Catarina Araya Cardoso
University of Westminster, UK
In emerging and developing economies, there has been significant growth in renewable energy investments, but public policies designed to encourage new sources of system flexibility, such as demand response, are at a very early stage. Chile is a case in point. To enable the continuing expansion of renewable energy generation, Chile legislated in 2017 to allow demand response to participate in its newly created ancillary markets but this initiative has had limited results.
Drawing from a comparative policy review and analysis between Chile, and two countries with relatively mature demand response sectors, France, and the United Kingdom, this study identifies policy and regulatory initiatives that can help incentivise demand response deployment in Chile. In so doing, the study makes two contributions to the DR policy literature. First, it examines demand response in the context of an emerging economy with a liberalised electricity market. Second, whilst the literature tends to focus on the impact of individual policies, this study examines the mix of policies used to incentivize demand response.
The analysis carried out indicates that despite the relatively low capital investment costs of demand response deployment, it is important for Chile to identify the potential value of demand response for the electricity system so that a rationale for implementing the significant regulatory changes required for its deployment can be articulated. As previous studies have noted, allowing demand response to participate in individual electricity markets is not sufficient to develop the sector. Policy makers need to identify options for increasing the business case for demand response by providing multiple opportunities for generating income from demand side resources and supporting the participation of independent aggregators in electricity markets.
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