Flexibility matters: Impact assessment of small and medium enterprises flexibility on the German energy transition

Abstract

This study analyzes the transition of the German electricity system towards climate neutrality by 2045, considering the demand-flexibility from small and medium enterprises (SME). The research uncovers the potential of flexibility from often-overlooked industrial SME sector, challenging their historical neglect in energy models and national strategies. Despite representing a small fraction of peak load, SME flexibility contributes to a significant reduction in carbon emissions and transition costs, as well as a decreased reliance on other flexibility measures. However, careful design and incentivization strategies are vital to reap the full benefits of SME flexibility. Challenges in achieving a secure electricity supply during extreme weather conditions in a 100 % renewable system are identified, along with how SME flexibility helps to achieve climate neutrality. By 2045, wind power becomes vital for supply security and is operated as a dispatchable ramping-up technology. Storage flexibility becomes essential. The transition incurs substantial costs but is economically advantageous in the long run. Overcapacities from renewables allow for a higher degree of electrification, stronger sector coupling, and suggest the possibility of a local hydrogen production. Although our study examines the flexibility of German SME, demand-responsive technologies exist worldwide, however with different shares and potentials. The study provides valuable insights into how SME demand response can contribute to achieving a sustainable energy system.