Find the balance: How do electricity tariffs incentivize different system services from demand response?

Time-varying electricity tariffs can incentivize end-users to operate in ways beneficial to energy systems. However, conflicts may arise when each tariff component solely addresses one specific system service. In this work, a framework for assessing multiple services from price-based demand response is developed and demonstrated in a flexible medium-sized industrial operation. The considered services are generation cost reduction, carbon intensity reduction and grid congestion mitigation. The respective service signals are wholesale market prices, emission factors and load in the concerned distribution grid. Different structures and price profiles of the grid fee and energy rate were investigated. It was found that in tariffs without an annual peak power change, the plant can shift its demand by 20% and provide high to moderate service levels compared to its technical potentials. With this charge, all services, including congestion mitigation, are significantly reduced. Time-varying energy rates effectively incentivize market-supportive operation, and indirectly contribute to other services. Three-level grid fees, in contrast, perform poorly in promoting grid-supportive operation and may not prevent congestion from over response. Our method and findings help understanding end-users’ flexibility potentials and the connection between services. They support utilities and policymakers in designing tariffs best-suited for all requirements of sustainable energy systems.