Impacts of residential energy efficiency and electrification of heating on energy market prices

The decarbonisation of the energy system is attracting the attention of policy makers worldwide, with many measures targeting the residential sector. It is expected that emission reduction targets will bring changes on the energy system, such as energy conservation measures and the electrification of heating (in a context where the electric sector is mainly decarbonised). However, the changes on electricity prices due to the electrification of heating have been scarcely addressed in the literature. This paper presents an assessment of the impact on electricity prices produced by the decarbonisation of heating and energy efficiency in the residential sector. A linear programming problem is used to find the optimal planning and operation of electric heating and residential loads, following a price-maker approach. Then, the potential cost changes for residential consumers and the impacts on electricity prices in the wholesale day-ahead market are estimated
considering different residential electric heating profiles and energy conservation scenarios.
Following an explanation of the method, a discussion of results is presented, considering how the electrification of heating change the energy price curves and the policy implications of these findings. In addition, it is discussed how the optimal operation of heating systems with energy conservation technologies and thermal storage could mitigate the cost increase of these changes on the energy system.