Manifesto for the development of demand flexibility in Spain

With the aim of reducing the national consumption of electricity in peak hours by 5% from December 1, Spain will have to find quick and effective solutions to comply with European legislation.

Although the objective seems ambitious and the deadlines very short, there is a solution to achieve it: open the Spanish market to the flexibility of demand.

This is what several players in the energy market, including us, are asking for. We have released a manifesto on September 22, 2022, which you can read below:

If you want to join the initiative and sign the manifesto, please contact us: contact@bambooenergy.tech

The process of ecological and energy transition in which we are immersed is essential to address the climate emergency, and we believe that it must be a key lever to build a fairer, more sustainable and lasting economic recovery over time.

The signatories of this manifesto consider that 1) the development of a legislative and procedural framework that facilitates the deployment of demand flexibility is a key element for a successful transition, in accordance with Directive (EU) 944/2019 on common rules for the internal electricity market and 2) it is urgent to incentivize the management of demand flexibility because it can contribute to reducing the costs of the energy system for all consumers. For this reason, we urge regulatory and government bodies to develop a National Demand Flexibility Strategy in Spain.

We understand demand flexibility as the ability of consumers to reduce, increase or shift their energy demand, by managing their consumption, generation or storage, during a given period of time. Traditionally, the flexibility of our electrical system has been provided by large generation plants or pumping plants. Currently, the flexibility of demand has the possibility of playing an important role in various aspects such as the integration of renewable and non-manageable generation, the modulation of market prices, the provision of reserves to the system or the solution of congestion in the networks, provided you get the right price signals and open up your participation in all markets[1].

In the first place, the development of the flexibility of aggregate demand is a key element to achieve the decarbonisation objectives of the electricity system set out in the PNIEC, as well as the revised objectives of the European Green Deal[2]. The increased share of renewable generation and the planned electrification of demand will require a greater volume of flexible resources to ensure the balance and security of the system in a sustainable manner. In this sense, the flexibility of demand and storage will be key elements. In fact, a study recently published by the International Energy Agency in which a scenario of zero emissions by 2050[3] is analyzed, argues that the volume of flexibility in the electrical system should be multiplied by 4. In addition, it identifies batteries and demand response as the main sources of flexibility, in turn replacing traditional sources such as coal, natural gas and oil.

Second, spot market prices increased in the last quarter of 2021 by more than 400% compared to the same quarter of 2020. This reality of high prices has been aggravated by the current war situation in Ukraine, resulting in prices spot market records never seen before, above €500/MWh. This price crisis has notably increased[4] the electricity costs of consumers, especially those exposed to the spot market, leading to production stops in the industrial sector[5] and affecting the economy of Spanish families. Given this scenario, the flexibility of demand, especially aggregate demand, becomes more relevant than ever as a tool to help reduce the energy cost of consumers in three different ways: 1) allowing manageable demand to be adjusted to the hours with the most generation renewable energy and more competitive prices, 2) adding value in the wholesale market, participating in balancing services but also fully in all electricity markets[6] and 3) moderating price volatility in the day-ahead market[7] .

Thirdly, the high price of electricity is aggravating the effects derived from the covid-19 economic crisis on the competitiveness of the Spanish economy. The development of demand flexibility not only contributes to improving energy costs borne by all consumers, but can also generate a positive impact on the economy and job creation. The same Strategic Plan for Flexibility to 2050[8] of the United Kingdom published in 2021, calculates that the domestic market for the development of intelligent systems and flexibility solutions in 2050 will have a weight of more than £1.3 billion per year in the national GDP and will create more than 10,000 jobs.

Finally, it is important to highlight that the European Commission has sent a formal letter[9] to Spain for its delay in communicating the transposition of Directive (EU) 2019/944, on common rules for the internal electricity market. The deadline to incorporate this Directive into national law ended on December 31, 2020, but to date Spain has only partially transposed the Directive, opening the balance markets to demand by participating only through a marketer.

It is for all these reasons that the signatories of this document urge the regulatory bodies and agents involved in the Spanish electricity sector to accelerate the necessary changes that allow, and encourage, the development of demand flexibility in accordance with the European regulatory framework. derived from the Clean Energy Package, developing a strategic and incentive framework to be able to face the aforementioned challenges. In this sense, we urge the regulatory and government bodies to develop a National Demand Flexibility Strategy, which defines the current state of the sector, including an evaluation of its potential, the challenges it faces, the objectives to be they should achieve, as well as a specific action plan that offers a clear signal to the sector to help achieve them.

We are at the right time to raise this ambition. The National Recovery, Transformation and Resilience Plan and the new Save Gas for a safe winter plan[10] offer an ideal framework to accelerate the development of demand flexibility and incorporate this resource as a key element of the Spanish electricity system, favoring the participation of all consumers, as well as new actors in the energy transition such as the Independent Aggregator and the Energy Communities.

Contact us if you want have questions on the points described in this Manifesto.