Philipp Riegebauer

• Renewable capacity growth is substantial around the world. A key issue is to find reasonable use for excess fluctuating renewable electricity generation. The idea is to equip conventional options to produce heat with appliances for heat production with electricity. This holds great promise for addressing the vexing challenge of matching an increasing share of electricity supply from fluctuating renewable energy sources with an inelastic electricity demand. The objective is to find out whether there is an intrinsic micro-economic benefit for consumers and producers to shift electricity consumption for heating purposes in dependency of the momentary requirements and market signals. Simulations are made for residential and district heating as well for process steam demand of a paper and a chemical company. The initial results of the thesis are that it is technically feasible to produce heat with electricity in the investigated sectors and that the heat market can be yielded for excess supply from renewable energy. The trans-sectoral economic comparison shows that in all application fields the levelized cost of heat are competitive with the conventional heat production cost. However, these results are restricted to the exclusion of state-induced price components. Subsequent analyses of the thesis depict that flexible demand interacts with the electricity market. With focus on macro-economic criteria, distinctive advantages emerge from the connection of the heat and electricity market: (1) Heat production with electricity increases the use of renewable electricity generation. (2) It leads to higher short-term electricity prices. (3) It holds substantial potential for reducing final energy demand and emissions from fossil energy sources. Policy-relevant conclusion is that matching flexible demand with a fixed structure of state-induced components is not adequate. Regulatory intervention is advised to establish a time-variable tax structure.