Value of flexible consumption in the electricity markets

Abstract

A transition from an oil and coal based energy system to a systems based on renewable and sustainable energy sources has begun in many countries throughout the developed world. As a pioneer, Denmark currently has a wind energy penetration of 30% in the electricity sector and an end goal of 100% renewables in all energy sectors by 2050. The main elements in this transition are an increase in the wind energy production and electrification of main energy sectors such as transport and heating. Activation of flexible consumption in the electricity markets is believed to be one of the means to compensate for the growth of fluctuating renewables and the decrease of conventional power plants providing system-stabilizing services. In this work, we examine the requirements for flexible consumption to be active in the spot market and the regulating power market in the Nordic system and estimate the costs of entering these markets; further, we briefly describe the debated and planned changes in the electricity market to better accommodate flexible consumers. Based on recent market data, we estimate the revenue that flexible consumers can generate by market entry depending on the capacity of the consumers. The results show that consumers should have an energy capacity in the magnitude of 20−70 kWh to break-even in the spot market, while a capacity of 70−230 kWh is required in the regulating power market under current regulations. Upon implementation of the debated and planned market changes, the break-even capacity will decrease significantly, possibly to an energy capacity as low as 1 kWh.