Investment Incentives for Flexible Energy Consumption in the Industry

The paper at hand analyses investment incentives for flexible manufacturing facilities within the energy market system. We propose a multi-stage equilibrium model which incorporates generation capacity investment, network expansion and redispatch, and include extensions regarding a flexible production approach. The model allows to investigate incentives for flexible production as well as locational choices and the impact of flexible energy demand on the energy market as a whole. In particular, we explore the profitability of flexible production units for different shares of flexible energy consumers in the electricity market. Furthermore, we examine from which point on flexible production units will have a considerable influence on energy price development and the extent to which price fluctuations will be mitigated by flexible consumption. First computational results on a test network reveal that flexible production units might be very profitable and even have a positive impact on welfare, additionally to energy cost savings of the flexible consumers. However, a large scale flexibilization of energy demand has a smoothing impact on the energy price curve and therefore reduces profits for flexible production approaches.