In smart grids, demand response and distributed energy systems aim to provide a higher degree of flexibility for load-shifting operations and the leverage to control intermittent wind supply. In this more dynamic energy system, deployment of energy storage at the site of consumption is envisioned to create synergies with the local distributed generation (DG) system. From a large end-user perspective, this paper contributes to the practical understanding of smart grids by modelling the impact of real-time pricing schemes (smart grids) on a hybrid DG system (mixed generation for heating and electricity loads) coupled with storage units. Specifically, we address: How does the portfolio of DG units affect the value of energy storage? and, what is the value of energy storage when assessing different designs of demand response for the end-user? To this end, we formulate a dynamic optimization model to represent a real-life urban community’s energy system composed of a co-generation unit, gas boilers, electrical heaters and a wind turbine. We discuss the techno-economic benefits of complementing this end-user’s energy system with storage units (thermal storage and battery devices). The paper analyses the storages policy strategies to simultaneously satisfy heat and electricity demand through the efficient use of DG units under demand response mechanisms. Results indicate that the storage units reduce energy costs by 7–10% in electricity and 3% in gas charges. In cases with a large DG capacity, the supply–demand mismatch increases, making storage more valuable
