The proposed Network Code on Electricity Balancing under consideration by the Agency for the Cooperation of Energy Regulators calls for the inclusion of demand-side resources in balancing activities, but leaves several key issues unaddressed. In Demand Response, Aggregation, and the Network Code for Electricity Balancing the Regulatory Assistance Project (RAP) makes recommendations designed to empower consumers to deliver valuable balancing resources and spur economic competitiveness.

“The Network Code represents a unique opportunity to deliver the benefits promised by the Internal Energy Market while facilitating power system decarbonisation at least-cost to consumers. But, this will happen only if it removes the barriers to participation by aggregated demand-side response,” cautioned Phil Baker, senior advisor at RAP and co-author of the policy brief. “Our recommendations will remove those barriers and ensure that the full potential of demand-side resources is available to participate in electricity markets.”

Chief among the recommendations is a consistent and well-defined approach to change across all Member States. As currently drafted, the Network Code defers decisions about the relationships between balancing responsible parties and balancing service providers to Member States—an omission which could lead to inconsistent application across Europe. In particular, RAP recommends that the Network Code allow balancing service providers to operate independently of balancing responsible parties.

Independence for balancing service providers is not sufficient. Additional detail is needed to define the financial settlement procedures between balancing service providers and electricity suppliers. The authors articulate three principles they believe would strengthen the final Network Code. These include an equitable outcome for both parties, terms that are as symmetrical as possible, and compensation to the supplier for their costs only, not ‘lost profit.’

Finally, electricity customers must be free to choose how they manage their energy consumption and with whom, if they choose to allow a third-party to manage their demand. While outside the scope of the Network Code, unbundling the functions of supplying energy and managing demand will be critical to success.

The Network Code includes a promising requirement to facilitate demand-side resources and aggregation participation in balancing markets. Implementing RAP’s recommendations will ensure that demand-side resources have the same access to balancing markets that traditional generation capacity currently enjoys, which can reduce costs.

The Network Code on Electricity Balancing, one of a suite of codes being developed to codify the operation of the integrated European electricity market (IEM),establishes a regulatory framework for cross border balancing markets, which can enhance security of supply and reduce costs.