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The role of DSR in the energy transformation

To ensure them, sufficient power reserves are necessary to maintain energy supplies, even in the event of failure of one or several key parts of the energy system: power plants or transmission lines. In the conditions of progressing transformation: closing obsolete power plants, variable generation of renewable energy sources, with a simultaneous growing demand, it is extremely important to ensure adequate power resources in a cost-effective and possibly environmentally friendly manner. The previously functioning single-commodity energy market has often turned out to be insufficient. Therefore, in many countries, so-called capacity mechanisms have started to be introduced, which are to additionally support (at least in a transitional period) ensuring sufficient reserves of power.


In 2016, the European Commission (EC) examined various capacity mechanisms operating in the Member States and issued a report with recommendations and guidelines regarding these mechanisms. This report emphasizes that it is extremely important to use audience flexibility. The European Commission recommended adjusting the capacity mechanisms to a given market: capacity market for markets with long-term structural deficits of capacity reserves (such as in Poland) and the mechanism of strategic reserves - markets where capacity reserves deficits are short-term.


Both the capacity market and strategic reserves should be a technologically neutral mechanism, taking into account not only production capacities. On the capacity market, the possibility of using the flexibility of energy consumption by consumers should be treated at least in the same way as generators.


Effective operation of the capacity market is possible, inter alia, thanks to the participation of power providers when the grid operator is called (i.e. demand side response - DSR programs). Taking into account that this is a relatively new technology, and at the same time very effective and environmentally friendly, the European Commission allows for the possibility of additional preferences for the development of DSR programs.


This mechanism may be more effective than the use of high energy prices in the event of an under-energy supply. It is worth recalling the situation of the lack of electricity and gas supply in the United States in Texas in 2021. High energy prices at the time of the deficit led to the bankruptcy of many companies selling energy.


In addition, the accumulation of simultaneous peak demand for electricity and gas caused a gas deficit for electricity generation. It should be remembered that the United States is the largest gas producer in the world, and Texas is the state with the highest production in the country.


In December 2017, the act on the capacity market was adopted in Poland, based on, inter alia, on the experiences of the United States or Great Britain. The act allows both entities on the receiving side (aggregators, final recipients) and energy producers to participate in auctions. It was a big step to turn passive buyers into active market participants. In 2021, several hundred customers already participated in the capacity market, most of them participating in the program through the Enel X aggregator, which is leading on the Polish market.


In March 2019, Tempus Energy challenged the decision of the European Commission allowing Poland to introduce the capacity market as a permitted form of public aid. However, Tempus's complaint did not contain any constructive mechanism that could replace the use of DSR in the capacity market. For this reason, Enel X Polska supported the European Commission in this dispute, along with the Polish government, PGE and Enspirion.


On October 6, 2021, the Court of the European Union dismissed the complaint of Tempus Energy against the decision of the European Commission. A month earlier, a similar complaint was dismissed concerning the decision of the European Commission regarding the consent to the operation of the capacity market in Great Britain.


The regulations of the Polish capacity market are not perfect, it is still necessary to work on their improvement and implementation of other solutions allowing to reward customers for their flexibility in energy consumption - including, in particular, access of DSR services to short-term energy markets by aggregators offering the ability to reduce demand in high conditions. energy prices. Such voluntary actions of consumers (even without the consent of basic energy suppliers) ensuring cost optimization on the energy market would be an important supplement to the capacity market. This market is to provide long-term strategic reserves, but should not directly affect the functioning of the energy market as long as the power deficits do not reach the values ​​critical for the proper functioning of the power system.


In this regard, Enel X tries to propose improvements to the functioning mechanisms and new forms of using DSR based on solutions proven in many countries around the world. The European Commission, in its recent recommendations on energy efficiency, also postulates a much wider use of DSR, not only in terms of production capacity reserves, but in the entire energy production and use chain, i.e. from generation, through supplies, consumption or energy storage.