Development of Demand Side Response in liberalized electricity markets: Policies for effective market design in Europe

The European Commission (EC) has set forth an arduous task for sustainable, secure and affordable future energy supply via the climate and energy package objectives. Demand Side Response (DSR) is seen as the core concept of the emerging Smart Grids paradigm and key ingredient in market development, having potential to aid in achieving the targets for 2020. DSR is of increasing interest due to the evolution of intermittency in power systems. International experience illustrates development of DSR as a flexibility resource. This paper provides an overview of the development of controllable and price-based mechanisms utilized in the United States and Europe. Future application of demand side participation lays in the integration of aggregated small-user participation through a network representative, retailer or commercial aggregator. Ultimately, consumer engagement is the objective and DSR programs must be tailored to fit their needs.