EHI position: Internal Electricity Market Design

What if you could buy electricity when it is cheap and not consume when it is expensive? And what if you could choose to consume electricity when it is renewable, for example when the sun is shining? This is the core of ‘demand response’, the innovative feature that should be a part of the new electricity market design.

And why is heating relevant for demand response?

First, because today’s smart heating technologies allow consumers to provide demand response services and participate in the electricity market. Indeed, with new-generation heat pumps and hot water storage, you can heat your rooms and produce hot water when electricity is cheaper, with the comfort that you expect. Hybrid heat pumps can switch from electric to gas consumption and vice-versa, whenever it is most convenient. And smart heating controls are the brains, that adjust the consumption of heaters based on your preferences, electricity prices and signals from the energy system.

Second, heating is relevant for demand response because it makes up the vast majority of a building’s energy needs. If consumers can anticipate or delay their demand of electricity for heating, they will be able to do demand response on most of their energy consumption.

A great way to promote demand response is to introduce variable electricity prices, which will indicate when it is better to consume electricity. These data should come to consumers via smart meters or the internet. But not all consumers may be able to participate in the electricity market, because accessing the market entails fixed costs and because they may not have time to trade their electricity. This is why consumers should be allowed to work with aggregators, who would gather the demand or supply of electricity of several consumers and sell it on the market for them. And the new electricity market design should promote the role of aggregators.