ENTSO-E Recommendations on Market Design and Demand Side Response

ENTSO-E Recommendations on Market Design and Demand Side Response

To integrate 45% of electricity from Renewable Energy Sources (RES) by 2030, new thinking, methods and partnerships are required. In response to the challenges ahead, ENTSO-E is publishing two policy papers on Market Design and Demand Side Response.

Creating value for flexibility and capacity

The common thread between these interrelated papers are the implications of the growing contribution of RES for energy investments, secure operations, trading and consumer choice. The power system, the market and consumers need flexibility to maximise the benefits of RES within a competitive and integrated IEM. Meeting these challenges will require increased cooperation between policymakers and stakeholders.

For Market Design, a general principle should be that market participants are incentivised to contribute to solving system scarcities (such as capacity and flexibility issues) for which they are responsible. In the short-term, renewables should be fully integrated in the market and balancing prices should reflect full system costs. The current European electricity market values capacity and flexibility only indirectly, and we lack the required mechanisms to support the integration of large shares of RES in a way that optimises cost-competitiveness.

By setting the right incentives for market parties to be balanced during real-time operation, demand for flexibility will occur and traders, generators and customers will contribute better to system needs and to system security, at a reduced cost to end-consumers. This approach should be designed in order to allow cross-border participation to any mechanism, and should be complemented with appropriate hedging instruments.

Demand Side Response is a decisive part of market design, for which all industry stakeholders – particularly policymakers, distribution system operators and TSOs – need to cooperate more closely to establish and define clear rules, roles, and market approaches. DSR not only brings benefits to system security (through its contributions to balancing and congestion management) and market flexibility, but also empowers end-consumers to manage their own electricity usage and energy bills.

Demand-side participation will also enhance competition and liquidity in electricity markets, while optimising the utilisation of electricity grids. Implementing DSR will require a concerted effort to develop and deploy sound data management and DSR-friendly market products, planning and operational standards. This will be a growing focus of the distributors’ and the TSOs’ work.


Download the full ENTSO-E policy papers

ENTSO-E Market Design Policy Paper
ENTSO-E Demand Side Response Policy Paper