Assessing customer engagement in electricity distribution-level flexibility product provision: The Norwegian case

Abstract

Procurement of demand-side flexibility at the distribution network level, as a cost-efficient alternative to traditional network reinforcement, requires customer engagement in the long-term. Potential limitations and benefits of alternative flexibility instruments (flexibility contracts, local flexibility markets, and dynamic network tariffs) for procuring such flexibility service are presented first. Secondly, a methodology is proposed to assess customer engagement and its effect on network reinforcement requirements and total system costs. An explicit flexibility instrument (a demand response program compensating customer for reductions in network withdrawals) is considered under two scenarios, one with a standard distribution network tariff (fixed and volumetric charges), and one with a dynamic distribution network tariff (fixed and critical peak charges). Rational customers’ responses are simulated, under both scenarios, using parameters and actual 2019 data for the Skagerak pilot project in Norway. Results confirm that flexibility instruments interact with one another, shaping customer engagement. Specifically for the observed case, the efficacy of the demand response program was found to be significantly enhanced by the simultaneous implementation of a dynamic distribution network tariff, leading to deferred network reinforcements, and higher system-wide economic efficiency.