 Industrial demand response: How network tariffs and regulation (do not) impact flexibility provision in electricity markets and reservesJörn C. Richstein and Seyed Saeed Hosseinioun Applied Energy, 2020, vol. 278, issue C, No S0306261920309430 Abstract: Incentives for industrial loads to provide demand response on day-ahead and reserve markets are affected both by network tariffs, as well as regulations on the provision of flexibility in different markets. This paper uses a numerical model of the chlor-alkali process with a storable intermediate good to investigate how these factors affect the provision of demand response in these markets. We also model the effect of network tariffs and regulation on endogenous investment into process excess capacities, which are needed to provide load shifting. We find that fixed network tariffs based on peak-demand (demand charges) can be detrimental for the provision of demand response, especially on new investments in process capacity. For existing excess capacities, only high network tariffs inhibit demand response by limiting the optimal peak load below its physical limit. Marketing flexibility on the day-ahead market and in the reserves are substitutes for each other. The choice where to market flexibility is affected both by fixed peak-demand network tariffs and existing excess capacities. For endogenous investments, there are synergies between primary reserve participation and day-ahead flexibility provision, with the combination leading to increased capacity investments. In contrast, so-called interruptible load reserves, regular payments to industrial loads to be able to reduce electricity consumption at any point in time, incentivize a flat demand level. Consequently, such reserve markets reduce investments into additional flexibility capacities and often crowd out active participation in other markets. Keywords: Demand response; Optimization; Day-ahead market; Reserves; Network tariffs; Chemical production (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:278:y:2020:i:c:s0306261920309430 Ordering information: This journal article can be ordered from DOI: 10.1016/j.apenergy.2020.115431 Access Statistics for this article Applied Energy is currently edited by J. Yan More articles in Applied Energy from Elsevier |
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