Europex & All NEMO Committee response to EU DSO & ENTSO-E public consultation on the Network Code for Demand Response

Europex and the All NEMO Committee welcome the opportunity to provide feedback to the EU DSO & ENTSO-E public consultation on the new Network Code for Demand Response (NC DR). We strongly support a swift increase of the flexibility of the electricity system, in line with the 2030 objective of “doubling flexibility” as stipulated in the EEA/ACER Report on Flexibility solutions to support a decarbonised and secure EU electricity system of September 2023.

To this end, the new Network Code should enable equal, non-discriminatory and transparent access to flexibility assets in wholesale electricity markets which provide the most reliable price signals for the activation, integration and remuneration of flexibility resources. Yet, as the new Network Code introduces an additional layer of regulatory, organisational and technical complexity, the impact of these new rules on the well-functioning, the liquidity and the integration of wholesale electricity markets should be properly assessed.

In our response to the consultation, we emphasise that the new Network Code should be more ambitious in fostering market-based flexibility procurement in comparison to the status quo and existing regulation. However, as the current draft fails to do so, it is questionable if and how the new Network Code will improve the framework provided by the Clean Energy for all Europeans package (CEP) which is not yet fully implemented across the EU, four years after its entry into force in 2019.

In addition, we believe that the present draft fails to properly recognise the role of Power Exchanges, Delegated Operators and NEMOs in organising trading across all timeframes, and within and between bidding zones, therefore allowing the procurement of flexibility resources through, e.g., local flexibility markets, including in a cross-border manner. When developing local flexibility markets, third parties remain the most efficient option to assure neutrality and transparency in Member States with multiple system operators (i.e., TSOs and DSOs).

Furthermore, we have identified several discrepancies between the ACER Framework Guidelines (FGs) and the EU DSO Entity & ENTSO-E draft of the new Network Code. For example, the market- based definition of flexibility procurement and the safeguarding of security of supply, two key concepts explicitly mentioned in the FGs, have not been taken up in the current draft text. Furthermore, the consulted text fails to ensure a pan-European approach to the development of flexibility while avoiding market fragmentation.

Finally, it remains unclear to us how exactly the new Network Code will take into account possible new flexibility rules that are currently discussed in the Electricity Market Design (EMD) review. In particular, a proper impact assessment should be conducted on the possible introduction of peak shaving products, an unnecessary and counterproductive instrument for the development of additional flexibility. We firmly believe that peak shaving products, if implemented, are detrimental to the well-functioning of electricity markets as they would directly impede the participation of flexibility resources in the wholesale market when needed most (i.e., during peak hours). Any such assessment should naturally involve relevant stakeholders.

Please find our responses to selected questions attached.