Source - NC DR Proposal (ENTSO-E and EU DSO Entity, 2024)

Full title: EU DSO Entity and ENTSO-E Proposal for a Network Code on Demand Response, v1.0 Authors: ENTSO-E and the EU DSO Entity (joint proposal) Published: 8 May 2024 Status: Proposal submitted to ACER; not yet adopted as EU law. ACER issued its own recommendation (Source - ACER Recommendation 01-2025 on NC DR) in March 2025 with significant revisions. Raw file: raw/1_NCDR_DSO_ENTITY_ENTSO-E.pdf

Summary

The proposed Network Code on Demand Response (NC DR) is a 129-page draft EU regulation that would establish detailed, binding rules for how Demand Response, energy storage, distributed generation, and demand curtailment participate in electricity markets across the EU. It operationalizes the principles of the Clean Energy Package — particularly the Directive‘s Art. 32 (DSO flexibility procurement) and the Regulation‘s Art. 3 (equal footing for DR/storage/generation) — into concrete technical, procedural, and data exchange requirements.

The document is notable for containing two parallel options on several articles (labelled “DSO Entity Option” and “ENTSO-E Option”), reflecting unresolved governance disagreements between the authoring bodies.

Structure

The proposal is organized into 11 Titles with ~87 articles:

Key concepts introduced

New entity/role definitions

The NC DR introduces a precise vocabulary for flexibility market participation:

• Controllable Unit (CU): a single or ensemble of technical resources behind one metering point, commonly controlled. A “small CU” is under 25 kVA. This is the atomic building block.
• Service Provider (SP): a qualified market participant supplying local or balancing services from one or more SPUs/SPGs
• Service Providing Unit (SPU): a single CU or ensemble of CUs at the same connection point — the unit that participates in a market
• Service Providing Group (SPG): aggregation of CUs across multiple connection points within a scheduling area — enables Aggregation
• CU Operator: the party controlling CUs — can be the customer or a third party
• Flexible Customer: a customer contributing to service provision via a service provider
• Transfer of Energy Service Provider: handles energy reallocation between BRP portfolios when flexibility is activated

Flexibility Register

A central new infrastructure requirement: each Member State must establish a flexibility register — an information system with:

• A single common front-door (one entry point per country)
• CU modules (registration of individual controllable units)
• SP modules (service provider qualification data)
• API and graphical interfaces
• Data portability requirements (prevent vendor lock-in)
• eIDAS-compliant digital identification

The register is where all registration, qualification, prequalification, and grid prequalification data lives. It becomes the backbone of the flexibility market infrastructure.

Pathway to market participation

A multi-step process:

1. CU Registration → register controllable units in the flexibility register
2. SP Qualification → financial prerequisites, ICT capability, communication test
3. SPU/SPG Registration → define how CUs are grouped for market participation
4. Product Prequalification (for standard balancing products) or Product Verification (default for local services — ex-post verification, lower barrier)
5. Grid Prequalification → system operators verify that activation won’t compromise grid safety

Table of Equivalences

A national mechanism to enable cross-market participation: if an SPU/SPG is prequalified for one product, it may be automatically recognized for other products with equivalent or less stringent requirements. This supports value stacking — participating in multiple markets simultaneously.

Local services market design (Title IV)

This is the most directly relevant title for the wiki’s topic.

Market-based procurement is the default (Art. 47). Non-market solutions are permitted only if:

• The regulatory authority assesses market-based procurement as not economically efficient, or
• Conditions under Regulation 2019/943 Art. 13(3) or Directive 2019/944 Art. 32(1)/40(5) apply

Existing rules-based mechanisms (established before entry into force) are preserved. The regulator must re-evaluate non-market derogations at least every 2 years.

Procurement rules (Art. 49):

• Non-discriminatory, technology-neutral
• Single or aggregated resources (production, consumption, storage)
• Energy-only payments, capacity payments, or combinations
• When capacity is procured in advance, activation competes with voluntary bids

Flexible connection agreements (Art. 51): explicitly recognized in the regulation — customers may connect with agreements where part of capacity can be limited. Activation must not distort markets and must coordinate with local services markets. This is the EU-level recognition of mechanisms like Villkorade Avtal.

Local market operators (Art. 55–57) can be DSOs, TSOs, or third parties — must be neutral, with business separation from service providers.

TSO-DSO coordination (Title VII)

Detailed framework for multi-operator coordination:

• DSO Observability Areas (Art. 71): each DSO defines its area of grid visibility (own network + relevant parts of adjacent grids), reassessed every 2 years
• Congestion forecasting (Art. 72): multiple time horizons — DNDP, outage planning, day-ahead, intraday, near real-time
• Solving congestion (Art. 73): requesting operator initiates; solution must respect operational limits of all affected grids
• Temporary limits (Art. 74): system operators can set short-term constraints on service provision for grid safety
• System balance (Art. 77): imbalances from local service activation must be resolved; local service costs kept separate from balancing costs

Implementation timeline

Key milestones after entry into force:

Relevance to the wiki

This is the most operationally detailed EU-level document on flexibility yet. Key implications:

1. The flexibility register will be mandatory infrastructure — Sweden will need a national register (or adapt existing systems) with a single front door for all flexibility market participants
2. Flexible connection agreements (Art. 51) give EU-level recognition to the Villkorade Avtal concept, but require coordination with market-based procurement — this may shape how Swedish DSOs evolve their use of villkorade avtal
3. The prequalification pathway (CU → SP → SPU/SPG → product → grid) will standardize how aggregators and flexibility providers enter markets across Europe, replacing the current patchwork of national processes
4. Market-based procurement as default with 2-year reviews creates ongoing regulatory pressure on Swedish DSOs using rules-based approaches
5. TSO-DSO coordination requirements will formalize the relationship between Svenska kraftnät and Swedish DSOs on flexibility, including shared observability and congestion management
6. The Table of Equivalences will enable value stacking, which fundamentally changes the business case for flexibility providers — one prequalification, multiple revenue streams