Red Eléctrica completes first demand response auction

Red Eléctrica completes first demand response auction
Supply and demand balance concept. Image: 123rf

The peninsular electricity system will now have a total of 497MW of demand response available from consumers and retailers who participated in the first active demand response auction, organised by Spanish system operator Red Eléctrica.

The auction’s bidders will undertake to reduce their consumption at specific times depending on the needs of the system to ensure a balance between generation and demand. The outcome of the auction will be applicable between 1 November 2022 to 31 October 2023.

The demand response auction was attended by retail traders and consumers with a demand of at least 1MW and participants in the wholesale electricity market, which excludes domestic consumers and small businesses, as established by law. In this first auction, a total of 16 participants submitted their bids online.

Successful bidders and demand response participants will be remunerated with €69.97 ($69.72) per megawatt-hour allocated for their availability over the course of the service (2,714 hours). The marginal price resulting from the auction is based on economic criteria, whereby the bids are ordered from the lowest to the highest until the system requirement is met.

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Criteria for applying the service

According to current legislation (Royal Decree-Law 17/2022), the service will be applied at specific times to ensure continuity of supply in situations when there is a lack of balancing energy that can be activated manually in the system, such as Replacement Reserve (RR) or tertiary control.

Bidders awarded the service agree to reduce their demand, after being requested to do so with at least a 15-minute notice, for a maximum period of three hours per day.

The service can only be activated from Monday to Friday from 8am to midnight, from October to March, and from 6pm to midnight, from April to September. The activation of the service will be remunerated at the then-current tertiary control price for the hour the service is requested.

Such active demand response service is a new tool that will provide extra flexibility for the operation of the electricity system at specific times when there is a lack of resources, and it is necessary to adjust the demand and balance it with generation.

The measure was approved in September by the Council of Ministers as part of the Spanish government’s Plan+Seguridad Energética (Energy Security Plan), in line with European recommendations to reduce overall electricity demand.

Countries such as France and Portugal, and recently the United Kingdom, have different demand-side reduction mechanisms similar to the Spanish one.