Romania is the first country in the EU to introduce a mechanism through which participants in the energy market can be paid for reducing consumption during certain time intervals, according to the president of ANRE, George-Sergiu Niculescu.
The measure could contribute to reducing prices during periods when energy is very expensive and could also be used in the current period of pressure on the energy system.
How it works
The consumption flexibility mechanism allows energy market participants to reduce their demand during certain intervals when prices are high. This way, market pressure can decrease, and the energy price can be lower.
"I want to tell you from the beginning that Romania is the first country in the European Union to adopt such a mechanism, and that is why we had to have in-depth discussions both with the representatives of the European Commission, because we are talking about an interconnected energy market, and also with the other regulatory authorities within ACER, so at the European level," stated George-Sergiu Niculescu, on Digi24.
In short, the idea is: instead of Romania always trying to produce more energy when consumption spikes, it can pay consumers who agree to consume less exactly in those moments.
A simple example
Let's assume that tomorrow, between 7:00 PM and 8:00 PM, energy consumption is very high.
Normally:
- everyone consumes as needed;
- producers must meet the demand;
- if the available energy is insufficient, more expensive sources come into play;
- the energy price can increase significantly.
Through the new mechanism, a large consumer - for example, a factory - can say:
"Between 7:00 PM and 8:00 PM, I reduce my consumption by 5 MW. But I want to be paid for it."
Transelectrica determines that it needs, let's say, 100 MW less in that interval.
Several companies come with offers:
- Company A: reduces 20 MW for 100 lei/MWh
- Company B: reduces 30 MW for 150 lei/MWh
- Company C: reduces 50 MW for 200 lei/MWh
Transelectrica selects them in order of price, starting with the cheapest offer.
"There will be quantities of energy proposed to be reduced by Transelectrica, and market participants who commit to this must come and justify the cost of this reduction. Depending on an increasing order, they will be selected by Transelectrica, meaning payment will start with the lowest price for the reduced amount of energy," stated the head of ANRE.
Why would the energy price decrease?
Here is the important part. If at a certain moment we have: high demand + limited supply = very expensive energy, then reducing demand can avoid the need to buy very expensive energy.
For example, if without the mechanism the market would need an additional quantity of energy produced at a very high cost, reducing consumption can eliminate that need.
Thus, the mechanism can have an effect on the market price, not only on the consumer who receives money.
Who can do this
First and foremost, the mechanism is designed for energy market participants, especially consumers who can temporarily control and reduce consumption.
For example:
- factories;
- shopping centers;
- large buildings;
- industrial installations;
- other large consumers who can shift certain activities to another interval.
It doesn't mean that a Romanian has to turn off the lights at home and then wait for money from the state.
But what about residential consumers?
Here things are a bit different. ANRE says that the regulation already allows suppliers to offer residential consumers tariffs that encourage them to shift their consumption.
For example, instead of starting the washing machine at 7:30 PM, when energy is expensive, you can schedule it for 11:00 PM when energy is cheaper.
"With residential consumers and final residential customers, already, at the regulatory authority level, we have noticed that there are more suppliers (...) through which residential consumers, final customers, are encouraged to shift their consumption in such a way as to benefit from better prices," said Niculescu.
However, this requires a smart meter, as the supplier needs to know how much you consumed and at what time.
"The only obstacle is the technological one, meaning they need an intelligent consumption monitoring system, a smart meter," stated the president of ANRE.
Where does the money come from?
Important: it is not simply about a bonus granted by the state to all those who consume less.
Participants will make offers for how much they are willing to reduce consumption and at what price. Transelectrica will organize the auctions and select the offers based on price.
"At the moment, such a mechanism, through the fact that certain consumers can reduce their electricity demand in exchange for a tariff, I believe it will be an element that they will access in this period," stated Niculescu.
Although the general regulatory framework has been adopted, the mechanism cannot be used immediately. Transelectrica must develop the procedure for organizing the auctions.
"Transelectrica must establish a procedure. We have created the general regulatory framework, and those at Transelectrica must establish the procedure for this auction mechanism and, subsequently, this mechanism will be available," explained George-Sergiu Niculescu.
Is there a risk?
Yes. The mechanism must be built in such a way that real consumption reductions are paid for, not fictitious reductions or reductions that would have occurred anyway.
Therefore, hourly measurement and smart meters are important.
ANRE is discussing with distribution operators to accelerate the installation of smart meters. Niculescu stated that the Ministry of Energy is preparing, through the Modernization Fund, financing for distribution operators for such equipment.