Multi-sector demand response for cost optimal energy transitions

Demand response is consistently highlighted as an important solution in electricity planning literature to help reduce costs throughout the energy transition. We build on these results and investigate how demand response performs in multi-sector energy planning studies. We implement two different demand response pricing strategies, one that is energy carrier independent and one that is energy carrier specific, and apply it to the open-source PyPSA-USA energy system optimization model. A case study of California and New England is performed for a future 2030 energy system. System-level metrics and net-load characteristics are analyzed. The results show that both electrical and thermal demand response offer cost savings in capacity constrained systems by acting as a flexible resource. Moreover, pricing demand response separately for each energy carrier and energy sector is most effective in reducing system costs. Finally, thermal demand response significantly reduces service sector space heating capacity, providing investment cost savings. A sensitivity analysis indicates that significant cost savings can be achieved with minimal demand response adoption. We conclude by highlighting how the pricing strategy implemented favours short-term load shifting and discuss where applying this method is appropriate.