New electricity market design – enough to develop demand side markets?

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The desire to promote a more engaged and active demand side to European energy markets is an objective that is widely shared by politicians, regulators and many within the industry. The launch of the European Commission’s energy “summer package” and its consultation on market design is another proof of this engagement.

However, no policy measures have hitherto proved effective in delivering the desired changes in consumer behaviour and market outcomes. Moreover, despite the emergence of many businesses offering consumer facing products and services, their voice in policy debates is often lost against the clear and sophisticated messaging of incumbent industry players.

These slides review the extent of the challenge and why it has been difficult for a coherent voice to emerge from new industry players; they also present some initial thoughts on the future policy agenda. Notably:

  • Promoting the development of demand side markets is a key challenge for policy makers and they need to set ambitious goals.
  • There is a difference between engaging the proportion of consumers that is price responsive and engaging a wide spectrum of consumers.
  • Both are important and neither will be easy – we need a policy agenda that delivers the ‘low hanging fruit’ of price responsive consumers along with the long term transformation of the market that embraces a wide spectrum of consumers.

There will be a role for:

  • The EU in setting a framework of targets, standards and integrated market design.
  • National governments in defining the approach of regulators and setting obligations on licensed players.

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