Europe: Flexible Demand Response Programs

Europe: Flexible Demand Response Programs

Demand response (DR) programs are still relatively new to electricity consumers in Vietnam. However, DR programs have been developed globally for a long time, with various flexible and practical implementation methods.

Spain: Customers Must Participate in Bidding to Experience Power Cuts

The focus of the demand response program in Spain is directed toward industrial electricity consumers with high consumption levels, such as steel, concrete, glass, and paper manufacturing companies…

To attract the participation of large customers, the Spanish authorities have implemented attractive measures and organized DR bidding. In 2015, the Spanish government provided 350 million euros in payments to customers who successfully participated in the bidding process. In 2019, the total amount of money generated by the DR program for electricity consumers in Spain was 319 million euros.

The bidding process is managed by the Red Eléctrica De España, under the supervision of the Spanish National Market and Competition Commission. During peak hours, two capacity reduction packages are offered: a 5 MW reduction package and a 90 MW reduction package. By providing these two capacity reduction levels, Spain attracts electricity-consuming customers to register for bidding, thereby increasing the program's effectiveness. Customers who meet the required capacity reduction levels and offer attractive bids are selected to participate in the demand response program under a contract with the electricity company. Customers receive a certain amount of financial support after successfully reducing their electricity consumption according to the contract requirements. For example, Alcoa, an aluminum production company, received 21 million euros for successfully bidding on a 400 MW capacity reduction in 2019.

The contracts for capacity reduction between the authorities and electricity consumers also have strict provisions regarding the responsibilities and rights of customers. If a customer fails to reduce their demand as agreed upon, they will be fined 120% of the contract value for the first violation, and if a second violation occurs, the customer will be permanently disqualified from participating in DR bidding.

In reality, in addition to the attractive bidding mechanism and financial benefits, Spain's success in attracting many customers to the DR program lies in effectively promoting the significance of demand reduction to customers. In promotional materials, Red Eléctrica emphasizes that the DR program is implemented to ensure the safety of the electricity system during abnormal high-demand periods or when supply cannot meet the increased demand due to weather conditions. In such situations, the DR program is an effective tool for the flexible operation of the electricity system with customer participation. Furthermore, the implementation of demand reduction is also driven by economic reasons by the Spanish authorities. Suppose the cost of implementing DR is lower than system upgrades and investments. In that case, deploying the DR program will contribute to controlling the production cost of electricity and preventing price increases. This is also a tangible benefit that electricity consumers receive from the DR program.

United Kingdom: The Impact of the "Economy 7" Program

In addition to demand response contracts targeting large customers in the manufacturing, commercial, and service sectors, the United Kingdom has successfully engaged and gained support from many residential electricity consumers through the "Economy 7" program. Under this program, customers can use electricity during a 7-hour off-peak period at a discount of 20-50% compared to daytime rates, resulting in cost savings. Each electricity company in different regions offers varying low rates and additional "golden hours" for customers. Typically, these hours range from midnight to 7:00 am or 1:00 am to 8:00 am, which are low-demand periods on the electricity grid. The implementation of the DR program helps efficiently manage the electricity system's load in the United Kingdom.

A prerequisite for successfully implementing the Economy 7 program is the modern infrastructure for electricity metering. Participants in Economy 7 will have a smart meter installed, capable of measuring and calculating electricity charges for two periods: the Economy 7 rate and the standard rate applied during the remaining hours of the day. Alongside the smart meter, a display device is installed in households, allowing residents to monitor their electricity consumption and make informed decisions on efficient and cost-saving usage.

Electricity companies provide specific instructions to households on effectively utilizing the "golden 7 hours." Various public media outlets in the United Kingdom offer a wealth of information and guidance, encouraging families to schedule high-capacity electrical appliances to operate during off-peak hours, such as washing machines, dishwashers, electric storage heaters, and electric vehicle chargers.

Following the success of the Economy 7 program, electricity companies in the United Kingdom have also introduced the "Economy 10" program, offering 10 hours of low-cost electricity consumption. Unlike Economy 7, which is limited to nighttime hours, Economy 10 provides flexible allocation of the "golden 10 hours" during both off-peak and daytime low-demand periods. Depending on their household habits and the functionality of their electrical appliances, residents have the flexibility to choose the DR program that suits them best.