Report: Demand response will see EU meet 40% of its 2020 energy targets

Despite slow adoption rates of demand-response measures in several member states, the service is on track to enable the EU to achieve 40% of its 2020 energy and carbon reduction targets.

That is according to a new report from consultancy Frost and Sullivan, which predicts the uptake of demand-response systems by utilities firms within the bloc will be “increasingly rapid” between 2018 and 2025.

The firm’s European Demand Response report, published earlier this week, concludes that the EU has the required infrastructure to implement enough customer-centric demand response programmes to help it cut energy use and greenhouse gas (GHG) emissions by 20% by 2020, against a 2005 baseline.

The study notes that utilities are “starting to perceive demand response as a useful resource rather than a complication”, despite evidence suggesting that that a lack of consumer awareness, combined with the absence of a universal, bloc-wide regulation framework, is slowing adoption rates.

It attributes the mindset shift of utility providers to recent innovation in the artificial intelligence (AI), Internet of Things (Iot) and big data fields, concluding that these technological advances are helping to make demand response “investable” for European consumers and utilities alike.

“As smart cities are mushrooming all over the region, demand-response systems with big data, predictive analytics, AI and the IoT will inevitably attract greater interest from utilities, aggregators, and other software companies,” report co-author Swagath Navin Manohar said.

“Meanwhile, in emerging markets, investments in cost allocations and tariff structures will drive the commercialisation of demand-response programmes, even beyond 2020.” 

Driving factors

The move away from petrol and diesel vehicles – as carmakers invest in EV production – is noted as a further contributing factor to the predicted expansion of demand-response systems, with the report claiming that EV infrastructure will account for 17% of appliances using demand-response by 2025.

Away from technology, the report claims that the growth of decentralised energy generation, coupled with policy and regulation reviews from EU Member States, will further spur the uptake of demand response as consumers move to source renewable energy and implement energy efficiency measures.

Indeed, it predicts that the value of the bloc’s demand response industry will rise from its current level of £680m ($0.9bn) to more than £2.6bn ($3.5bn) by 2025.

However, researchers from Frost and Sullivan found that advances were likely to be “highly concentrated” going forward, with the report claiming that the UK, Switzerland, France, Belgium and Finland were the only European nations providing the “most conducive framework” for further development of the systems.

The study additionally details several other challenges facing the uptake of demand response across the EU, including “inefficient” data handling mechanisms, a lack of support from consumers and the persistently high costs of infrastructure.

Finally, the report provides a list of recommendations which firms within the bloc can take to lower demand response costs, urging aggregators and utilities to work with IoT gateway providers, data analysts and consumers to “stay ahead of the competition”.

It also encourages utility providers to follow the example of companies such as E.ON, RWE and Actility in positioning themselves as energy partners rather than electricity providers in order to shift towards more customer-centric business models.

To find out more about demand response, you can download our edie Explains report by clicking here.

Sarah George

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