As part of the energy transition, end-use sectors like transportation and heating are becoming electrified. Technologies such as electric vehicles and heat pumps enable decentralized flexibility, which can fundamentally reshape the electricity market. However, this development also raises new challenges: How does decentralized flexibility affect electricity prices, and which stakeholders benefit from it?
The new working paper by EWI researchers Polina Emelianova and Nils Namockel addresses these questions:
Using a high-resolution European electricity market model, the researchers analyze various flexibility technologies and groups. Several use cases were simulated to quantify the impacts of flexibility in the transportation and heating sectors. The research shows: While the average wholesale electricity price remains largely stable, flexibility significantly reduces price fluctuations. This is achieved by smoothing the residual load curve, which improves the integration of renewable energy sources. This effect also leads to a reduction in national CO₂ emissions.
Another key effect is the redistribution of economic benefits. “Flexibility shifts welfare in favor of consumers, who benefit from lower electricity procurement costs — regardless of whether they themselves provide flexibility,” explains Nils Namockel. At the same time, electricity producers experience a decline in profits.
An intense competition also emerges between different flexibility options. Decentralized technologies such as electric vehicles and heat pumps exert substantial pressure on centralized storage solutions like battery storage, reducing their profitability. This highlights the challenges associated with increasing flexibility in the energy system.
“The diverse impacts in the sectors under consideration are particularly interesting,” notes EWI researcher Polina Emelianova. “In the transportation sector, electricity costs vary significantly depending on charging and parking behavior, leading to considerable cost disparities.” In heating, however, additional flexibility — for instance, through the use of heat storage — results in greater alignment of electricity costs across different user groups. “These differences underscore the complex and multifaceted effects of flexibility in the energy system,” concludes Emelianova.
