With the transition of Europe’s energy system, the need for flexibility and in particular, local flexibility, is becoming increasingly important. The role of consumer-empowerment, the active participation of energy consumers in the energy markets, is moving into the foreground:
- improve services for consumers
- integrate more variable renewable energy sources
- enable the cost-effective uptake of electric vehicles
- relieve pressure on energy networks
The main prerequisite for all energy system/market stakeholders to reap these benefits is that the majority of energy consumers voluntarily subscribe to demand response programs, preferably both price-based and incentive-based programs and expose their demand flexibility to the energy grid and markets.
The rate of adoption of demand response programs throughout Europe is slow. These opportunities are mainly exploited by independent aggregators who recruit and aggregate large – typically industrial – energy loads and bid their flexibility in ancillary service markets.
Residential and tertiary buildings which represent the vast majority of buildings and are responsible for 44% of final energy consumption in Europe are currently not engaged in DR activities due to
- Smart energy metering (slow rollout, at different levels in EU member states)
- Automated communication between energy market actors and buildings: Extreme fragmentation of protocols, data models and standards for BEMs and B2G communications
- Currently only static ToU energy pricing schemes are deployed
- Very high cost for customer acquisition and interfacing with utilities for small DR customers
- DR programs can be intrusive for consumers and carry the risk of increased bills or inconvenience
- Risk aversion and potential benefits are not well-known
- Significant savings and reversal of automated control actions can curb fears
What motivated DRIMPAC consortium was that if these roadblocks are overcome, massive demand flexibility potential from distributed buildings can be unleashed. A quarter of consumers does not trust retailers to respect existing consumer protection regulation and ess than 30% of consumers trust them for energy management and they also feel a strong imbalance of power in their relationship with retailers. Energy retailers must strive to re-establish their relationships with energy consumers on the basis of trust through a consumer-centric strategy that will be implemented through the provision of innovative, digital services that promise – and deliver – better consumer experience at lower energy costs.
To achieve this transformation and materialise the benefits of demand response for the entire energy system, retailers will require three main elements:
- Technological foundation: the IT infrastructure for end-to-end interoperability among the systems of all involved actors, the BEMS & automation components. Technology solutions must be human-centric, always prioritising personal comfort and lifestyle preferences along with energy costs and energy system reliability in order to maintain the consumer engagement and prolonged participation in DR programs.
- Market push: innovative and value-adding propositions for the customers that build upon digital, smart services and devices to deliver truly engaging and rewarding experiences for consumers. Definition and implementation of innovative business models that transform retailers
- Energy consumer pull: convincing demonstration of these innovative propositions for creating an initial critical mass of early adopters, opinion leaders and credible success stories.