Dodging the electricity price hike: Can demand-side flexibility compensate for spot price increases for households in Germany?

Abstract

In 2022, energy prices skyrocketed across Europe, with average day-ahead spot market prices in Germany 2.43 times higher than the previous year, hinting at future trends. At the same time, electricity infrastructure is expected to be overutilized in some regions in the future due to the uptake of electric vehicles, heat pumps, PV systems, and other appliances in the residential sector. Dynamic electricity pricing for households is proposed as a solution to alleviate infrastructure strain and reduce costs. The question arises as to what impact dynamic electricity prices as recently seen on the day-ahead spot market in Germany would have on the use of flexibility in households and whether it can compensate for cost increases for households. We analyze the cost-effectiveness of utilizing flexibility through a home energy management system (HEMS) and smart meters against increased self-consumption using a HEMS and static tariffs. We show that with higher electricity prices and price spreads, a higher share of households can offset initial investments in HEMS and metering operation costs by utilizing flexibility from their electric vehicles, heat pumps, and battery storage systems. While increasing self-consumption remains beneficial for households with heat pumps and PV systems, dynamic electricity tariffs are financially more advantageous for those with electric vehicles. The study also determines the maximum additional annual costs for HEMS and metering point operation that still allow cost savings for 75% of households. these costs range from 126 to 145 Euro in the self-consumption scenario depending and from 50 to 111 Euro in the dynamic electricity tariff scenario, highlighting the financial viability of flexibility utilization in response to current pricing trends.