Energy Strategy Reviews (Jan 2023)
Dynamic pricing and the flexible consumer – Investigating grid and financial implications: A case study for Germany
Abstract
Due to the ongoing expansion of renewable energies and the increasing energy demand of household consumers, e.g., due to the electrification of the mobility and heating sectors, grid bottlenecks and voltage band violations in low-voltage grids in Germany are expected to occur more frequently in the future. Dynamic pricing, implemented through digitization, is seen as one option to incentivize flexible and responsive electricity use of household consumers. Flexible consumption of household consumers could make grid utilization more efficient. So far, most studies on the effects of dynamic pricing focus on only one tariff for all household consumers within one low-voltage grid, whereas, in reality, households are free to choose between many different static and dynamic electricity tariffs. As previous studies have shown, the choice of tariff plays a major role in how flexibility is used. To address this research gap, we developed a model which integrates households and their static and flexible consumption and generation units into a home energy management system (HEMS) and minimizes the households’ power purchase costs. The model considers a range of dynamic tariffs that are already available today and includes the decision-making of heterogeneous household customers regarding the choice of tariff. Load flow calculations are then used to determine and analyze the effects on a low-voltage grid area. With this methodology including the free choice of tariff we go beyond the state of the art and paint a more realistic picture of the effects of dynamic tariffs on low-voltage grids. Our results show that, even though dynamic tariffs lead to increased peak demand at the level of individual households, peak loads are spread more widely within a grid area as the result of households choosing different tariffs based on economic considerations. Due to these effects, dynamic pricing has positive effects on grid utilization and could reduce the need for grid expansion.
