Power market impacts of increased use of electricity in the heating sector

An electrification of the heating sector through increased use of electricity in district heating plants may add valuable flexibility to the future renewable energy system while at the same time improve integration of fluctuating renewable energy sources and reduce emissions. This study quantifies how the energy system and the electricity market may be affected by an increased electrification of the district heating sector. A comprehensive energy system model covering the power and heat sector is applied for the analysis of the 2030 energy system in Northern Europe. According to the model results the heat generation from electricity in district heating varies from 2 TWh/year to 75 TWh/year in the analyzed scenarios, representing 0.5% to 19% of annual electricity consumption in the region. The results show that the level of electricity taxes and grid rents are decisive factors for the use of electricity in district heating. Total wind power generation from existing and new installations range from 70 TWh/year to 90 TWh/year, depending on the magnitude of power to heat use in district heating. Sensitivity studies confirm that the biomass price are highly decisive to the use of power to heat in district heating, since new heat pumps mainly replaces wood-based biomass. As expected, carbon prices influence the share of wind power versus natural gas power, but the carbon price does not affect investment levels in power to heat significantly.