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The demand-side flexibility in liberalised power market: A review of current market design and objectives

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  • Cabot, Clément
  • Villavicencio, Manuel

Abstract

The recent European energy crisis has underscored the need for improvements in the electricity market design, emphasising the necessity for enhanced liquidity, flexibility, and risk-hedging instruments. In addition, the ongoing transformation of power systems with more active participation from the demand-side requires revisions of rates and market designs. As a result, demand response (DR) schemes have started to be deployed over the past ten years in many jurisdictions. The objective of this study is to describe current trends and highlight key differences in DR programs to understand whether the most recent programs have achieved their primary objective of integrating consumers in electricity markets and whether DR has been effective in limiting the recent power crises in Europe. A comparative analysis of demand response (DR) programs is performed in different electricity markets: France, Germany, and the Pennsylvania-New Jersey-Maryland (PJM) Interconnection in the United States. Despite the acknowledged critical role of demand response in the future, a global approach to its integration in electricity markets is still lacking. This jeopardises the full potential of demand-side flexibility and prevents benefits for consumers and the grid. However, recent DR programs have also demonstrated their effectiveness during the 2021–2023 energy crisis, notably in France, despite the long-lasting operational and economic challenges. These findings underscore the importance of further research and policy development in this area.

Suggested Citation

  • Cabot, Clément & Villavicencio, Manuel, 2024. "The demand-side flexibility in liberalised power market: A review of current market design and objectives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 201(C).
    • Handle: RePEc:eee:rensus:v:201:y:2024:i:c:s1364032124003691
    DOI: 10.1016/j.rser.2024.114643
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