Flipping the switch of the electricity market

In a time of geopolitical instability and skyrocketing energy prices, deploying long-term solutions for Europe to reach its energy security objectives escalated the EU political agenda.

Energy efficiency and demand-side flexibility are one good way of doing it. Strategically running appliances, especially the ones used to heat and cool our homes requiring the most energy, during off-peak hours could significantly reduce pressure on the entire electricity network. Following this logic, consumers should be able to receive price signals that allow them to adjust their daily consumption patterns to match non-peak hours. According to a study run by SmartEN, flexible consumption from energy demand sectors alone could slash consumer bills by 71 billion a year - a clear warning to not undervalue the role of consumers in light of the huge potential impact they play toward an efficient, clean electricity system.

To get there, “a market for demand-side management must be developed with opportunities for consumers to participate in it,” said Paolo Falcioni, APPLiA Director General. This can only happen through consumer engagement and proper rewards. “Incentives must be introduced to truly alter consumer habits,” he continued. Tariff reductions offer one possible solution to increasing demand-side flexibility by making it more affordable for consumers to shift their energy consumption to times when electricity is cheaper. The creation of such a market provides consumers with an opportunity to participate in the European Commission’s REPower EU Plan, which aims to transform Europe’s energy system. Introducing demand-side functionalities directly in the appliances is another viable route, amongst a wide range of solutions. Imagine a washing machine advising you on the most advantageous times to run the cycle. This way, consumers would be given the possibility to make a free, conscious choice and would be motivated to adopt a flexible demand side. 

In January, amid growing calls for action, the European Commission launched its public consultation on the reform of the EU’s electricity market design, aimed to address the shortcomings of the current crisis. Alongside, an EU-US Energy Security Task Force, of which APPLiA is an active member, was put in place to bring together best practices that could guide the creation of a market for demand-side management in Europe.