Impact of Locational Marginal Electricity Pricing on future Industrial Energy Systems in Germany

Inhalt:
System and market operators use dynamic electricity prices to incentivize customers to adjust their active power exchange according to the current scarcity of electricity. Additionally, regulators and policymakers across Europe discuss market reforms introducing location-dependent electricity prices with varying granularity to reflect regional differences in electricity scarcity. As the 2022 energy price crisis in Europe highlighted, industrial profitability is highly sensitive to electricity prices. Therefore, industrial customers have reservations about regional electricity prices, especially those customers in potentially more expensive regions. In this paper, we explore the effects of dynamic and locational electricity prices on a hypothetical industry plant using locational marginal prices for the German electricity system for 2050 from the literature. Using a stylized model of the hypothetical industrial plant and its flexibility options as well as synthetic load profiles, we determine the optimal configuration of the internal energy system, energy flows, use of flexibility as well the the cost of energy for the plant. We find that leveraging electricity price spreads with energy flexibility can compensate for higher mean electricity prices and therefore alleviate locational disadvantages for industrial customers. Therefore, introducing locational electricity prices is not necessarily a disadvantage for customers—given an appropriate regulatory framework.