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FLEXIBLE DEMAND for ELECTRICITY and POWER Barriers and Opportunities

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FLEXIBLE DEMAND FOR ELECTRICITY AND POWER Barriers and opportunities Flexible demand for electricity and power Barriers and opportunities TemaNord 2017:567 Flexible demand for electricity and power Barriers and opportunities ISBN 978-92-893-5259-8 (PRINT) ISBN 978-92-893-5260-4 (PDF) ISBN 978-92-893-5261-1 (EPUB) http://dx.doi.org/10.6027/TN2017-567 TemaNord 2017:567 ISSN 0908-6692 Standard: PDF/UA-1 ISO 14289-1 © Nordic Council of Ministers 2017 Cover photo: unsplash.com Print: Rosendahls Printed in Denmark Disclaimer This publication was funded by the Nordic Council of Ministers. However, the content does not necessarily reflect the Nordic Council of Ministers’ views, opinions, attitudes or recommendations. Rights and permissions This work is made available under the Creative Commons Attribution 4.0 International license (CC BY 4.0) https://creativecommons.org/licenses/by/4.0 Translations: If you translate this work, please include the following disclaimer: This translation was not pro- duced by the Nordic Council of Ministers and should not be construed as official. The Nordic Council of Ministers cannot be held responsible for the translation or any errors in it. Adaptations: If you adapt this work, please include the following disclaimer along with the attribution: This is an adaptation of an original work by the Nordic Council of Ministers. Responsibility for the views and opinions expressed in the adaptation rests solely with its author(s). The views and opinions in this adaptation have not been approved by the Nordic Council of Ministers. Third-party content: The Nordic Council of Ministers does not necessarily own every single part of this work. 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Photo rights (further permission required for reuse) Any queries regarding rights and licences should be addressed to: Nordic Council of Ministers/Publication Unit Ved Stranden 18 DK-1061 Copenhagen K Denmark Phone +45 3396 0200 [email protected] Nordic co-operation Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland and Åland. Nordic co-operation has firm traditions in politics, economics and culture and plays an important role in European and international forums. The Nordic community strives for a strong Nordic Region in a strong Europe. Nordic co-operation promotes regional interests and values in a global world. The values shared by the Nordic countries help make the region one of the most innovative and competitive in the world. The Nordic Council of Ministers Nordens Hus Ved Stranden 18 DK-1061 Copenhagen K, Denmark Tel.: +45 3396 0200 www.norden.org Download Nordic publications at www.norden.org/nordpub Contents Preface ...................................................................................................................................... 7 Executive summary .................................................................................................................. 9 Introduction ............................................................................................................................ 17 1. The literature .....................................................................................................................19 1.1 Options: Reduced base load demand, load shifting, load shedding .........................19 1.2 Potential and net benefit......................................................................................... 21 1.3 Barriers to demand side flexibility ........................................................................... 35 1.4 The price elasticity and influence of smart metering ................................................39 1.5 Key findings from the literature .............................................................................. 45 2. Options in residential space heating .................................................................................. 47 2.1 Factors determining the efficient use of heat capacity in buildings for load shifting purposes ................................................................................................................. 47 2.2 Potential in the short and long run ......................................................................... 49 3. Impacts of removing barriers to demand side flexibility ...................................................... 53 3.1 Existing barriers ...................................................................................................... 53 3.2 Pros and cons of removing existing barriers ............................................................ 54 3.3 Benefits of removing barriers ................................................................................. 60 4. The existing potential and value of demand side flexibility .................................................61 4.1 The economic potential for demand side flexibility ..................................................61 4.2 Benefits of demand side flexibility .......................................................................... 62 4.3 What’s next? Possible next steps for Nordic regulators ........................................... 65 References ............................................................................................................................. 69 Sammendrag på norsk ............................................................................................................. 73 Appendix 1 – The Terms of Reference ...................................................................................... 75 Appendix 2 – Concepts and markets ........................................................................................ 79 Preface This is our report on flexible demand for electricity and power, conducted in the spring, summer and fall of 2017. We would like to thank our reference and steering groups, and in particular to thank Karin Alvehag, Ulrika Bäärnhielm, Terje Gjengedal, Juha Kiviluoma, Ville Väre and Kristina Östman for their extensive and useful comments to earlier drafts. Ingeborg Rasmussen has provided quality control at Vista Analysis. Any remaining errors and omissions are the responsibility of the authors. This version replaces a previous version of 29 September 2017. Haakon Vennemo Project Manager Vista Analyse AS Executive summary Demand side flexibility is the ability of power consumers to reduce their demand in periods of peak load, possibly shifting demand to other periods. We perform a literature survey (meta study) of demand side flexibility and assess the potential for, and benefit of demand side flexibility. Based on the survey we highlight implementation barriers and possible contributions from Nordic regulators to reducing these barriers. Demand side flexibility is becoming more important and valuable Nordic and European electricity markets are phasing in renewable energy sources that depend on wind and sunlight, and variation in production ensues. To reduce cost and increase efficiency it would be helpful if the demand side accommodates the variation in production. Variable renewable energy therefore makes demand side flexibility more important. Demand side flexibility also helps to reduce peak pressure on the grid. In Oslo, for example, power demand in the 0.5% coldest hours is 10% higher than in the remaining 99.5%. If demand were flexible during these periods of peak pressure, society could avoid or delay grid investments and save significant investment costs. Important barriers to demand side barriers are lifted, but many remain Traditionally, the electricity consumption of most Nordic consumers over the day has not been monitored. This is now changing and modern smart meters are being introduced. The installation of smart meters removes an important barrier to demand side flexibility since it enables real-time pricing of electricity and power consumption. Yet, barriers and obstacles remain. These are related to the concrete design of real-time prices; the interaction between pricing signals and regulation of distribution grid operators; the role of aggregation of small consumers, and more. Nordic energy regulators are seeking advice on common positions Confronted with the necessity of demand side flexibility on the one hand, and the remaining barriers to demand side flexibility on the other hand, the Nordic energy regulators are calling for advice on common positions and “what to do next”. Our study is a response to this call. The purpose of the study is to: Explore available information on demand side flexibility in a Nordic perspective and highlight key findings that may develop into concrete measures. Make an overview of existing barriers and of potential and value for demand side flexibility in the Nordic market. Our study is a “meta study” where we draw inferences and make assessments based on reports and peer reviewed research. A hierarchy of barriers to demand side flexibility Several barriers to demand
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