|Demand Side Response Aggregator (DSR Aggregator)|
|European Union Electricity Market Glossary|
Demand Side Response Aggregator (DSR Aggregator) is a third party company specializing in electricity demand side participation.
In practice, DSR Aggregator contracts with the individual demand sites (industrial, commercial or residential consumers) and aggregate them together to operate as a single DSR provider to:
- Balance Responsible Party (BRP) or to
The individual demand sites can use a combination of increasing on-site generation and/or process shutdown or reduction to deliver the active power demand reduction service.
The DSR Aggregator receives a percentage of the value created by the avoided consumption to reduce peak demands, balance intermittent generation, provide a balancing service or increase security of supply.
There are multiple references to DSR Aggregators in the European energy market legislation.
Pursuant to Article 2(19) of the Demand Connection Code (DCC) demand aggregation represents a set of demand facilities or closed distribution systems which can operate as a single facility or closed distribution system for the purposes of offering one or more demand response services.
In turn, Article 2(45) of the Energy Efficiency Directive defines an aggregator as a demand service provider that combines multiple short-duration consumer loads for sale or auction in organised energy markets.
According to Article 2(14) of the Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity, being part of the European Commission's Winter Energy Package of 30 November 2016, ‘aggregator’ means ’a market participant that combines multiple customer loads or generated electricity for sale, for purchase or auction in any organised energy market’.
According to the said European Commission’s legislative draft of 30 November 2016:
- aggregators must not be required to pay compensation to suppliers or generators (Article 17(3)(d)),
- in order to ensure that balancing costs and benefits induced by aggregators are fairly assigned to market participants, compensation payments between aggregators and balance responsible parties may be exceptionally allowed by the EU Member States (Article 17(4)).
Such compensation payments must, however, be limited to situations where "one market participant induces imbalances to another market participant resulting in a financial cost".
Such exceptional compensation payments must also be subject to approval of the national regulatory authorities and be monitored by the ACER.
The said Proposal of 30 November 2016 also identifies an 'independent aggregator', which has been defined as "an aggregator that is not affiliated to a supplier or any other market participant" (Article 2(15)).
The above rules proposed by the European Commission in Articles 17(3)(d) and 17(4) have been, however, questioned by the EFET, EURELECTRIC and Europex, which in the document "Ensuring a level-playing field in the development of Demand Response, Reaction of EFET, EURELECTRIC and Europex to the Clean Energy Package" of 16 May 2017 (p. 3, 4) argue that exempting aggregators from paying suppliers or generators for energy sourced but not consumed (art. 17(3(d) is unjustified.
"When an ‘independent DR aggregator’ sells energy on the market, this energy has been sourced by supplier of the involved consumers. This energy is not consumed by the activated customer; this then results in freeing up of energy that is implicitly diverted by the independent DR aggregator and potentially consumed elsewhere in the system. We support the idea that there should not be undue compensations imposed on ‘independent DR aggregators’ beyond the costs of the sourced energy. However, a fair market based remuneration of this sourced energy - by which the ‘independent DR aggregator’ pays the supplier for its sourcing costs - should be required instead of being explicitly excluded. Omitting this adds distortions to free price formation and risks undermining the overall efficiency of the market. As stated in the EC own impact assessment “the exclusion of any compensation mechanism introduces a possibility of demand aggregators being free riders in the markets and therefore creating inefficiencies. This is not in line with the EU target model and generally not in line with creating a level playing field for competition.“ If this issue is not tackled, other participants in the market will bear the costs of DR activation, with a risk of seeing end-consumer bills increase," the organisations said.
In that regard the organisations point that: "the current market model is based on the central principle of balance responsibility, an obligation for anyone connected to the grid to respect its schedules or to be exposed to the financial consequences for deviating from them. This principle would be violated if one category of market participants were exempted from being charged by the TSO the cost of its energy imbalances. The activity of ‘independent DR aggregators’ should not induce distortions for BRPs, which can for instance be ensured if an imbalance adjustment is applied on impacted BRPs. Also policy makers should beware that creating an enabling framework where specific businesses are immune from balancing responsibility could incentivise the opportunistic establishment of DR activities only according to the requirements of the CEP (explicit DR through an independent aggregator) to the detriment of other DR approaches such as implicit DR or explicit DR in one’s own name. Such a development would, as long as the standard discipline of the market would not apply to independent DR aggregators, lead to an ever-increasing share of the overall consumption that would not be subject to balance responsibility in the planning stage. This would have negative economic repercussions among market participants in the wholesale/retail markets and lead to larger real-time imbalances in the power system as schedules provided to the TSOs would lose precision. For all these reasons, and as a fundamental rule, ‘independent DR aggregators’ should thus be financially responsible for their own imbalances."
EFET, EURELECTRIC and Europex in the said document of 16 May 2017 made, finally, an interesting observation that demand response aggregation is only at a nascent stage in many EU Member States, because in several European markets, current electricity prices provide limited incentive for consumers to participate in demand response programmes as the energy component represents on average only 25 to 35% of retail consumers’ bill, which in many Member States is heavily burdened with increasing taxes and levies.
European Energy Regulators ACER and CEER recognise the benefits of introducing independent aggregation and propose that the EU Member States enable independent aggregation, "unless a national implementation assessment suggests an alternative that better serves system efficiency and can be implemented effectively" (ACER and CEER document of 22 May 2017: "European Energy Regulators’ White Paper # 3, Facilitating flexibility, Relevant to European Commission’s Clean Energy Proposals", p. 1, 2).
Such an assessment might be supported by an analysis of the state of competition in the EU Member States retail markets.
This reflects a focus on the facilitation of aggregation (the activity), rather than aggregator type (the agent).
According to the said ACER and CEER document of 22 May 2017, in implementing models of independent aggregation, the EU Member States should ensure that:
- market access by independent aggregators is not foreclosed by suppliers to the detriment of consumers;
In turn, the European Parliament’s Committee on Industry, Research and Energy (ITRE) in its Report of 27 February 2018 proposed the aforementioned European Commission’s Proposal of 30 November 2016 should be supplemented with the provisions that:
Moreover, while according to the European Commission’s text a final customer wishing to terminate the contract with an aggregator was entitled to such termination within three weeks (while respecting contractual conditions), the ITRE proposed instead that a final customer wishing to terminate the contract with an aggregator may do so in accordance with the rules for the supplier switching (with the burden of proof of the direct economic loss on the aggregator).
Another discrepancy between the European Commission and the ITRE Committee pertains to the final customers’ right to all relevant demand response data or data on supplied and sold electricity.
According to the European Commission final customers should have such a right at least once per year while the ITRE proposed to increase this frequency to at least once per month.
Moreover, ITRE considers that, additionally, settlement data should be available to final customers upon request.
The ITRE’s version also contains an explicit provision that final customers should’t be charged any additional fees for the said data.
Report on the proposal for a directive of the European Parliament and of the Council on common rules for the internal market in electricity (recast) (COM(2016)0864 – C8-0495/2016 – 2016/0380(COD)), European Parliament, 27 February 2018, Committee on Industry, Research and Energy
Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Article 17, Article 13
Energy Efficiency Directive - Article 2(45)
Network Code on Demand Connection (DCC) - Article 2(19), Article 34(2) and (3), Article 35(1)
|Last Updated on Sunday, 06 May 2018 12:03|