To meet the Paris Agreement objectives, renewable and carbon-neutral power generation will play a major role. This study assesses the cost-optimal portfolio of flexibility solutions to allow the feasibility of a 100% decarbonized power system in 2050, considering the additional electricity demand from direct and indirect electrification. Given the constraint of maintaining the supply-demand equilibrium at different time scales, the results highlight and quantify the complementarity between flexible power production, cross-border flows, short-term storage (stationary batteries, electric vehicles, residential thermal storage, etc.) and medium / long term storage (hydraulic storage, storage in the form of synthesis gas). A specific focus was set on the potential synergies between gas and electricity, notably through the hybridization of residential heat supply. Gas-fired back-up heaters for heat pumps are found to be profitable as they limit the electricity consumption in the event of load peaks and very high electricity prices.

In power systems with a high RES penetration rate, a significant share of electricity generation is weather-dependent. This uncertainty of RES generation translates into an increased risk of price volatility that may negatively impact all players: conventional and renewable power producers, storage operators, consumers, etc.

This study analyses the evolution of price patterns in a carbon-free electricity system. It further quantifies the profitability risks due to weather variations, as well as unforeseen changes in the structure of the power supply fleet, and suggests adequate hedging strategies.
The analysis shows that wholesale market prices are increasingly often set by flexible consumers (such as electrolysers). In terms of revenue risks, solar power is particularly vulnerable to a cannibalisation effect, as non-dispatchable PV power generation is concentrated in midday hours and thus causes an overproportionate revenue reduction. As the generation profile of wind turbines is more evenly distributed in time, and as storage is essentially sensitive to arbitrage opportunities, the cannibalisation effect is less pronounced for these technologies. Flexible consumers, such as electrolysers, take advantage of reduced prices and thus represent a hedging option for power producers.

Space heating currently represents 70% of European households and commercial buildings’ energy consumption. In a context of an increasing penetration of renewable energy sources in the European power mix, using electricity to generate heat could play an important role in the decarbonisation of these sectors. This study reveals that heat pumps represent an efficient way to decrease the CO₂ emissions of the European heating sector. However, in the REF16-2030 scenario, the profitability of heat pumps from a system point of view is more than uncertain. Indeed, earnings from the energy consumption reduction are not sufficient to offset the significant investment costs related to the installation of heat pumps and the need for additional peak power generation to meet the increased load peaks. The dedicated models created with METIS emphasize the benefits of the flexibility offered by heat pumps with thermal storage, which allows lower power generation costs, and higher integration of renewable energy sources. Ultimately, equipping heat pumps with gas back-up heaters appears to be a promising compromise to curb the potential increase in electricity demand peaks during the coldest days. Consequently, fewer investments in additional peak power units are required, but at the expense of a slight decrease in the heat pumps’ CO₂ emission reduction potential.