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.

 

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 (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), being part of the European Commission's Winter Energy Package, ‘aggregator’ means "a market participant that combines multiple customer loads or generated electricity for sale, for purchase or auction in any organised energy market".

 

In turn, Article 2(15) of the said Proposal for a Directive of 30 November 2016 defines an 'independent aggregator' as "an aggregator that is not affiliated to a supplier or any other market participant".

 

Pursuant to the ENTSO-E Supporting Document for the Network Code on Operational Security of 24 September 2013 2nd Edition Final (p. 161), the DSR Aggregator will contract with the individual demand sites (industrial, commercial or residential consumers) and aggregate them together to operate as a single DSR provider to:

 

 

Article 2(45) of the Energy Efficiency Directive

 

'aggregator' means a demand service provider that combines multiple short-duration consumer loads for sale or auction in organised energy markets.

 

- Transmission System Operator (TSO),

 

- Balance Responsible Party (BRP) or to

 

- Distribution System Operator (DSO).

 

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.

 

The corresponding definition comprises Article 2(19) of the Demand Connection Code (DCC).

 

Pursuant to the said provision demand aggregation means 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.

 

The EFET, EURELECTRIC and Europex document of 16 May 2017 "Ensuring a level-playing field in the development of Demand Response, Reaction of EFET, EURELECTRIC and Europex to the Clean Energy Package" made 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 in particular.

 

According to the said Proposal for a Directive 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)).


 

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 


Demand response 



1. Member States shall ensure that national regulatory authorities encourage final customers, including those offering demand response through aggregators, to participate alongside generators in a non-discriminatory manner in all organised markets. 



2. Member States shall ensure that transmission system operators and distribution system operators when procuring ancillary services, treat demand response providers, including independent aggregators, in a non-discriminatory manner, on the basis of their technical capabilities. 



3. Member States shall ensure that their regulatory framework encourages the participation of aggregators in the retail market and that it contains at least the following elements: 

(a)  the right for each aggregator to enter the market without consent from other market participants; 

(b)  transparent rules clearly assigning roles and responsibilities to all market participants; 

(c)  transparent rules and procedures for data exchange between market participants that ensure easy access to data on equal and non-discriminatory terms while fully protecting commercial data; 

(d)  aggregators shall not be required to pay compensation to suppliers or generators; 

(e)  a conflict resolution mechanism between market participants. 



4. In order to ensure that balancing costs and benefits induced by aggregators are fairly assigned to market participants, Member States may exceptionally allow compensation payments between aggregators and balance responsible parties. Such compensation payments must be limited to situations where one market participant induces imbalances to another market participant resulting in a financial cost.

Such exceptional compensation payments shall be subject to approval by the national regulatory authorities and monitored by the Agency.

 

5. Member States shall ensure access to and foster participation of demand response, including through independent aggregators in all organised markets. Member States shall ensure that national regulatory authorities or, where their national legal system so requires, transmission system operators and distribution system operators in close cooperation with demand service providers and final customers define technical modalities for participation of demand response in these markets on the basis of the technical requirements of these markets and the capabilities of demand response. Such specifications shall include the participation of aggregators.


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 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", 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.“1If 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.


The aforementioned organisations also opposed the proposal for the exemption of DSR Aggregators from market disciplines regarding imbalance settlement (as foreseen by Article 17(4) of the Proposal for a Directive).

 

In that regard the organisations are you 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."

 

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;


- arrangements provide for payments for resold energy (‘compensation’). This payment for resold energy could be facilitated through a central financial settlement or be based on contractual relationships between the customers and suppliers, but would not require any contractual relationship between the supplier and the independent aggregator.

 

 

 

 

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Last Updated on Friday, 16 June 2017 20:51
 

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