Which electricity market design to encourage the development of demand response?
10th Conference on Applied Infrastructure Research, Berlin University of Technology, 7th et 8th October 2011.
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 regulatory models are considered, ranging from a regulated business to a competitive model.
In this paper we focus on demand response and smart metering for mid-size and small consumers and we investigate which types of market signals should be sent to demand manager to see demand response emerge as a competitive business.
Using data from the French power system over the last 8 years, we compare the possible market design solutions to allow demand response to develop.
Our simulations demonstrate that with the current market arrangements, demand response is not profitable. Introducing a capacity remuneration could bring additional revenues to demand response providers and increase incentives to put in place demand response programs.
