Levelised Cost of Demand Response: Estimating the Cost-Competitiveness of Flexible Demand

TL;DR

This paper introduces the levelised cost of demand response (LCODR), a new metric for comparing demand response schemes with storage technologies, considering consumer rewards and variable availability, aiding investment decisions.

Contribution

It develops the LCODR metric, adapting cost estimation methods for demand response, and provides comparative analysis of various DR schemes against storage technologies.

Findings

Heat pumps with thermal storage outperform storage technologies in cost.

EV-based demand response schemes are competitive in some applications.

The methodology enables cost assessment with limited user data.

Abstract

To make well-informed investment decisions, energy system stakeholders require reliable cost frameworks for demand response (DR) and storage technologies. While the levelised cost of storage (LCOS) permits comprehensive cost comparisons between different storage technologies, no generic cost measure for the comparison of different DR schemes exists. This paper introduces the levelised cost of demand response (LCODR) which is an analogous measure to the LCOS but crucially differs from it by considering consumer reward payments. Additionally, the value factor from cost estimations of variable renewable energy is adapted to account for the variable availability of DR. The LCODRs for four direct load control (DLC) schemes and twelve storage applications are estimated and contrasted against LCOS literature values for the most competitive storage technologies. The DLC schemes are vehicle-to-grid, smart charging, smart heat pumps, and heat pumps with thermal storage. The results show that only heat pumps with thermal storage consistently outcompete storage technologies with EV-based DR schemes being competitive for some applications. The results and the underlying methodology offer a tool for energy system stakeholders to assess the competitiveness of DR schemes even with limited user data.