The right kind of demand: How flexible demand can support renewable energy

Wind and solar power are being challenged by market developments that see drops in power prices, particularly for solar, which weakens their business cases significantly. This in turn puts a spoke in the wheel of Europe’s massive build-out of renewable energy, and policymakers are faced with the complex challenge of stimulating demand without distorting markets, investing significantly in the power grid, or risking national budgets. 

Our approach

Speaking to this challenge, we conducted a thought experiment using our power market model that examines how closing the gap between projected and actual electricity generation in Denmark (8.3 per cent lower than projected in 2024) would affect renewables. In this case, we analyse how the Danish power market would respond if this additional demand of 8.3 per cent came from flexible consumers, who shift to low-price hours, rather than traditional consumers.

Smart demand design can unlock renewable potential

We identified significant effects from this increased demand and how it can affect ailing renewable energy business cases. In particular: 

• Stimulating flexible demand by 8.3% benefits solar producers 31 per cent more than if new demand follows traditional patterns by increasing capture price for solar producers by 9.9 per cent

• The return for new solar parks in Denmark increases by 0.3 percentage points more if new demand is flexible 

These results suggest that flexible demand can play a supporting role in making renewable investments more attractive and that policymakers have a cost-effective path towards accelerating the energy transition. 

Read the insight piece below to learn more about the specific findings.