Photovoltaics and Heat Pumps – Limitations of Local Pricing Mechanisms

Demand side management has been proposed as one cornerstone for a future sustainable energy system. Local pricing may contribute to enable a smart behaviour of grid users by providing appropriate incentives. In this paper, we apply a local pricing algorithm on distribution grid level. We analyse its effects for a typical German rural low voltage grid with high penetration of photovoltaics and heat pumps. With households using electric heat pumps, a potentially flexible consumer type is implemented in detail. Such setup is used to assess two issues: Firstly, the exploited potential in terms of avoided curtailment and, secondly, redistributive effects of such local pricing mechanism under use of different stylized policy choices. Results show that – even with given local incentives – the consumption adjustment towards an efficient grid usage can frequently not be realized since complementarity of photovoltaics and space heating demand is limited and technical constraints do not allow to overcome this gap. Furthermore, we show that – despite limited merits in terms of system costs – the redistributive effects of local pricing mechanisms are very significant