The European Union (EU) has committed to reducing CO₂ emissions by 55% by 2030, compared to 1990 levels. For this reason, it aims to increase electricity generation through renewable energy sources by 40%. Additionally, a growing electrification of energy consumption is expected, driven by the rise of electric vehicles, increased demand for air conditioning, and the conversion of thermal processes to electric ones, such as heating with heat pumps or industrial processes.

All of this is part of the response to the climate emergency, which is already evident on a global scale. However, until relatively recently, we have focused on just one part of this response: electricity generation. Today, however, the key role of two other components has become clear: electric grids and demand.

These two components are interrelated. Electric grids require a balance between demand and generation to ensure a reliable and high-quality supply. Moreover, the distributed nature of new generation sources—from our rooftops to small and medium-sized renewable plants across the territory—poses new challenges for even the most advanced grids.

This is where demand plays a crucial role, particularly demand flexibility. Why is this now making headlines when it has been discussed for some time? Because we now have a draft Royal Decree on the table that approves the General Regulation of Supply and Contracting, establishing the conditions for the commercialization, aggregation, and protection of electricity consumers. In other words, a law that will change how we consume energy and, most importantly, how we can benefit from our energy consumption.

Demand Flexibility: A Key Concept

Demand flexibility is the ability of customers to modify their consumption and generation patterns in response to external signals, representing a crucial element for achieving decarbonization goals.

However, the large-scale deployment of demand flexibility still faces many barriers, mainly due to delays in the implementation of European regulations by member states and the new design of energy markets.

The 2023 SmartEn study on flexible potential by 2030 estimates a total of 164 GW of available flexibility, with an activation (i.e., the use of that flexibility) of 390 TWh. This flexibility will help avoid a 61% curtailment of renewables, meaning we will make better use of the energy already produced, improving the economic return on these investments. It will also save €4.5 billion compared to a scenario without demand flexibility. Additionally, and with regard to grids, between €11 billion and €29 billion will be saved in the necessary investment for medium- and low-voltage distribution networks.

Demand Aggregators: A New Player in the Sector

For the energy transition to meet its objectives, and for us to achieve a 100% renewable-based energy system, it is essential that demand activates its flexibility, changes consumption patterns, and supports the system.

This is not new; the grid has always required flexibility and has requested (and compensated) it from generators. For example, when there is a network imbalance for any reason, the grid operator asks the generator to adjust its generation level and pays them for doing so, as it disrupts their planning. In 2023, €1.59 billion was generated from flexibility services on the power grid, monetizing 12,605 GWh of energy.

What is the big change? That now renewable generators are not able to adjust their generation. They cannot generate more than what the sun or wind allows, and generating less means curtailing renewables, which, as we have seen, is not a good solution. Therefore, demand flexibility must provide this service, ensuring grid stability while maximizing the use of renewable energy.

Incorporating this demand flexibility into the system poses an even greater challenge. We need to understand that, by shifting consumption, we need to have an impact on the grid equivalent to what a combined-cycle plant would achieve by adjusting its production. This is why it is necessary to group and coordinate a large number of consumers. A new market player, the demand aggregator, has been created for this purpose.

The aggregator is an intermediary between flexible consumers, energy markets, and power grids. They are responsible for forecasting when their customers can change their consumption, i.e., how much flexibility is available, offering it to the system, and, if necessary, managing it safely and efficiently to ensure consumption changes when required.

From the system's perspective, and given the disruption of integrating flexibility from many distributed resources, strict regulations have been established regarding who and how participation in these services can occur. However, neighboring countries have already shown that even domestic consumers can participate in aggregated flexibility services. For example, in France, 200,000 households are already participating with the flexibility of their thermostats in energy markets and receiving corresponding income. Therefore, this is a challenge we should not fear; it is technologically and regulatorily feasible, and our French, British, Belgian, and many other neighbors have proven that it poses no risk to the system or grids.

The Independent Aggregator and Its Implications

Since 2021, Spain has recognized the role of the aggregator, but only energy suppliers can act as such. Therefore, if I, as a consumer, want to participate, I must approach my energy supplier to see if they offer this service; otherwise, I cannot participate in the markets without changing suppliers.

The new draft General Regulation of Supply and Contracting sets the stage for this to change, as is already the case in most European countries and as required by the European Commission. The introduction of the independent aggregator will allow the separation of energy commercialization from flexibility commercialization, so that consumers can offer their flexibility to new companies focused solely on this aspect. Suppliers can continue to offer this service to their customers and others. This change will affect all of us but will open the market to greater competition, encouraging the monetization of our flexibility and transforming the energy system. Involving demand will accelerate the energy transition, placing the citizen at the center of the energy system.

Bamboo Energy has been offering a solution for four years to efficiently, scalably, and securely manage demand flexibility through independent aggregators and energy suppliers.