Leveraging flexibility of residential heat pumps through local energy markets

The integration of variable renewable energy sources such as wind and solar energy has made demand-side flexibility a critical aspect for balancing the power grid during fluctuating power generation. In recent years, heat pumps have gained increasing attention for their flexibility potential. While demand response programs have been extensively discussed to leverage flexibility, the market-based approach of local energy markets (LEMs) requires more attention. LEMs provide a marketplace for local energy exchange, facilitating a more balanced energy system by harnessing the flexibility of heat pumps at lower costs. Therefore, this study examines the economic benefits of leveraging flexibility of heat pumps through LEMs and the problems that may arise. An agent-based simulation of LEMs with double-sided auctions is utilized to consider prosumer behavior, incorporate model-predictive control, and employ detailed modeling of energy devices. According to the findings, a district where 40% of households use heat pumps can reduce their annual cost by 5.1% through a LEM. The study identifies several factors contributing to the relatively small economic benefits, including high balancing costs, excessive taxes and network charges, uneven distribution of benefits, and seasonal fluctuations. Additionally, the study proposes daily demand charges to mitigate high residual demand peaks resulting from heat pumps. In conclusion, the study emphasizes the key role of heat pumps in achieving economic benefits through LEMs and highlights the regulatory framework changes required to effectively tackle the challenges faced by LEMs with a large share of heat pumps.