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Demand response is defined as an action intended to temporarily reduce, in response to a one-time request sent to one or more consumers by a demand response operator or electricity supplier, the electricity effectively withdrawn from the public transmission or distribution network at one or more consumption sites, relative to a consumption plan or consumption estimate (article L 271-1 of the energy code).

Market players can use demand response to optimise their own portfolios or to sell energy directly to other users or to RTE. There are two main categories of demand response that contribute to the supply-demand balance:

  • Industrial demand response, when consumption is reduced at one or more industrial sites (either by shutting down processes or by switching over to own consumption). This type of demand response can be proposed either directly by the industrial user or through an aggregator or supplier.
  • Distributed demand response, or the aggregation through an aggregator or supplier of individual demand response actions involving smaller volumes, all carried out at the same time by residential or professional customers.

Demand response is remunerated through a variety of mechanisms


France was the first country in Europe to open all parts of its national market to all consumers, including those connected to the distribution networks:

  • Since 2003, it has been possible to offer industrial demand response on the balancing mechanism.
  • Since 2008, RTE has been contracting with BRPs for demand response capacity to guarantee the availability of their capacity to the balancing mechanism.
  • Since 2011, RTE has been contracting demand response capacity that can be activated on very short notice for the mFRR (manual frequency restoration reserves). In 2019, demand response capacity made up half of the mFRR.
  • Since January 2014, it has been possible to sell demand response energy directly on energy markets through the NEBEF mechanism.
  • Since July 2014, industrial customers have been able to participate in frequency ancillary services by offering demand response (1 MW minimum). These reserves, which can be automatically activated in timeframes ranging from a few seconds to a few minutes, are critical to keeping supply and demand balanced. Previously, only generation facilities could participate. In 2019, demand response capacity contributed 10% of the frequency containment reserve.
  • In 2018, demand response tenders became a support mechanism for the demand response sector. Organised by the Ministry of Energy, the tenders encourage the development of demand response capacity to meet the targets set forth in the Multiannual Energy Programme.

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Demand response tenders in 2019

For the third demand response tender organised since the mechanism was overhauled, the volume selected was 31% (770 MW) higher than a year earlier. This increase was particularly noteworthy since participation criteria were tightened: load reductions achieved by switching to self-generation (diesel) are no longer eligible. All of the demand response capacity selected in 2020 was thus 100% “green”. For the second year in a row, “green” demand response volumes surged, with increases of 34% between 2018 and 2019 and 43% between 2019 and 2020. Over two years, even as self-generation (diesel) was gradually excluded from the tender process, “green” demand response volumes accepted doubled.

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Demand response on the balancing mechanism


The average demand response volume offered on the balancing mechanism was 878 MW, higher than the average for 2018 (727 MW).
A total of 7.6 GWh of demand response was activated, down from 22.3 GWh in 2018. The fact is that most demand response has a capacity value, meaning it as a high price and is activated in real time by RTE in times of significant stress on the power system, notably during cold spells. In 2019, there were fewer instances where the price of the last offers activated on the balancing mechanism matched or exceeded the high price of the demand response capacity offered.

 

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The NEBEF mechanism


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The NEBEF mechanism (Demand Response Block Exchange Notification) allows market actors to realise value on demand response directly through the market. They inform RTE of the demand response they plan to activate the next day and can now re-declare schedules at the intraday scale. RTE verifies afterward that actual volumes correspond to the schedules submitted by participants.
As of today, 21 demand response operators have contracts with RTE to participate in the mechanism.

Demand response volumes selected through the NEBEF mechanism reached 22.2 GWh in 2019, in line with 2018. Distributed demand response accounted for the lion’s share of volumes exchanged via the NEBEF. Instances of significant demand response volumes being activated were concentrated in the last quarter.

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