Demand flexibility integration is an important measure for the decarbonization of energy systems and a more efficient use of resources. Demand flexibility can provide multiple benefits to the power system and reduce system costs. Adjusting electricity demand to match variable production supports the integration of larger shares of variable renewable energy (VRE). Using demand response for system services provided by network operators can contribute to a more cost-efficient use of infrastructure and resources.
Demand flexibility is a large and complex field of study which includes different markets, different grid voltage levels and different actors. The aim of this PhD project is to study how demand flexibility can be optimally integrated into electricity markets, taking account of the benefits to the power system as a whole and the interplay between different markets. Demand flexibility is studied from the perspective of the whole system, as well as from the private economic perspective of aggregators and electricity consumers.
The thesis includes separate studies which go in depth about specific topics. The whole system perspective is studied in Paper I, which focuses on the value of demand flexibility in spot and reserve markets in power systems with high shares of VRE. The perspective of TSO and DSO is studied in Paper II, which proposes a marketplace for procurement of transmission and distribution system services from demand flexibility. The perspective of demand flexibility aggregator is studied in Paper III which develops an optimization framework for an aggregator participating in the wholesale and the regulation capacity markets. The perspective of private electricity consumers is studied in Paper IV which studies price-based demand response and investments in load control in an energy system.
The results of these studies offer various useful insights. Firstly, demand flexibility was found to significantly decrease the system cost when large shares of VRE are integrated into the system. This happens primarily by replacing reserve provision from coal and gas plants but also by reducing peak load generation due to price response on the wholesale market. Optimal allocation of demand flexibility between reserve and wholesale markets maximizes the system benefits. The results suggest that in systems with large shares of VRE and small shares of base load, more demand flexibility should be placed in the reserve market than in the wholesale power market.
Demand flexibility also benefits the distribution system, and it was also found that new market designs and better coordination between the transmission and distribution levels are important for efficiently integrating demand flexibility and minimizing the total procurement costs. New market designs can ensure that demand flexibility is used to maximize the value for the whole system and not only for single actors.
Next, the results of the studies illustrate that demand flexibility access to many markets is beneficial, from both the system and private economic perspectives. It increases the value of demand flexibility, gives incentives to aggregatorsโ business and ensures that demand flexibility is optimally allocated between markets based on price. However, market interplay can also have negative effects, as when demand flexibility providers favour one particular market with higher profitability and flee from other markets. New market designs for demand flexibility should consider the interplay between different markets.
Finally, modelling demand response to electricity price shows that private investments in demand flexibility are governed by the cost of load control, the daily electricity price variability and the price flattening effect. The price flattening effect implies that demand response to price reduces price volatility in the market, and at some point, no more demand response is feasible. To achieve this optimal demand response level in the wholesale market, it is important to have correct feedback between the market and consumers so that they do not respond more is optimal from the system perspective.
To sum up, the results of this PhD research suggest that efficient integration of demand flexibility into electricity markets implies giving it access to many markets, strengthening the role of aggregators, improving coordination between the distribution and transmission system levels and promoting market designs that optimize demand flexibility use and system value. This thesis illustrates the importance of studying demand response in a holistic perspective, including different markets, actors and system levels.Norwegian Research Council ; Enfo ; Sysco ; NV
