Optimizing demand response through the aggregation of small decentralized consumers : a strategic analysis

Abstract

The transition of the electricity system towards decarbonization is driven by the integration of multiple decentralized renewable energy systems with intermittent production characteristics. Hence, operational grid stabilization and the allocation of future grid investments are decisively influenced by the capability to mobilize flexibilities on both the producer and consumer sides. This thesis quantifies electricity grid flexibility from residential heat pump demand response across four building archetypes: passive house, low-energy house, renovated existing building, and existing building with air-to-water, brine-to-water, or water-to water configurations (3–12 kWth).Energy-efficient buildings provide only 0.3–0.6 kWhel flexibility per unit compared to 1.0–1.5 kWhel for existing buildings, making conventional building stock the main flexibility resource. Aggregating 840–1,000 units of a mixed portfolio achieves a nominal2 MW pool to safely provide the 1 MW minimum threshold for Austrian balancing market participation, generating approximately €30,000 to €110,000 annual revenue in automatic Frequency Restoration Reserve (aFRR) markets, 90% from energy sales. Revenue channels include day-ahead arbitrage (30–50 €/MWh), intraday optimization(+6–8% uplift versus day-ahead), and automatic frequency restoration reserve balancing. Low-energy and passive houses yield significantly less total revenue (35–68 €) compared to existing or renovated buildings (196–219 €), making low energy installations much less attractive considering the onboarding effort. Activation costs remain modest originating from efficiency penalties, e.g., 2–10% for water-to-water versus 5–16%for air-to-water systems adding to ≤10 €/MWh and storage losses of ≤0,5 kWh/d. Further, it must be noted that seasonal heating demand variations require portfolios10× larger for year-round service provision, as summer flexibility drops to ∼10% of winter capacity. A baseline framework using storage temperature setpoint elevation is proposed to separate arbitrage from balancing operations. While the potential is evident, the recommendation is to focus on building stock with high thermal demand (existing and renovated buildings) and subsequently aim for aggregated mixed portfolios with other flexibility options, such as electric vehicles or battery storage.