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Demand-side flexibility can be incentivised to reduce the need for investment in distribution grids either implicitly or explicitly. Implicit demand-side flexibility is when prosumers react to price signals triggered by network tariffs. Explicit demand-side flexibility is when the DSO can contract flexibility. In this paper, we focus on one contractual arrangement: mandatory curtailment by the DSO for a fixed level of compensation. We develop a long-term bi-level equilibrium model. The upper level (UL) is a regulated DSO deciding on the network investment and/or curtailing consumers for a fixed level of compensation. The lower level (LL) consists of consumers, which can be prosumers or passive consumers. Prosumers can invest in solar PV and battery systems. They react to the network tariffs and to the compensation provided by the DSO for curtailing them. The regulated DSO anticipates the reaction of the consumers when investing in the network and when setting the level of curtailment. Network tariffs are set to recover the network costs and the payments made to consumers that have been curtailed. We find that the economics of explicit demand-side flexibility in distribution grids are positive, and they are more positive when tariffs are cost-reflective. This implies that we cannot avoid redesigning tariffs by using explicit demand flexibility. We also find that setting an appropriate level of compensation is difficult in the presence of prosumers and passive consumers. A level of compensation that is high enough for passive consumers will be gamed by prosumers. ispartof: The economics of explicit demand-side flexibility in distribution grids: the case of mandatory curtailment for a fixed level of compensation status: published

This paper offers an overview of EUniversal H2020 project which aims to develop and demonstrate a replicable solution for the interaction of the DSO (through the UMEI - Universal Market Enabling Interface) with the new flexibility markets and services specified and developed within the project. The UMEI brings forward a universal, open, adaptable and modular approach to interlink active system management with electricity markets and foster the provision of flexibility services, also acknowledging the activation needs of DSOs and the coordination requirements with other commercial parties and TSOs. A set of market-oriented flexibility services from DERs will be implemented to answer DSOs’ needs in a cost-effective way, supporting the energy transition. EUniversal comprises 3 demonstration sites: Portugal, on the focusing demonstration of the UMEI concept and of new data driven network operation tools for the management of market driven flexibility services for LV and MV grids; Germany, addressing congestion management using market-driven flexibility via the UMEI in LV networks; Poland, focusing on grid observability and future networks supporting flexibility management via the UMEI. The interdisciplinary and complementary expertise of the project partners will allow to capture and cover different requirements and solutions and to maximise their impact and replicability across Europe. Lastly, the project will develop business models archetypes for flexibility mechanisms, perform a Cost Benefit Analysis and deliver a Roadmap with coherent set of key results to be exploited.

Bridging theory and practice, this book offers insights into how Europe has experienced the evolution of modern electricity markets from the end of the 1990s to the present day. It explores defining moments in the process, including the four waves of European legislative packages, landmark court cases, and the impact of climate strikes and marches. Leonardo Meeus explains the sequence of electricity markets in Europe from wholesale to balancing markets, forward transmission markets, capacity mechanisms, redispatching and flexibility markets. Chapters explore current issues including the new paradigm that places the citizen at the centre of the energy transition. Concluding that most of the market integration process in Europe so far has required horizontal coordination between transmission system operators in different countries, the book looks ahead to the importance of vertical coordination between the transmission and distribution. An invaluable book for energy policymakers and practitioners working in Europe, the solutions offered for contemporary issues will also be helpful for those working in international or multi-region electricity markets more widely. Academics involved in the world of electricity regulation will also find this an invigorating read. Contents: Introduction Part I – How to trade and transport electricity across national borders? 1. Why did we start with electricity markets in Europe? 2. Who gets the rights to trade across borders? 3. How to calculate border trade constraints? 4. Who pays for the network when trade is international? Part II – How to combine electricity trade with system security to keep the lights on? 5. Who is responsible for balancing the system? 6. How to organize system operation and connection requirements? 7. How to ensure adequate investment in power plants? Part III - How to put the citizen at the centre of the energy transition? 8. How to put the citizen at the centre of the energy transition? 9. Conclusion Index

QM-02-13-166-EN-C QM-02-13-166-EN-N Energy regulation and policy currently belong to the most important and developing areas in the European Union. THINK, the Florence School of Regulation’s think tank was running from June 2010 to May 2013. THINK advised the European Commission (DG Energy) on Energy Policy and presented policy options each semester. This booklet gives an overview of the THINK output published in the second half of the project and focuses on 6 topics: How to Refurbish All Buildings by 2050; Electricity Storage: How to Facilitate its Deployment and Operation in the EU; A new EU Energy Technology Policy towards 2050: Which Way to Go?; Cost Benefit Analysis in the Context of the Energy Infrastructure Package ; Shift, Not Drift: Towards Active Demand Response and Beyond; From Distribution Networks to Smart Distribution Systems: Rethinking the Regulation of European Electricity DSOs. The THINK project (2010-2013) was funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

QM-AI-11-002-EN-C (print)/QM-AI-11-002-EN-N (online) THINK Policy Briefs are abbreviated versions of THINK Reports. The EU is subscribing to the international trend of local governments becoming more involved in climate change policy-making and higher levels of government encouraging this trend. With the Covenant of Mayors, the EU has already been successful in voluntarily committing city authorities to reduce their CO2 emissions by at least 20% by 2020. The ambition of the Smart Cities Initiative is to speed up the transition towards local sustainable energy systems. A portfolio of smart cities that represents the population of European cities should be selected, consisting of cities with different energy fundamentals, a different political economy, and different institutional capacities. The cities in this portfolio need to be given the institutional flexibility (human and financial resources) to conceive and manage the implementation of concepts of city smartness, i.e. to lead by example (first level of city smartness: city as a public actor), to govern the actions by the private urban actors (second level of city smartness: city as a local policy maker), and to promote an integrated approach (third level of city smartness: city as a coordinator). To have an impact, the initiative needs to establish a strict performance reporting methodology (currently, city pioneer experiences are difficult to compare or replicate because of a lack of reporting, and pioneers that do report, use very different reporting methodologies), which would allow the creation of a good-practice forum or register. An EU level legislative initiative to require all cities to report about their progress or lack of progress is also recommended to further improve the impact of the initiative. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute