The arrival of the independent aggregator in the Spanish electricity system coincides with the existence of comparable demand aggregation experiences in other markets, although with different regulatory designs. The review of these models leaves a first constant: aggregation is an activity that can be carried out either by marketers with technology or by independent aggregator companies (Ai, for short) that can apply it.
These Ai, in turn, need a marketer to have previously purchased energy in the markets for the end customer. The aggregation of energy demand, whether carried out by a marketer or an Ai, has been developed mainly as a flexibility tool for the electricity system and participation in balancing services, not as a mechanism exclusively oriented towards retail commercial competition.
Another common guideline is that the deployment of aggregation has been largely supported by large consumers, flexible demand, storage, or distributed resources, with a more visible residential incorporation in some specific cases.
International experience also reflects that there is no single aggregation model, but rather different frameworks depending on the country, the system operator, and the applicable regulation.
What is being done in other countries?
- One of the most cited cases is Italy. The UVAM (Mixed Enabled Virtual Units) model promoted by Terna allows demand, generation, and storage to be aggregated to participate in balancing and flexibility services. Terna indicated in its disclosure information about this scheme the existence of more than 220 qualified UVAMs and around 1,280 MW. The coexistence and compensation model between the aggregator and the retailers is a free agreement between the parties.
- In the United Kingdom, a report by the British Parliament indicated that flexibility could reduce system costs by between £3 billion and £8 billion annually by 2050. However, the British design of the compensation mechanism for aggregators by retailers, for the energy they have available to operate from that which these have purchased, has proven to be a failure: instead of foreseeing a bilateral relationship between the aggregator and the retailer, the regulator opted to mutualize (socialize) part of the aggregator's costs among all retailers and, ultimately, among all consumers, whether they participate in flexibility or not. The cost of the scheme has grown rapidly, and the British regulator (Ofgem) is already processing, on an urgent basis, the reversal of the model, a rectification that is costly in terms of legal certainty and necessary to control energy bill inflation.
- France appears in European reports for the NEBEF mechanism, cited as one of the first frameworks that allow the participation of aggregated demand in electricity markets, and in the Netherlands, the USEF (Universal Smart Energy Framework) framework is cited in sectoral documentation as a reference in aggregation and flexibility design. The relationship between the aggregator and the retailer is based on a bilateral agreement, with compensation from the aggregator to the retailer that takes into account the price of energy in the day-ahead and futures markets.
- Reports from Eurelectric and ACER also place Belgium, Finland, and Germany among the advanced markets, with developments in flexibility and virtual power plants, while Ireland is linked in European analyses to aggregation and renewable integration. The aggregator-retailer relationship is a bilateral agreement with 100% compensation of the energy's value.
- Australia is distinguished by developments that retailers are implementing, linked to virtual power plants, with residential resources, especially homes with aggregated batteries, within programs linked to AEMO.
What lessons can be learned for Spain
The international comparison indicates that the development of this figure of the AI has been closely linked to regulatory design, the allocation of risks among agents (AI, marketers, and final customer), and the definition of the value that aggregation in general, and AI in particular, brings to the system.
Another constant is that existing models have been deployed with different degrees of maturity and without a single architecture, which reinforces the idea that comparative experience offers references, rather than a single replicable mold.
And it leaves a conclusion that runs through a good part of the cases: where aggregation, executed by a marketer or AI, has been developed, its role appears associated above all with flexibility and services to the electricity system in the balancing markets.
The British experience—the only known case in Europe that has implemented a mutualization of AI costs—also concentrates the most directly applicable lessons to the Spanish design:
- The entry of a new agent is only socially desirable if the AI brings net value to the system, in terms of resource efficiency and cost reduction for the final consumer, without hidden subsidies from other agents (retailers or customers) or socialization of its costs throughout the system in the tariff.
- The bilateral relationship between the retailer and the AI to agree on the financial transaction is necessary to compensate for the energy that the retailer previously acquires in the electricity markets. All models have in common 100% compensation that reflects the real cost of energy acquisition, without diminishing its value, something that has only been considered as a possibility in Spain. The retailer–AI relationship must be bilateral and settled through a financial transaction (k) equivalent to 100% of the energy on which it operates, in all scenarios. Dispensing with this bilaterality, as the British model did, leads to cross-subsidies, discriminatory and arbitrary between agents, distorted price signals, and a more expensive bill for all customers.
- Objective baseline for the calculation of AI activation, not declarative. The reference program (baseline) on which the AI operates must be set by an independent body based on standardized, auditable, and replicable methodologies, subject to continuous review and verification. A free declarative approach turns the baseline into a manipulable parameter.
- Level playing field for the innovating retailer. The retailer with aggregation technology must be able to operate flexibility services for its customers on equal terms with any AI. The British case shows what happens when this is not the case: the same unit of flexibility receives different price signals depending on who offers it, retailers are discouraged from developing their own offerings, and those who have invested in innovation are penalized. A basic principle of a healthy competitive market is that the same activity must have the same rules of the game for all agents.
How it is impacting the sector
Reports associate aggregation, regardless of who performs it, with three main functions: providing flexibility to the system, favoring the integration of renewables, and opening new avenues for demand and storage participation.
This is the predominant approach in both regulatory documentation and sectoral studies. Alongside these potential benefits, various sources also point to challenges associated with the design of compensation between AI and marketers, risk sharing, or regulatory barriers.
Another recurring idea in the documents consulted by Demócrata is that a good part of the value attributed to aggregation is linked more to system services and flexibility than to a direct translation to retail prices, although there is a savings incentive for the end customer indirectly on their bill, thanks to the efficiency that flexibility brings to the system, favoring the integration of renewables and optimizing grid investments: fewer km of cable (hardware) can be deployed with better software (digitally operated flexibility technologies).
To which clients are they targeting
The most frequent initial orientation of aggregation is towards large industrial and commercial consumers. In Italy, for example, the UVAM scheme appears linked to requirements that show this initial focus on aggregable loads of a certain size.
The reports also show, among the segments linked to aggregation:
- Storage.
- Self-consumption.
- Distributed resources.
- Energy communities.
- Residential customers with batteries or electric vehicles.
Australia appears precisely as one of the cases where the residential dimension is most visible. This sequence—first industry and larger-scale flexibility, then distributed resources and part of the domestic sphere—is the most repeated pattern.
In summary: six keys for the independent aggregator to work in Spain
From comparative experience, and very particularly from British trial and error, a clear roadmap for the Spanish design emerges:
- Do not lose sight of the objectives. The introduction of the Aggregator's figure must serve the purposes that justify it: more competition, more flexibility that brings firmness to the system and more competitive energy prices for the final customer, providing efficiency along with other agents, the marketers, who in some cases can provide aggregation technology on their own for the same purposes, and in others will not have the adequate technological level and there the bilateral relationship with the Aggregator generates a win-win.
- Net value of the aggregator. The Aggregator must provide net value to the electricity system; its entry cannot be sustained on cross-subsidies from other agents such as marketers, nor by transferring part of its costs to a common pool that ends up being passed on to all customers' tariffs. If the Aggregator demands subsidies to start its activity, these must be motivated, explicit, transparent, sustainable and limited in time to the exclusive cost of market development. It should be remembered that other new agents, such as the marketers of the free market at the time, did not demand or were granted any subsidy to break up markets of oligopolies or territorial quasi-monopolies.
- Bilateral, not mutualized relationship. The bilateral Aggregator-marketer relationship is the optimal design, as evidenced by the failure of the British mutualized model and its costly backtracking.
- Compensation for energy operated by the Aggregator not less than 100%. The compensation or financial transaction between the Aggregator and the marketer must not be less than 100% of the energy on which it operates, except by free agreement between the parties. There is no country analyzed where this is not the case, because the opposite would be arbitrary and discriminatory.
- Objective and verifiable baseline. The consumption baseline on which the Aggregator operates cannot be declarative: it must be objective, based on standardized methodologies and reviewable by an independent technical body, to make the benefits of the technology introduced by the Aggregator transparent.
- Do not discriminate against the innovative marketer. The marketer with aggregation technological capacity must be able to provide flexibility services to its clients on equal terms as any Aggregator, because the same activity would bring the same benefits and should have the same rules of the game.