EU DSO Entity & ENTSO-E Consultation on the Draft Network Code on Demand Response

Key Messages

• A specific regulatory approach is needed to adapt to reflect the new reality in which the
role of DSOs is increasing significantly. The Network Code on Demand Response is key
to fill an existing gap in regulation and simultaneously it needs to be framed to
complement (and not overlap or infringe) existing legislation. Demand response is a
relatively untapped area that has been emerging, in part as a result of the rapid
development of distributed energy resources and two-way energy flows. This part of
the power sector is only partially covered by the current EU legislative framework and
this framework will need to change in the coming years. Regulatory certainty and
simplicity are key for market participants. We recommend a legislative analysis of the
existing network codes and guidelines (in particular the Demand Connection Code, CACM,
the Electricity Balancing Guidelines, and the System Operator Guidelines) and the
development of a clearer definition of what is in scope for this Code and what is under
the scope of other pieces of legislation. There should also be a better understanding of
the foundational elements to be tackled in this Code which are not already covered
elsewhere. This Network Code should be more focused on the local market and flexibility
services in its specific provisions, while identifying needed revisions topics under the
scope of other existing network codes.

• This Code must not exclude any resource provider as the main aim of the new rules shall
be to ensure access to all electricity markets for all resource providers (FG paragraph 4).
The current draft Code must include load, storage, and distributed generation
(aggregated or not), however, generation in particular is missing from the definitions and
key articles throughout the Code.

• Proper compensation must be ensured by setting in place appropriate frameworks.
When it comes to the aggregation models, we would stress that the priority order for
defining the exhaustive list of models should start with the balance responsibility, then
with the compensations for different incurred costs, and then finally the metering
architecture needed to measure the activations. The current draft does not make this
clear and may force a rearrangement of existing markets across Europe. And when it
comes to dispatch, freedom of dispatch must remain a key principle – any service
provided to a system operated must be compensated.

• Market-based procurement must be privileged by principle. We recognise that there are
situations where a system operator may need to rely on non-market-based procurement
to maintain system stability or where the market fails to deliver appropriate flexibility
services, however, we would stress that in the Code it should be explicitly stated that
market-based procurement should be the default form of procurement of flexibility
services where it is fit for purpose. In the case where non-market-based procurement
may need to apply, the procuring system operator should provide a justification to the
NRA.

• National Regulatory Authorities should have the final say when it comes to validating
methodologies or areas where system operators may have a conflict of interest. For
example, system operators should not be validating their own proposals on baselining
methodologies nor a proposal to co-own or outright own storage facilities where a
market analysis should be conducted. We think this decision-making power should be in
view of the wider goal of EU-level harmonisation, while recognising the different
maturities of the different markets of different Member States