Unleashing the economic and ecological potential of energy flexibility: Attractiveness of real-time electricity tariffs in energy crises

Abstract

The European energy crisis in 2021 and 2022 emphasized the importance of energy flexibility to mitigate price peaks and manage increased market volatility. Dynamic electricity tariffs are key to unlocking the potential of energy flexibility, as they incentivize flexible consumers to reduce their costs by shifting their load to periods of low prices. We quantify the potential of dynamic tariffs and focus on their economic and ecological potential particularly in energy crises. Using German Day-Ahead spot market data covering 2019 to 2022 as basis for a dynamic tariff, we determine the cost and emission spread between non-flexible and flexible industrial processes. Our results show that energy flexibility together with the real-time electricity tariff lead to energy cost reductions, with relative cost reductions of flexible loads being up to 12 times higher in the energy crisis. Moreover, pre-crisis electricity costs and associated emissions were highly positively correlated, implying flexibilities in real-time electricity tariffs may minimize electricity costs while simultaneously reducing emissions. Based on our results, we conclude that real-time electricity pricing provides a suitable instrument to (1) incentivize necessary investments in energy flexibility, especially in energy crises, and (2) facilitate flexible consumers to reduce costs and emissions at the same time.