Demand-side energy efficiency and flexibilities – potentials for peak load reduction and system services, and policies to make them reality

Peer-reviewed paper 2-138-26

Traditionally, thermal power plants were the backbone of the electricity system, providing both power to match the load and its gradients, and system services such as frequency containment and restoration, voltage containment, grid building capabilities, and redispatch. In the future decarbonised electricity system, photovoltaic and wind energy will provide the bulk of power generation in most countries, increasing the need for functions of flexibility.

For the case of Germany, this paper reports on a systematic review of the potentials for reducing the peak residual load and providing the above-mentioned system services, for the following demand-side flexibility options: energy end-use efficiency; demand-side response; batteries (large, BEVs and home storage); flexible use of electrolysers, heat pumps, and power-to-heat equipment in heat networks; plus the flexible use of biogas plants and geothermal CHP plants. For example, we estimate the potential of energy efficiency renovation in Germany’s buildings equipped with heat pumps for reducing the need for backup power plants during periods of high residual loads in winter to be more than 10 GW in 2035, and 25 GW in the long run.

In addition, the paper reports on our analysis of the policy mix for each type of alternative flexibility option. In particular, the relevance of applying the energy efficiency first principle, energy efficiency policies, the roll-out of smart meters, dynamic power prices and network tariffs, improved grid connection processes, improved redispatch price signals, financial support for heat storage, improved financing for grid expansion, and a technology-open capacity mechanism was examined.