Demand response cost analysis and its effect on system planning

T. Freire-Barceló, F. Martín, A. Sánchez

International Journal of Electrical Power & Energy Systems Vol. 165, pp. 110483-1 - 110483-11

Summary:

Demand response (DR) is an ideal option for development and deployment in electricity systems, especially in a high-renewable production context. This paper tries to identify the costs of implementing DR to have a fair comparison with other options, such as storage, since the current literature neglects the costs, obtaining over estimated savings for DR. However, determining the allocation of these DR costs remains challenging due to the lack of literature. This work uses an enhanced model capable of optimizing DR from various sources within the residential and commercial sectors. Through multiple iterations, which account for different investment, operating, and maintenance costs, the model identifies a range of fixed and variable costs that ensure the profitability of DR implementation. The analysis demonstrates that DR is profitable when the levelized cost of electricity (LCOE) for each DR technology is below 100 €/MWh. The findings indicate that heating and cooling is the most cost-sensitive DR technology, requiring lower costs to achieve profitability, followed by domestic hot water. In contrast, electric vehicles provide greater flexibility, allowing for a 40% wider cost range while remaining profitable. Moreover, the comparison between accounting for DR costs and ignoring them highlights their crucial role in making optimal investment and operational decisions.

Spanish layman's summary:

Este paper mejora un modelo existente de planificación de expansión de la generación al incorporar la DR como un recurso adicional dentro del sistema para inversión y provisión de servicios energéticos. A través de este modelo, se obtienen el rango de costes de inversión y operación en los que la DR es rentable.

English layman's summary:

This paper improves an existing generation expansion planning model by incorporating DR as an additional resource within the system for investment and energy service provision. Through this model the range of investment and operation costs at which DR is profitable are obtained.

Keywords: Demand response cost; Electricity system planning; LCOE; Buildings flexibility; Profitability analysis

JCR Impact Factor and WoS quartile: 5,000 - Q1 (2023)

DOI reference: https://doi.org/10.1016/j.ijepes.2025.110483

Published on paper: April 2025.

Published on-line: January 2025.

Citation:
T. Freire-Barceló, F. Martín, A. Sánchez, Demand response cost analysis and its effect on system planning. International Journal of Electrical Power & Energy Systems. Vol. 165, pp. 110483-1 - 110483-11, April 2025. [Online: January 2025]