Economic potential for future demand response in Germany – Modeling approach and case study

Abstract

The activation of demand response (DR) potentials offered by electricity consumer flexibility is one promising option for providing balancing power and energy in supply systems with high share of variable renewable energy (VRE) power generation. In this paper, a model-based assessment of the economic DR potential in Germany is presented. It relies on the extension of the REMix energy system model by flexible electric loads. In a case study considering a future German power supply system with a VRE share of 70%, possible cost reductions achieved by investment in DR are quantified. The sensitivity of the results to changes in the assumed DR costs and characteristics are analyzed in additional simulations. The results show that the major benefit of employing DR is its ability to substitute peak power generation capacity, whereas the impact on the integration of VRE power generation is lower. This implies that the focus of DR is on the provision of power, not energy. Even at rather pessimistic cost DR assumptions, more than 5 GW of power plant capacity can be substituted. Consumer flexibility furthermore triggers an increase in the operation of back-up power plants, whereas it decreases the utilization of pumped storage hydro stations. In the model results, the reductions in annual power supply costs achieved by DR add up to several hundreds of millions of Euros.