Pump it up

Are you trying to find a source of flexibility that also helps you boost the share of renewables? Heat pumps might just be what you’re looking for. In addition to being a cheap, efficient, environmentally-friendly alternative to other ways of heating or cooling for homeowners, residential users are by far not the only ones that can benefit from the technology.

Heat pumps are suitable for applications in commercial and industrial settings, too, and they also bring benefits for the power grid, the most important of which is grid flexibility, i.e., the ability of the grid to adapt to changes in electricity supply and demand.

With the rapid growth of renewable energy sources, power generation has become more decentralized but also more variable, which means that maintaining the stability of the grid and ensuring a reliable supply of electricity are now more challenging than they used to be. Grid flexibility can take on this challenge through various technologies and strategies, such as demand response and variable tariffs. Heat pumps have the features that make both possible and can enhance flexibility as a result.

The heat is on

The price of electricity varies throughout the day, and consumers are willing to adjust their power consumption in return for financial incentives. Indeed, they’re often compensated through lower tariffs, bonuses or refunds, which is possible due to demand-side management. Real-time price signals prompt companies that use heat pumps to increase or decrease energy supply and demand, which in turn affects the consumption of electricity. When there is a high electricity demand and/or low renewable energy availability, heat pumps that are integrated into demand response programs can reduce their consumption. This also helps to reduce peaks - through what is referred to as “peak shaving” - and balance grid load, and to avoid overloading during peak times.

Today, the common solution to demand-side management is balancing renewables with gas peakers or other fossil fuel-based power plants. By flattening peaks, however, we can also reduce the number of these plants and rely on a larger share of renewables. As the energy transition gains traction, “unclean” technologies are being replaced by eco-friendly heat pumps that can be operated by 100% green electricity. So, heat pumps not only manage demand and supply in a flexible and efficient way but also support the growth of renewable energy generation. At first glance, the increasing share of renewables in the power mix may seem counterintuitive since these variable energy sources are prone to fluctuations. Heat pumps, however, can address the challenge of volatility. During periods of high renewable energy generation, their operation can become more intensive, while they can reduce their consumption when there is less renewable power available. Their ability to ramp up and down is another reason why heat pumps are ideal for supporting grid balancing measures. And because turning off a heat pump doesn’t immediately change the temperature, these operations don’t noticeably impact consumer comfort.

Name your price

Since the cost of electricity varies based on the time of day, heat pumps can operate on dynamic tariffs that are determined by the time of use. Used during off-peak periods, heat pumps don’t only contribute to load shifting, relieving the strain on the grid, but also take advantage of lower power prices and run more cheaply. The most modern types can even be supported by innovative solutions such as an intelligent price optimizer that can schedule operations based on energy prices and optimize consumption accordingly. Many heat pumps can also access the internet and support IoT protocols, which makes them a valuable asset with controlling capabilities.

CrowdFlex, a multi-year project carried out in the UK to explore how domestic flexibility can support grid operations, has shown that time-of-use tariffs reduce the daily evening peak by 12% for households on average. When coupled with smart controls, these rates can also reduce the operating costs of heat pumps. Tariffs, however, are often a key barrier to accelerating the deployment of heat pumps.

The design of electricity tariffs and taxation often favor fossil fuel-based technologies and they put heat pumps at a relative disadvantage. Both tariffs and fuel taxes need to be reformed to ensure that cleaner and more efficient heat pumps become the number one option for consumers. Even though important regulations are yet to be introduced in many countries, grid operators already have the opportunity to incentivize heat pump owners to offer their flexibility services by lowering their tariffs where current market design allows it. Specially metered electricity or special rates for customers who have both electric heating and an electric vehicle are also effective ways of making heat pumps appealing.

Priming the pump

Despite an 11% growth worldwide and an almost 40% increase in Europe in 2022, the International Energy Agency (IEA) estimates that heat pumps only meet around 10% of the global heating need in buildings. The deployment level needs to increase in order to meet the goals of IEA’s Net Zero Emissions by 2050 Scenario, which shows a pathway for the global energy sector to achieve net zero CO2 emissions by mid-century. However, IEA also realizes the enormous potential of heat pumps. It estimates that they can reduce global CO2 emissions by at least 500 million tonnes in 2030, which is equal to all the CO2 emissions caused by all the cars in Europe a year.

IEA has called for policy support and technical innovation to make the most of the benefits that heat pumps offer. Besides cost reductions, the removal of market barriers, the improvement of performance and durability, the agency identifies “the potential of heat pumps as an enabler of power system integration and flexibility” as a requirement for getting on track with the Net Zero Emissions by 2050 Scenario.

Once the necessary measures and clear regulations have been adopted, heat pumps will become truly valuable assets in modern energy systems and accommodate a higher share of renewable energy sources. They offer a flexible and versatile solution to support the growth of variable renewable generation, while helping to stabilize the grid and to reduce greenhouse gas emissions from the heating sector.