How households can help keep our energy supply affordable

The energy transition only seems to cost money for citizens. However, you can also earn money with it. Or save on your energy bill. How? By using your electrical appliances, such as the heat pump, flexibly. In doing so, you also contribute to an affordable energy supply.

More and more houses are heated with heat pumps. Heat pumps extract heat from the environment and use it to heat a home. A heat pump uses electricity for this, while a central heating boiler uses natural gas. Heat pumps also consume less energy than central heating boilers. They are therefore an important tool in making houses more sustainable.

In 2019, 5% of all homes (400,000) had a heat pump. That doesn't seem like much, but this is a fivefold increase since 2014. This growth will continue in the coming years.

Experts estimate that in 2030 approximately 10-25% of existing houses will have a hybrid heat pump (a heat pump combined with a central heating boiler) and all electric heat pumps in approximately 60-80% of all new-build houses.

Why is the flexible use of electrical devices actually important? The reason is the energy transition. The demand for electricity is increasing and the supply of electricity is increasingly coming from weather dependent sources such as sun and wind.

Electricity supply and demand must always be in balance and the electricity grid has a limited capacity. That is why being able to adjust electricity supply and demand is gaining more and more value. Heat pumps can help with this; By shifting the use of heat pumps over time, or by adjusting the appliance up and down, they can help to make better use of the supply of electricity and the capacity of the electricity grid.

Research by Tennet [1] shows that heat pumps without flexibility require a capacity of 5 Gigawatts, or 3-4 gas-fired power stations, until 2030. By making heat pumps smart and controlling them flexibly, this is limited to 1 Gigawatt.

How can you earn money with the flexible use of your heat pump and other devices?

That can be done in different ways. For example, by making use of variations in the electricity price, by taxing the electricity grid less and by making maximum use of the electricity from your own solar panels.

By combining these revenue models, a household will soon be able to reduce its energy bill by tens to hundreds of euros. Individual households cannot simply participate in national markets, such as the imbalance market and the wholesale market.

Also, with 1 heat pump you can mean little to network operators in the efficient use of the electricity network. Aggregators are needed for this. These are companies that bundle control of large numbers of small appliances, such as heat pumps, and thus form a kind of large battery with which they can make money in these markets.

The owners of those devices benefit from this by means of a monthly earnings or a discount on the energy bill.

Our research shows that there is currently little benefit to be gained from the flexible use of your heat pump for these purposes. The costs are still relatively high and the returns are too low. But that will soon change. Costs will fall through economies of scale, standardization of communication protocols and by reducing the number of components required.

There is also still a lot of room for improvement on the revenue side. However, the right incentives must be given for this and that is hardly ever happening. On the contrary, the incentives now given to households actually contribute to imbalance and a high load on the electricity grid.

An example of such an incentive is the netting scheme. This has resulted in an enormous growth in solar panels on the roofs of homes. That is of course positive, but due to netting, it does not matter at all for a household with solar panels whether the electricity it produces is needed at that moment or whether the electricity grid is likely to be overloaded at that moment.

Or take the rate that the network operator charges for households. This is just as high for households that put a heavy load on the electricity grid as it is for people who do much less. And finally the electricity price you pay; it is always the same, regardless of the amount of electricity available on the grid.

There is therefore a need for the right incentives, such as a net tariff that rewards the reduction of the network tax. And an electricity price that is low if there is a surplus of sustainable energy, so that households can then regulate their heat pump or charge their cars.

Removing regulations that hold back innovations, such as the netting scheme, can also help.