Real-time pricing for heat pumps: Who pays, who gains?

Abstract

The widespread adoption of heat pumps in residential buildings offers a promising opportunity for demand response, particularly with the implementation of real-time pricing (RTP) to encourage flexible electricity consumption. However, the financial impact of RTP on different household and building types with heat pumps remains underexplored. This study investigates the economic implications of heat pump operation under RTP, analyzing how building characteristics, user thermal comfort settings, and local photovoltaic (PV) self-consumption influence electricity consumption and related cost savings or financial burdens. The analysis also includes the financial perspective of heat pump aggregators and their impact on users’ costs and benefits. By integrating an agent-based electricity market model, AMIRIS, and a heat pump dispatch optimization model, simulations were conducted for various representative building types in Germany. The results indicate that heat pump users in well-insulated buildings, particularly those with underfloor heating, benefit most from RTP, as electricity consumption can effectively be shifted to low-price periods. When combined with local PV generation, effective heating cost savings can be amplified to up to 50%, with user flexibility in thermal comfort settings enhancing self-consumption rates. Conversely, older, poorly insulated buildings face challenges in realizing financial benefits due to limited flexibility, with electricity cost savings insufficient to offset the cost of enabling flexible heat pump operation with RTP. While the study identifies the building types best suited for flexible heat pump operation under RTP, it also demonstrates that even in the absence of RTP, user flexibility in thermal comfort can enhance energy efficiency and reduce costs for heat pump operation.