Synergies and competition: Examining flexibility options in the European electricity market

Abstract

The electricity market transitions from a market clearing in which flexible generation meets inflexible demand to one in which inflexible generation meets flexible demand. Consequently, new types of flexibility are needed to balance generation and demand. This paper mainly aims to analyse competition and synergy between various flexibility options in the electricity market. The developed European electricity market model maximises the joint socio-economic welfare of the electricity and the hydrogen market. Transmission grid,- storage expansion, electric vehicle demand side flexibility and hydrogen sector coupling are flexibility options. This work examines the implementation of different flexibility options in the bidding zones Austria and Germany. Austria, with a very high storage capacity in the alpine arc and Germany, with massive wind turbine capacities serve as representative case study. Results show that the storage location heavily influences the corresponding socio-economic welfare increase. Hence, location-dependent synergy and competition between storage and transmission line expansion can occur. In contrast, sector coupled hydrogen production and storage expansion compete with each other as both will reduce very low electricity prices. Demand-side flexibility primarily benefits end-users while producer surplus reduces. In combination with storage expansion, further positive synergistic effects for end-users occur. The combination of storage expansion and demand-side flexibility can replace transmission line expansion and vice versa if used comprehensively. Further efforts could address the evaluation of these effects if the individual flexibility providers aim for something other than a system-wide but individual optimum.