The effect of demand response on CO2 Emissions in the Iberian electricity market – Combining economic and environmental perspectives

Abstract

The energy sector is the largest contributor for CO₂ emissions and therefore energy use is a key issue for climate change and sustainable development. The acceleration towards decarbonization of electricity supply through renewable technologies development is critical for reducing CO₂ emissions. During peak-hours electricity consumption increase and peak units are needed to balance the demand and supply. Despite the technology updates done in many peak units, the most efficient fossil plants are not emission free. An approach to combine economic and environmental benefits through DR implementation was developed and applied to the Iberian Electricity Market data (MIBEL). It was developed a methodology that reduces emissions and replaces peak units with high prices by production with lower prices. The results indicate that generation portfolio and climatic conditions have a large impact on the offset emissions levels at each moment. At night polluting technologies have a greater share in the supply mix. Through DR implementation is possible to save emissions, reducing the need for peaking plants and simultaneously achieve an overall price decrease at peak hours, without compromising users’ comfort.