Exploring regulatory designs and product-service offerings to empower end-users and incentivise demand flexibility: a modelling framework in support to low-carbon energy systems
KeywordsAgent-based modelling ; Battery storage ; Demand-Response ; Demand-side management ; Energy policy ; Energy system modelling ; Feed-in-tariff ; Greece ; Net-metering ; Policy assessment ; RES generation ; RES support mechanisms ; Self-consumption ; Smart home ; Solar PV ; Technology adoption ; Uncertainty quantification ; Ανανεώσιμες πηγές ενέργειας ; Αξιολόγηση πολιτικών ; Απόκριση της ζήτησης ; Ελλάδα ; Ενεργειακή και κλιματική πολιτική ; Ενεργειακός συμψηφισμός ; Ιδιοκατανάλωση ; Μοντελοποίηση και προσομοίωση ενεργειακών συστημάτων ; Μοντελοποίηση με συστήματα πρακτόρων ; Πολιτική σταθερής ταρίφας ; Ποσοτικοποίηση αβεβαιότητας ; Συστήματα αποθήκευσης ενέργειας ; Συστήματα διαχείρισης της ζήτησης ; Τεχνολογική διάχυση ; Φωτοβολταϊκά συστήματα
The actions proposed by the European Green Deal aim at increasing the European Union’s climate ambition and are expected to lead to the complete transformation of the current energy system, by investing in feasible and innovative technological options, and by empowering end-users (i.e., citizens and consumers) and including them in the energy transition. In this context, energy system models have been used for policy advice and in policymaking processes in Europe, such as to explore potential energy futures or alternative socio-technical pathways and scenarios. While existing models have provided valuable information about how to make marginal modifications to the current energy system in ways that will reduce costs, and, thereby, enhance economic growth, they were not designed to support the transition to energy systems dominated by intermittent renewable energy sources. Accelerating the energy transition towards climate neutrality by 2050 in Europe requires us to develop a new set of modelling tools, able to represent and analyse the drivers and barriers to complete decarbonisation, including decentralisation, a large-scale expansion of fluctuating renewables-based power leading to a vastly increased need for system-side flexibility, sector coupling, including the electrification of mobility and heating, and the impacts of different market designs on the behaviour of energy sector actors. In addition, without the necessary behavioural and societal transformations, the world faces an inadequate response to the climate crisis challenge. This could result from poor uptake of low-carbon technologies, continued high-carbon intensive lifestyles, or economy-wide rebound effects. In this context, it is important to acknowledge that the shift to a more decentralised vision of a low carbon energy system in Europe, where end-users take ownership of the energy transition, benefit from new technologies to reduce their bills, and actively participate in the market, implies that part of the necessary infrastructure will be only developed if they are willing to invest in the technological capabilities required. However, while technological infrastructure is already available, business models and regulatory innovations are needed in order to find ways to maximise the value of the technological capabilities, as well as to monetise them, to compensate end-users. This doctoral dissertation thesis builds on these insights, and, by developing two new energy system models, contributes to the analysis of innovative regulatory designs and product-service offerings that could incentivise end-users to actively participate in the energy transition and invest in demand flexibility. In particular, the thesis acknowledges the need to improve understanding on how the interactions between the key characteristics of end-users’ behaviour affect investment decisions, and on the specific benefits of different technological capacities for engaging end-users and incentivising household-level changes towards energy autonomy. In this context, the dissertation thesis is structured around three main pillars: • In the first pillar, the thesis asks questions of “what,” “how,” and “why,” considering the problem of policy instrument design as a multifaceted problem with different objectives to satisfy instead of just a fixed target. It focuses on the policy landscape of the past (“what”) and “how” this has incentivised end-users so far to participate to the energy transition. This allows to learn from past failures (“why”) by identifying evaluation objectives and criteria that could be used to make better-informed judgments on policy instrument (re)design and selection to, eventually, (re)adjust future planning and decision-making. To this end, an analytical framework that facilitates the systematic exploration of the impact that policy measures have on the electricity system and its components was developed, building on the premise that understanding and quantifying the major monetary flows in the electricity market can contribute to the efficiency assessment of policy interventions, and that assessing how a policy measure affects the performance of the energy market requires the quantification of both the benefits and the costs attributed to it. In the second pillar, the dissertation thesis focuses on the interaction between the policy landscape and end-users, i.e., the technological infrastructure required and its role in empowering end-users to participate more actively to the energy transition. Alternative regulatory designs, which are currently showcased in different geographical and socioeconomic contexts in the EU were considered, to evaluate their potential effectiveness in driving investments in the necessary technological infrastructure. Considering that people and their social interactions greatly influence the diffusion and use of technology and further shape overall technological transition dynamics, investment criteria, and different decision-making behaviours were also explored, since many technical innovations and public policies often fail because they do not sufficiently consider what matters to people (i.e., the motivating factors shaping their adoption preferences). To do so, a new energy system model, the Agent-based Technology adOption Model (ATOM), was developed, which, apart from exploring the expected effectiveness of technology adoption under regulatory designs of interest, allows to consider and explicitly quantify the uncertainties that are related to agents’ preferences and decision-making criteria (i.e., behavioural uncertainty). • In the third pillar, the approach of the two previous pillars is expanded by focusing on the end-users’ perspective. The main premise is that, in order for end-users to have a more active participation to the energy transition, they first need to become more aware of the benefits from investing in new technological capabilities. While technological infrastructure is often available, business models and regulatory innovations are needed to find ways to maximise the value of these technological capabilities, as well as to monetise them, to compensate end-users. To this end, “game changer” business models in terms of different configurations of innovative product-service offerings, which could incentivise end-users to invest in demand flexibility, were evaluated. In addition, market-oriented regulatory designs, which eliminate aspects of subsidisation and implement more advanced market rules that could affect the behaviour and consumption patterns of end-users were explored. To do so, a fully integrated dynamic high-resolution model embodying key features that are not found together in existing demand-side management models was developed. In particular, the hybrid bottom-up Dynamic high-Resolution dEmand-sidE Management (DREEM) model combines key features of both statistical and engineering models and serves as an entry point in demand-side management modelling in the building sector, by expanding the computational capabilities of existing building energy simulation models, to assess the benefits and limitations of demand flexibility for residential end-users. Finally, to test the analytical framework developed under the first pillar, and to demonstrate the usefulness and the applicability of the two new energy system models, this dissertation thesis used as a testing ground the case of Greece. In this context, feasible and robust decarbonisation pathways were developed and agreed with a variety of stakeholders under the European Commission-funded Horizon 2020 projects “CARISMA,” “TRANSrisk,” and “SENTINEL,” which were, then, modelled via the developed agent-based and demand-side management modelling architectures. This enabled to identify not just least-cost pathways, which have traditionally dominated modelling exercises, but rather institutionally and socially preferred, and politically realistic transition pathways, in line with current and increased decarbonisation ambitions.