How flexible are energy flexibilities? Developing a flexibility score for revenue and risk analysis in industrial demand-side management

Abstract

With rising and increasingly volatile energy prices, demand-side management (DSM) is becoming attractive within industry to optimize flexible electricity demand and to remain competitive. Despite economic and ecological benefits for companies, DSM implementation is not yet widespread. High effort in flexibility audits and complex optimization models to quantify DSM’s economic potentials represent initial barriers in practice, raising the question whether there is a simple way to analyze economic DSM potential as an initial indicator of successful DSM implementation that requires little data on flexibility characteristics. To address this need, this study develops a flexibility score that describes the degrees of freedom of individual energy flexibility measures (EFMs), i.e. how flexible a flexibility measure is. The flexibility score is tested and validated in a risk-return analysis on 46 real-world industrial EFMs from Germany optimized with integer linear programming (ILP). Analyzing Germany’s Day-Ahead and Intraday markets, the results show an increase in expected revenues and a simultaneous decrease in revenue risk with an increasing flexibility score, outlining DSM investments as attractive. Due to its ease of use, we see industrial companies, aggregators, energy service providers, and (energy) consultancy agencies as target users of the flexibility score. Policymakers can use the flexibility score to identify and design subsidies for energy flexibility investments.