, Elsevier, vol. 264(C).
    12. Mkireb, Chouaïb & Dembélé, Abel & Jouglet, Antoine & Denoeux, Thierry, 2019. "Robust Optimization of Demand Response Power Bids for Drinking Water Systems," Applied Energy, Elsevier, vol. 238(C), pages 1036-1047.
    13. Palm, J. & Kojonsaari, A.-R. & Öhrlund, I. & Fowler, N. & Bartusch, C., 2023. "Drivers and barriers to participation in Sweden's local flexibility markets for electricity," Utilities Policy, Elsevier, vol. 82(C).
    14. Claire Bergaentzlé & Cédric Clastres, 2013. "Tarifications dynamiques et efficacité énergétique : l'apport des Smart Grids," Post-Print halshs-00822731, HAL.
    15. Voulis, Nina & van Etten, Max J.J. & Chappin, Émile J.L. & Warnier, Martijn & Brazier, Frances M.T., 2019. "Rethinking European energy taxation to incentivise consumer demand response participation," Energy Policy, Elsevier, vol. 124(C), pages 156-168.
    16. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    17. Bublitz, Andreas & Keles, Dogan & Zimmermann, Florian & Fraunholz, Christoph & Fichtner, Wolf, 2018. "A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms," Working Paper Series in Production and Energy 27, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    18. Bergaentzlé, Claire & Clastres, Cédric & Khalfallah, Haikel, 2014. "Demand-side management and European environmental and energy goals: An optimal complementary approach," Energy Policy, Elsevier, vol. 67(C), pages 858-869.
    19. Lambin, Xavier, 2020. "Integration of Demand Response in Electricity Market Capacity Mechanisms," Utilities Policy, Elsevier, vol. 64(C).
    20. Cédric Clastres & Haikel Khalfallah, 2020. "Retailers' strategies facing demand response and markets interactions," Working Papers hal-03167543, HAL.
    21. Bublitz, Andreas & Keles, Dogan & Zimmermann, Florian & Fraunholz, Christoph & Fichtner, Wolf, 2019. "A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms," Energy Economics, Elsevier, vol. 80(C), pages 1059-1078.
    22. Pedro Faria & João Spínola & Zita Vale, 2018. "Reschedule of Distributed Energy Resources by an Aggregator for Market Participation," Energies, MDPI, vol. 11(4), pages 1-15, March.

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