A new policy brief by the Regulatory Assistance Project (RAP) reinforces the need for a regional approach to resource adequacy and highlights the importance of demand-side resources in meeting Europe’s clean energy targets reliably and efficiently. Resource Adequacy, Regionalisation, and Demand Response examines several recent resource adequacy assessments and evaluates the potential contribution of low-cost demand-side resources.

Utilizing data from several sources including the latest Scenario Outlook & Adequacy Forecast from ENTSO-e, Europe’s association of power system operators, RAP demonstrates that Europe as a whole maintains a generation capacity surplus through 2025, though some Member States are forecast to develop capacity deficits. This suggests that a broader regional approach to resource adequacy—where available resources are shared across national borders—would reduce investment needs, lowering the cost of national reliability mechanisms and supporting the orderly retirement of aging, high-emissions plants.

A regional approach to resource adequacy is only one piece of the puzzle however—demand response resources must also play a key role.

“Many European countries don’t even consider demand-side resources when assessing resource adequacy,” said Phil Baker, senior advisor at RAP and author of the brief. “Those that do, assume no more than around four percent of peak demand will be met by demand response, even though studies suggest that it could account for as much as 14 percent.” 

When reasonable assumptions about demand response are factored in, the Member State capacity deficits in 2025 are eliminated or greatly reduced. For example, Germany could go from a capacity deficit of 8.2 GW to a surplus of 0.8 GW by exploiting the potential of demand response resources. RAP recommends that policymakers recognize and capture the reliability and economic potential of more active demand response resources, which represent a competitive and operationally robust alternative to supply side resources.

RAP also sees a key role for demand response in managing the intermittency of renewable resources built to meet Europe’s low-carbon goals. As the share of renewable supply grows, the remaining “residual demand” (the portion not met by renewable power) will become increasingly variable, with higher change rates and an increased risk of curtailment. Demand-side resources are cost-effective, can be nearly instantaneous, and are readily available to meet the flexibility requirements presented by the growing fleet of renewable generators.

“In the face of the global Paris Agreement and Europe’s own low-carbon goals, it is ever-more important to deliver practical solutions to the challenges of high-renewables power grids,” said Richard Cowart, European programme director. “European utilities can enhance reliability and lower costs by recognizing all of the power assets already in place in nearby systems, and by making much greater use of the flexible demand in their own backyards.”

Contact: Sarah Keay-Bright