Assessing the Impacts of Demand-Side Flexibility on the Performance of the Europe-Wide Integrated Day-Ahead Electricity Market

Abstract

The ever-increasing integration of variable renewable energy sources in the European power systems has brought new challenges to the system operation. The uncontrollability and uncertainty of power production by these resources increases the need for flexibility in power systems to balance supply and demand continuously, while eliminating the curtailment of renewable energy in hours with excess renewable generation. Market integration acts as a solution to increase operational flexibility and facilitate the integration of variable renewable energy sources into the European power system. However, the limited power transfer capacity of the interconnections narrows the potential of market integration to provide adequate flexibility. The required flexibility can also be provided by active participation of demand-side resources in the electricity markets through demand response programs. Therefore, the European Union has already required the member states to remove the barriers of active participation of demand side resources such as demand response programs, alongside supply in wholesale and retail markets. In this regard, this study investigates the impact of different levels of demand-side flexibility in European countries on the market performance of a Europe-wide day-ahead electricity market with reference to five European test cases: Portugal, Sweden, Belgium, the Netherlands, and Denmark. A Europe-wide market scenario for 2030 is generated which models 34 European countries with stochastic scenarios for wind/solar generation and the electricity demand. Day-ahead market performance under different levels of demand-side flexibility is compared in terms of average market prices, generators' profit and cost to loads during 2030.