New network code on demand response will further advance the energy transition
What is it about?
On 7 March 2025, ACER submitted its proposal for a new EU-wide network code on demand response to the European Commission. This is the result of close collaboration with network operators and extensive consultation.
What is demand response?
Demand response is when consumers (retail and industrial) intentionally adjust their electricity consumption in response to a change in the electricity market price or a financial incentive to increase/decrease/shift the timing of their electricity consumption. This can be done for the purpose of balancing supply and demand or for solving congestion in the grid. For example, retail consumers can provide balancing services through bi-directional charging of their electric vehicles (EVs). Demand response development will enable lowering electricity supply costs (which are a key driver of electricity bills).
Demand response in electricity markets is increasingly important to support more variable renewable generation such as wind and solar (with variable output that must be balanced), being added to the power grid.
Why does this network code matter?
This network code will ensure that demand response resources (such as consumers, storage providers, and distributed generation) can fully participate in wholesale electricity markets, providing much needed flexibility to an evolving power system driven by renewable energy and thereby contributing to energy security and the transition to clean energy.
To achieve this, the network code and the related amendments to existing regulations (balancing, system operation, and demand connection) cover four main areas:
Market access: The new EU-wide rules will make it easier for smaller energy players to participate in electricity markets. A new European registry will standardise how demand response is measured, ensuring fairness and consistency.
Service provider qualification process: New measures will make it easier for all resources to provide services to system operators, with simpler prequalification, product verification, and a national system for managing participation.
Procurement processes: Clear rules will ensure that system operator services (such as congestion management and voltage control) are procured transparently and efficiently, with any exceptions to market-based methods requiring justification. Guidelines will also prevent distortions between different electricity markets.
System operators’ coordination: Stronger collaboration between distribution and transmission system operators will help integrate more renewables, address congestion and voltage control issues, and prevent system disruptions. Clear rules will ensure that actions in one part of the system do not create problems elsewhere.
The process
In May 2024, ACER received the electricity system operators’ (EU DSO Entity and ENTSO-E) proposal for the draft network code, including the amendments to the three related electricity regulations. ACER revised the draft and consulted on it in autumn 2024. After making final amendments, ACER now submitted its proposal to the European Commission.
What are the next steps?
The Commission will review the proposal and initiate the process of establishing the Demand Response (DR) Regulation and amending the three related regulations. Once adopted by Member States, these will become legally binding across the EU.
Get involved!
ACER will hold a webinar on 27 March 2025 to present its proposal for the network code on demand response, along with amendments to the three related electricity regulations. Register for free here.