The role of energy efficient buildings in Europe’s future power system

Consultants at Ecofys have recently carried out a study for EURIMA, the European Association of Insulation Manufacturers, to assess the role that energy efficient buildings can play in Europe’s future power system, as these buildings have the potential to reduce costs and increase efficiency on the supply side.

The heating sector is currently expecting electrification due to the growth in electric heat pumps to supply heating (and cooling) to the EU’s building stock. This will require significant investments in electricity production capacities and a consequent strengthening of the grid. These investments could be reduced through energy efficiency measures that lead to a decrease in the energy demand of buildings. As such highly efficient buildings offer benefits to the power systems in two ways:

By reducing energy demand: this translates into a reduction of the system peak and a corresponding reduction in generation and grid infrastructure investments. Furthermore, it leads to a reduction in the amount of energy that needs to be generated and transmitted and ultimately to a reduction of the system’s operational costs and associated losses.

By providing the grid with increased flexibility: the flexibility of heat demand refers to the ability of heat pumps to change their operation without affecting temperature comfort levels inside the building. Typically, highly efficient buildings have a higher capacity to change heating operation over time, as a well-insulated building envelope can maintain the desired stable room temperature over a longer period, even when the heating system is turned off. This increased flexibility can translate into a reduction in the peak demand and to a reduction in system losses by reducing marginal losses.

The study reveals (comparing the situation in 2050 with a high efficiency scenario to that of a low efficiency scenario) that a highly energy efficient building stock, via a reduction in the peak loads of electric heat pumps and the ability to change heating demand over time (as highly efficient building envelopes can keep the desired room temperature stable for a longer period when the energy supply is interrupted), has the capacity to significantly reduce the necessary peak capacities and avoid distribution losses.

The reduction in peak load from the reduced electricity demand for electric heat pumps due to energy efficient buildings is 57 GW. This matches the current total electricity production capacity (renewable and non-renewable) of Austria and the Netherlands combined. The impact of energy efficiency on the flexibility of the power systems leads to an additional reduction in peak load of the EU’s power system of around 12 GW. This is a lower limit of impact, as in practice grid operators have to balance demand and supply not at EU level but at national/regional boundary level (with less options to balance), which translates into higher peak load savings from the gained flexibilities.

Moreover, the huge fluctuation of the growing share of renewable electricity production will further increase the need for flexibility on the demand side. In financial terms, the total CAPEX savings in 2050 could amount to €73bn (impact of the reduced electricity demand for electric heat pumps by high efficiency buildings) plus an additional €16bn (impact of the increased flexibility of running heat pumps in highly efficient buildings) resulting in a total CAPEX reduction of €89bn in 2050 (and up to €153bn if more national/regional limits are taken into account).

As a consequence, highly energy efficient buildings (both new and deep retrofit buildings) not only generate benefits at building level itself but can also deliver benefits at electricity system level, thus supporting a robust future energy system.