The impact of industrial self-supply on Bavaria's electricity system - effects on supply security and market prices

Purpose The purpose of this paper is to analyze the role of industrial self-supply in the transition process from centralized energy generation based on fossil fuels and nuclear power to decentralized supply based on renewable energies in the Bavarian electricity system. Design/methodology/approach To quantify effects on system and price stability, a model of the Bavarian electricity grid is created and used to simulate electricity system behavior during a 1-year period for scenarios that are characterized by parameter variations in industrial self-supply, nuclear power capacity, renewable power generation and the capacity of electricity imports. Findings The simulations show that industrial self-supply can reduce instances of maximum grid utilization by 23 per cent and, based on the merit-order effect, decrease electricity market prices by 1.90 and 5.03 Euro/MWh in the scenarios with and without nuclear power, respectively; these values represent 5.7 and 15.0 per cent of average market prices from 2014. Research limitations/implications The analysis shows that industrial self-supply can contribute to transforming the electricity system in a secure, sustainable and affordable manner. However, merit-order-based price effects have a limitation concerning the future applicability of results as quantified effects may not be permanent when the electricity system adapts. Originality/value This paper connects industrial self-supply and the merit-order effect within a nodal energy model. It provides insights into the relevant interdependencies and reciprocal effects by means of a simulation.