[Paper Review] Early Insights into System Impacts of Smart Local Energy Systems

Marko Aunedi, T.C. Green|arXiv (Cornell University)|Mar 19, 2020

Integrated Energy Systems Optimization4 references6 citations

TL;DR

This study uses an investment-optimizing whole-system model to analyze how Smart Local Energy Systems (SLES) reduce total electricity system costs by enhancing demand-side flexibility and enabling greater deployment of offshore wind. With 50% SLES penetration by 2040 under a 25 gCO2/kWh target, annual savings reach £8.7 billion, even if wind costs do not decline, and remain substantial despite partial non-SLES demand response adoption.

ABSTRACT

A whole-system, investment-optimising model has been used to examine the change in total cost of meeting demand for electricity when Smart Local Energy Systems (SLES) are deployed. Our assumption is that SLES, alongside their other features, enhance the flexibility of electricity consumption through demand-side response (DSR) and facilitate use of local energy storage. We find that with the flexibility of SLES present, variable renewables such as offshore wind can displace firm but more expensive low-carbon sources such as CCS. Considering a 100 gCO2/kWh emissions target in 2030, a 10% penetration of SLES could reduce total costs by £1.2bn/year relative to no SLES, while at higher penetration of 50% SLES, savings increase twofold to £2.8bn/year. Under a more stringent emissions limit of 25 gCO2/kWh in 2040, the savings rise to £2.9bn/year for 10% SLES uptake and rise threefold to £8.7bn/year at 50% uptake. These results hold for costs of enabling DSR of less than £100/kW and it is not until an unlikely £5,000/kW that the savings are nullified. The savings from substituting wind for CCS remain substantial even if the anticipated reduction of cost of wind in 2040 does not materialise. Cost savings from the flexibility provided by SLES are affected by realisation of domestic DSR through other means. A 20% uptake level of non-SLES DSR in 2040 still allows SLES to create cost savings of £6.8bn/year at 50% penetration (a 20% fall from £8.7bn/year).

Motivation & Objective

• To assess the system-wide cost impacts of deploying Smart Local Energy Systems (SLES) in the UK electricity system.
• To evaluate how SLES enhance flexibility through demand-side response (DSR) and local energy storage.
• To quantify cost savings from displacing carbon-intensive firm low-carbon sources like CCS with variable renewables such as offshore wind.
• To analyze the sensitivity of savings to DSR cost assumptions and alternative DSR adoption levels.

Proposed method

• An investment-optimizing whole-system model simulates electricity system operation under various SLES penetration levels and emissions targets.
• The model evaluates cost-minimizing dispatch of generation, storage, and demand response across a 2030–2040 timeframe.
• SLES are modeled to provide flexible demand response and support local energy storage, increasing integration of variable renewables.
• Cost savings are calculated relative to a baseline with no SLES, under different emissions constraints and DSR cost assumptions.
• Scenarios include 10% and 50% SLES penetration, with sensitivity to DSR costs up to £5,000/kW.
• The model accounts for non-SLES DSR uptake (e.g., 20%) to test robustness of SLES cost savings.

Experimental results

Research questions

• RQ1 To what extent do SLES reduce total electricity system costs by enabling greater deployment of offshore wind?
• RQ2 How do cost savings from SLES vary under different emissions targets (100 gCO2/kWh in 2030 vs. 25 gCO2/kWh in 2040)?
• RQ3 How sensitive are the cost savings to the cost of enabling demand-side response (DSR) in SLES?
• RQ4 What is the impact on savings if non-SLES demand response is also deployed at scale?
• RQ5 Can SLES still deliver significant savings if the projected cost reduction of offshore wind does not materialize?

Key findings

• At 50% SLES penetration and a 25 gCO2/kWh emissions target in 2040, annual system cost savings reach £8.7 billion.
• With a 10% SLES uptake under the same 2040 target, savings amount to £2.9 billion per year.
• Even if wind costs do not decline as projected, SLES still enable substantial cost savings by displacing more expensive CCS capacity.
• Savings remain robust at £6.8 billion/year when 20% of demand response is achieved through non-SLES means at 50% SLES penetration.
• The cost savings are nullified only at an implausibly high DSR enabling cost of £5,000/kW.
• Savings from replacing CCS with offshore wind remain significant even under conservative assumptions about future wind cost reductions.