EKSTERN RAPPORT 2019 - NVE ...

EKSTERN RAPPORT
Nr. 5/2021

Value of flexibility from electrical storage
water heaters
Thema Consulting Group and Danish Technological Institute 2019

NVE Ekstern rapport nr. 5/2021
Value of flexibility from electrical storage water heaters

Published by: Norges vassdrags- og energidirektorat
Author: Berit Tennbak, Mina B. Ryssdal, Kristine Fiksen, Ole-Kristian
 Ådnanes (Thema Consulting Group AS), Christian Holm
 Christiansen (Danish Technological Institute) and
 William Rode, NVE.

Cover photo: Thema Consulting Group

ISBN: 978-82-410-2108-4
ISSN: 2535-8235

Abstract: Flexibility in many forms and locations will be necessary for cost-efficient
 and safe operation and balancing of the future power system. This report
 explores the potential role and value of flexibility provided by electrical
 storage water heaters (ESWH). ESWH can provide a range of relevant
 flexibility services, ranging from fast response to diurnal load shifting, and
 both locally and on a system level. It can be used within a building (behind
 the fuse), within a smaller grid area or local energy community, within a
 distribution grid, and in the central energy system, both in terms of energy
 balancing and grid operation. The value of the flexibility depends on the
 needed flexibility characteristics and the cost of alternatives. The value
 estimates for individual flexibility services range from 8 to almost 500 €/
 kW/year, depending on the market and the time horizon. However, while
 new flexibility technologies and solutions are developed, ESWHs represent
 an existing and proven flexibility resource that is highly distributed and
 already utilized in several systems.

Key words: ecodesign, energy label, 812/2013, 814/2013, electrical storage water heaters,
 ESWH, consumers, peak shaving, load shifting, demand side, flexibility, cost,
 power system, electricity system, smart grid, smart appliance, smart control,
 thermal battery, electrical battery, demand response, load shifting, grid
 balancing, local voltage control, frequency control, DSO, TSO, zero carbon,
 charging, tapping profile, ripple control, Norway, France, Finland, Sweden,
 Germany, Switzerland.

Norwegian Water Resources and Energy Directorate
Middelthuns gate 29
P.O. Box 5091 Majorstuen
N-0301 Oslo
Norway
Telephone: 22 95 95 95
E-mail: nve@nve.no
Internet: www.nve.no

March, 2021

Preface
The European Union is making substantial efforts to reduce CO2 emissions in order to meet global
climate challenges. Phasing out fossil energy generation and decarbonisation of the European
heating sector will contribute to that goal. However, intermittent electricity generation such as wind
and solar, increases the importance of demand-side flexibility.

In many countries, electric storage water heaters (ESWHs) represent a large and important source of
flexibility. The total stock of ESWHs in Europe corresponds to the daily storage capacity of more than
120 GWh and a daily flexible capacity of 20 GW. This equals a third of the installed nuclear capacity
in France, the entire installed capacity of Czechia, or more than the generation capacity in Finland.

The analyses in this report are conducted by Thema Consulting Group, commissioned by NVE. The
report explores the size and the potential value of the flexibility in the stock of ESWHs in the
European electricity system. It describes the flexibility characteristics of ESWHs and how ESWHs
have several advantages compared to other sources of flexibility: fast reacting, high cyclicity, low
latency, short resting time, defined capacity, affordable, and low impact on life expectancy and user
comfort.

A narrow focus on energy efficiency requirements at single product level may reduce the ability of
products to provide important flexibility and power reducing capabilities for the overall energy
system and the distribution grid. Large water heaters with load profiles XXL-4XL were phased out
from the single market in 2018, as a result of the strict ecodesign energy efficiency requirements in
regulation 814/2013. The regulation is currently being revised by the EU. The energy efficiency
requirements introduced in 2018 reduced the flexibility contribution from new ESWHs. Further
restrictions on the ESWH will remove or significantly reduce flexibility from ESWH.

The report shows value estimates for alternative flexibility services that range from 8 to almost
500 €/kW/year, depending on the market and the time horizon. It concludes that flexibility from
ESWHs can provide local balancing in interaction with local demand and local generation, like
Electric Vehicle charging and PhotoVoltaic generation. The ESWHs represent flexibility within a
building (behind the fuse), within a smaller grid area or local energy community, within a distribution
grid, and in the central energy system, both in terms of energy balancing and grid operation.

We hope this report gives better insight into how ESHWs can contribute to flexibility in an energy
system with an increasing share of intermittent electricity production.

Inga Nordberg Ingrid Ueland
Director, Head of Section,
Energy and Licensing Department Section for Policy Instruments

Public
 ISBN nr. 978-82-8368-079-9

Commissioned by NVE
2/17/2021

THEMA Report 2020-17

THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

 About the project About the report
 Project number: NVE-20-01 Report name: Value of flexibility from
 electrical storage water
 heaters

 Project name: The value of ESWHs as Report number: 2020-17
 flexible distributed and
 aggregated storage facility for
 Demand Side Management

 Client: Norwegian Water Resources ISBN-number: 978-82-8368-079-9
 and Energy Directorate, NVE

 Project leader: Berit Tennbakk Availability: Public

 Project participants: Mina B. Ryssdal Final version: February 17, 2021
 Kristine Fiksen
 Ole-Kristian Ådnanes
 Christian Holm Christiansen
 (Teknologisk Institut)

 Brief summary
 Flexibility in many forms and locations will be necessary in for cost-efficient and safe operation and
 balancing of the future power system. This report explores the potential role and value of flexibility
 provided by Electrical water heaters (ESWH). ESWH can provide a range of relevant flexibility services,
 ranging from fast response to diurnal load shifting, and both locally and on a system level. The value of
 the flexibility depends on the needed flexibility characteristics and the cost of alternatives. The value
 estimates for individual flexibility services range from 8 to almost 500 €/kW/year, depending on the market
 and the time horizon. However, while new solutions and new technologies are developed, ESWHs
 represent an existing and proven flexibility resource that is highly distributed and already utilized in
 several systems.

 About THEMA Consulting Group
 Øvre Vollgate 6 THEMA Consulting Group is a Norwegian consulting
 0158 Oslo, Norway firm focused on Nordic and European energy issues,
 Company no: NO 895 144 932 and specializing in market analysis, market design and
 www.thema.no business strategy.

Disclaimer

 Unless stated otherwise, the findings, analysis and recommendations in this report are based on publicly available information and commercial reports.
 Certain statements in this report may be statements of future expectations and other forward-looking statements that are based on THEMA Consulting
 Group AS (THEMA) its current view, modelling and assumptions and involve known and unknown risks and uncertainties that could cause actual results,
 performance or events to differ materially from those expressed or implied in such statements. THEMA does not accept any liability for any omission or
 misstatement arising from public information or information provided by the Client. Every action undertaken on the basis of this report is made at own
 risk. The Client retains the right to use the information in this report in its operations, in accordance with the terms and conditions set out in terms of
 engagement or contract related to this report. THEMA assumes no responsibility for any losses suffered by the Client or any third party as a result of this
 report, or any draft report, distributed, reproduced or otherwise used in violation of the provisions of our involvement with the Client. THEMA expressly
 disclaims any liability whatsoever to any third party. THEMA makes no representation or warranty (express or implied) to any third party in relation to this
 report. Any release of this report to the public shall not constitute any permission, waiver or consent from THEMA for any third party to rely on this
 document.

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CONTENT
SUMMARY AND CONCLUSIONS ................................................................................ 4
1 INTRODUCTION ................................................................................................. 8
2 FLEXIBILITY CHARACTERISTICS OF ESWH .................................................... 9
 2.1 What is the flexibility potential of individual ESWH? .................................... 9
 2.2 How can ESWHs provide flexibility? ......................................................... 10
 2.3 Mapping of flexibility potential from ESWHs in Europe .............................. 12
3 FLEXIBILITY BEHIND THE FUSE ..................................................................... 14
 3.1 Use cases ................................................................................................. 14
 3.1.1 Interaction with electric vehicle charging ................................................... 14
 3.1.2 Interaction with PV generation .................................................................. 15
 3.2 Evaluation ................................................................................................. 16
4 FLEXIBILITY IN THE LOCAL DISTRIBUTION GRID ......................................... 17
 4.1 Use cases ................................................................................................. 18
 4.1.1 Voltage control .......................................................................................... 18
 4.1.2 Grid capacity management ....................................................................... 19
 4.1.3 Congestion management .......................................................................... 20
 4.2 Alternative values ..................................................................................... 20
 4.2.1 Alternatives to ESWH flexibility ................................................................. 21
 4.2.2 Value estimates ........................................................................................ 22
5 FLEXIBILITY IN SYSTEM OPERATION ............................................................ 29
 5.1 Frequency control ..................................................................................... 32
 5.1.1 Real-life examples of aggregation for frequency reserves......................... 34
 5.2 Capacity adequacy and balancing of supply and demand......................... 36
6 OVERALL ASSESSMENT AND OBSERVATIONS OF BENEFITS.................... 37
 6.1 System perspective .................................................................................. 37
 6.2 Barriers and facilitators ............................................................................. 37
LITERATURE ............................................................................................................. 39

THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

SUMMARY AND CONCLUSIONS
The value of flexible resources in the electricity system is set to increase with the transition
to a future low-carbon and renewable electricity system. Flexibility in many forms and
locations will be needed in the balancing of the market itself, but also in grid management
and to defer massive grid investments, and locally, behind the fuse and in local smart
grids. Electrical water heaters (ESWH) represent a distributed and highly flexible resource
that is already utilized in several systems. The future value of the flexibility of ESWHs
depends on the availability and costs of other solutions as well. However, while new
solutions and new technologies are developed, ESWHs represent an existing and proven
flexibility resource.

Demand flexibility is needed to manage the power system of the future
Traditionally, the balancing of the electricity system in Europe has been secured by large, thermal
power plant located close to consumption centres. In contrast, the future low-carbon energy system
will be dominated by intermittent and distributed generation capacity, and system balancing will have
to be secured by new technologies, such as batteries and hydrogen, and by engaging demand-side
flexibility to a much larger extent.
Electrical storage water heaters (ESWH) are already used as a flexible resource in several European
electricity systems. In this study, we assess the potential value that the flexibility of ESWHs
represent. The background for the study is the concern that this flexibility potential may be lost if the
application of energy efficiency standards for ESWHs only regard the efficiency of the singular
product while not taking into account their potential contribution to system efficiency in tomorrow’s
decarbonized energy sector.

Charging of ESWHs can be shifted to help reduce peaks in the power system …
The electricity consumption of ESWHs is highly flexible. Due to the capacity to store hot water, the
charging of ESWHs can be shifted without loss of comfort to the consumer, largely without loss of
efficiency, and without reducing the lifetime of the ESWH. And they react fast, the load can be
automatically switched off and on in a matter of seconds.
If the ESWHs are not controlled, they will typically be charged during the morning and afternoon
peaks in the power system. Charging can easily be shifted to off-peak periods via simple or smart
signals. By reducing peak load, the need for costly investments in both generation and grid capacity
can be reduced.

… and already represents a significant demand-flexibility potential
ESWHs are widespread in many European countries. In total, the stock of primary water heaters in
Europe make up a daily flexible capacity corresponding to a third of the nuclear capacity in France
and the entire installed capacity of Czechia. The daily controllable storage capacity corresponds to
the total storage capacity of 3 million Nissan LEAF EVs. Moreover, ESWHs represent a highly
distributed flexibility potential as they are already found in numerous buildings, including homes.

ESWHs may reduce peaks and increase self-consumption
The energy transition and changes in consumption patterns are changing electricity demand and
peak loads. In households, the introduction of induction hobs, more electrical heating, high pressure
washers, some heat pumps without soft start, and electrical vehicle charging implies higher peak
loads. Roof-top solar PVs imply a demand for storage when household generation exceeds
household consumption. By storing excess PV generation, studies show that self-consumption can
increase as much as 60 percent.
Not all European households have fuse and connection capacities that readily accommodate local
EV charging and PV generation. While the EV charging profile can also be controlled, interaction

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

with ESWHs can provide additional flexibility at a low cost. Hence, costs related to expansion of fuse
size and connection capacity can be avoided and the peak load reduced.

Flexibility is an alternative to expansion of distribution grid capacity
In distribution grids, utilizing flexibility can be the cheapest and fastest way to handle more peaky
load patterns and the connection of new consumption and distributed generation. When peak load
increases but occurs in fewer hours and less frequently, and demand projections become more
uncertain, the business case for grid capacity investments grows weaker. Moreover, grid expansion
is costly and takes time, and access to flexibility can make it possible to connect new generation and
load without having to wait for capacity expansion (early connection).

Relevant flexibility can be provided by several sources
The attractiveness of flexible use of ESWHs in grid operation and for system balancing depends on
the characteristics of the challenges at hand and the costs of alternative flexibility solutions.
Studies show that flexibility, if used in a grid-friendly manner, can contribute to more efficient grid
operation, better planning and reduced investments via different services, such as voltage control,
grid capacity management, and congestion management. While several flexibility resources can
contribute, ESWHs have the necessary characteristics – well-defined storage, high cyclicity, short
resting time – to provide all the relevant distribution grid flexibility services.
Demand-side flexibility can come from ESWHs, EVs, heat pumps and changes in behaviour.
Alternatives to demand-side flexibility include system battery solutions and possibly contributions by
distributed generation. Different flexibility alternatives have different characteristic and may
complement each other.

The value of flexibility from ESWHs depends on the costs of alternative sources
The system value of ESWH flexibility is the alternative cost, i.e. the costs that are incurred if the
flexibility from ESWHs is not available in future. Ideally, market prices would reflect the alternative
value of ESWH flexibility. If market prices are not available, an alternative approach is to estimate
the costs of the cheapest relevant alternative.
We have made estimates based on both approaches and for different flexibility services. Relevant
data is however hard to come by and the estimates should be viewed as illustrative guesstimates
rather than best guesses.

Estimates based on market prices
▪ DSO flexibility prices: The first group of estimates is based on the total per kW remuneration
 (availability and activation) for different flexibility services for a GB DSO. DSO flexibility markets
 are however in their infancy, and current market prices are but weak indicators of the value of
 flexibility for DSOs.
▪ Frequency Containment Reserve prices: A Swedish pilot tested the use of aggregated ESWH
 participation in the FCR-N market. Based on Swedish 2020 FCR-N prices we have estimated
 the annual capacity remuneration per kW per year. In addition, net energy compensation would
 be paid for activation, depending on activation frequency and market prices.

Estimates based on alternative costs
▪ System battery costs: Batteries are expected to be necessary to provide flexibility to distribution
 grids in the future. The cost of batteries with characteristics comparable to ESWH thus indicate
 the value of future ESWH flexibility. The estimates are based on the per kW capital cost of
 batteries providing different flexibility services.
▪ Future redispatch costs: Based on a study by Frontier Economics, the net cost of demand
 response is compared to the cost of CHP and biomass for future redispatch (upregulation) in
 Germany.

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

▪ Cost of peak load capacity: The value of flexibility is estimated based on the cost of peak load
 reserves. In France, the value of ESWHs is generally regarded as most valuable for the
 balancing supply and demand through down-regulation in peak load hours, thus reducing
 investments in peak plant capacity.
The estimates are summarized in the table below.

Summary of alternative value estimates for flexibility provision
 Power €/kW/year
 Flexibility market prices
 Western Secure market (GB) 110
 Western Dynamic market (GB) 9.2
 Western Restore market (GB) 7.8
 FCR-N market (SE) 75
 Cost of alternatives
 Battery cost system stability 346–474
 Battery cost wholesale market 63–391
 Battery cost behind-the-meter 246–336
 CHP and biomass capacity (DE) 50
 Peak load reserve 40–60

Notably, the prices in the DSO markets are far below the cost of batteries. The values are however
likely to vary by location, by DSO, and by season. The prices also reflect current values, while battery
costs are likely to be a better estimate of the future value of flexibility. Battery costs are however set
to be reduced, and the value of flexibility expected to increase in the future.
ESWHs are already aggregated and used by transmission system operators for provision of
frequency control and to balance supply and demand in peak hours. All flexibility markets are
however not open to participation by aggregated demand-side flexibility yet. In addition, potential
flexibility values have been demonstrated in several pilots.

Remarks
It should be noted that the estimates are not readily comparable as they rest on different sources,
different services and different assumptions. They do however illustrate that there is a potential
significant flexibility value contained in the presence of ESWHs in the electricity systems.
It should also be noted that the estimates are made for singular use cases, while in reality, the
flexibility can be used for several purposes and both on distribution and transmission and system
level. Still, the values cannot be just be summarized, as there will be some simultaneity in the
challenges for which flexibility can be used, and all capacity will not be available at the same time.
The extent of such simultaneity will vary with system characteristics.
The future value of flexibility from ESWHs will also depend on the development of marketplaces,
alternative technologies, smart technology, and alternative costs, such as the cost of batteries.

Conclusion: The flexibility characteristics of ESWHs represent a positive option value
In summary, the flexibility from ESWHs can provide local balancing in interaction with local demand
and local generation, within a building (behind the fuse), within a smaller grid area or local energy
community, within a distribution grid, and in the central energy system, both in terms of energy
balancing and grid operation. There are several alternatives to the flexibility offered by ESWHs, but
ESWHs have some very attractive characteristics:
▪ They are highly distributed, which means they can contribute to grid operation in areas with few
 alternatives

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

▪ They can respond fast and frequently to automatic signals with very low cost
▪ Their flexible use does not depend on substantial additional investment costs nor impose
 additional costs on the consumer
▪ The technology to control them is already demonstrated for a long time and in different
 contexts
In order to utilize the substantial flexibility potential from ESWHs (and other distributed resources),
individual loads must be aggregated, aggregators must be given access to flexibility markets, and
flexibility markets must be established.
While the value estimates are highly uncertain, it is clear that the volume of flexibility that will be
needed and the alternative value of flexibility is set to increase in the future electricity system. It is
likely that contributions from several resources will be needed in order to keep costs down.

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

1 INTRODUCTION
Engaging consumers and utilizing demand-side flexibility in the safe operation of the electricity
system is a crucial part of the transition to the European low-carbon economy. While the transition
implies replacement of conventional thermal generation with variable renewable generation and
electrification that change load patterns, exploiting demand-side flexibility can contribute to lowering
total system costs related to investments in generation and grid capacity.
Demand-side flexibility can come from several sources and new smart technology makes it possible
to control different parts of end-users’ electricity consumption at low cost. Electrical Storage Water
Heaters (ESWH), found in many European homes, are highly flexible appliances that in some
countries already provide flexibility services to system operators. ESWH may support the power
system through energy storage applications enabling very fast reaction times. In future, the flexibility
potential in ESWHs may increase as fossil fuel-based water heating is phased out and smart
metering and control become widespread.
Now there is a worry that strict energy efficiency requirements in the current Ecodesign regulation
(EU) No. 814/2013 and that may result from the ongoing revision of both the Energy Label egulation
(EU) No. 812/2013 and the Ecodesign regulation, may effectively remove or significantly reduce the
volume and flexibility of ESWHs.
This report explores the potential value of the flexibility contained in the stock of ESWHs in the
European electricity system by way of their flexibility characteristics and the cost of alternatives. We
start by describing the flexibility characteristics of ESWHs and how ESWH charging may interact
with crucial household loads such as EV charging and PV generation behind the fuse. Then we go
on to explore the potential cost savings by using ESWH in the operation of distribution and in system
operation. In conclusion, we discuss the overall value of ESWHs as a flexible resource and reflect
upon the wider implications of forgoing this flexibility potential in the transition to the future zero-
carbon energy system.

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

2 FLEXIBILITY CHARACTERISTICS OF ESWH
The charging of electrical storage water heaters is highly flexible. Charging can be
switched on and off within seconds and the charging pattern can be shifted diurnally,
largely without loss of efficiency and without loss in comfort for consumers. The larger the
storage tank, the higher the power capacity, and the higher temperature in the tank, the
more flexible is the ESWH. The short response time implies that ESWH can contribute to
frequency and voltage control in grids. Moreover, controlling ESWH charging can flatten
the diurnal load profile of a household significantly. While normal user profiles imply that
ESWH charging contribute to the morning and the afternoon peaks, charging can easily be
shifted via simple or smart signals. The prevalence of ESWHs differ among European
countries. We estimate that the total stock of primary water heaters corresponds to a
controllable daily storage capacity of more than 120 GWh and a daily flexible capacity of
20 GW, which is more than the installed generation capacity in Finland.1

2.1 What is the flexibility potential of individual ESWH?
Electrical Storage Water Heaters consist of a water storage tank and a heater element. Its basic
function is to provide hot water supply to a household or a building. The ability to store hot water for
several hours with little loss in temperature, implies that, if beneficial for other reasons, the diurnal
heating cycle can be altered independently of the tapping cycle. This flexibility in power demand from
water heaters has already been used for balancing in the power systems, e.g. in France, Finland
and Switzerland, for several decades, using load management often referred to as “Ripple control”
How flexibly an ESWH can be operated within a day depends on the user profile, the power capacity,
and the energy storage capacity.

User profiles
In standard usage, the heater element will be turned on and off according to a pre-set water
temperature. If the temperature falls below this pre-set level, the heater element will immediately
switch on. When the pre-set temperature is reached, the heater element is automatically turned off.
Then the tank can store hot water for several hours until hot water is tapped, cold water is inserted,
and the water temperature falls.
The tapping profiles of individual ESWH depend on the usage patterns in the residence but with a
clear concurrence of consumption between users, which also coincide with the general electricity
consumption for the residential sector. Figure 1 shows the user profile of an ESWH according to a
standard XL tapping profile used in Ecodesign regulation. The green line bars represent the tapping
profile, the blue line the tank temperature, and the red line the power usage of the tank. As seen in
the profile below there are some heat losses in the ESWH tank. However, the standing heat loss is
relatively small for ESWHs with normal consumption, and in the example below heat loss never
causes the temperature to fall below the set-temperature activating the heating power.

1 Installed power generation capacity in Finland was 17.7 GW in 2019 (Energiavirasto, 2020)

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

Figure 1: Example consumption for a 300-liter/3 kW ESWH with XL tapping profile and
standard charging

Power (kW) and energy storage (kWh) capacity
The desired hot water demand defined in the tapping profile can be provided from ESWHs with
different combinations of tank volume, storage temperature and power capacity. ESWHs for
residential use usually have a power range of 1–3 kW. For a given power range, the storage capacity
depends on the tank volume and storage temperature. The storage capacity is approximately 14
kWh for a 200-liter tank with a 2 kW heating element (heated from 10 °C to 70 °C), and approximately
21 kWh for a 300-liter/3 kW ESWH.2
Smaller water heaters with less storage capacity require a heating element with a higher power rate
and/or more frequent charging and/or higher temperatures to cover the same hot water demand.
With less storage capacity it is more likely that the heating element is charged more frequently than
with a larger tank. Thus, smaller ESWHs can be less flexible in their power demand than ESWHs
with larger storage volumes.

2.2 How can ESWHs provide flexibility?
In order to change the charging profile of the ESWH, it must be possible to control the power element
in the water heater based on a signal. When receiving a signal, the ESWH responds in less than a
second.
The ESWHs can be controlled with various degrees of complexity, from a simple relay to advanced
smart control systems. Demand-side management of ESWHs for system use has historically been
obtained by ripple control. In ripple control a high-frequency control signal is transmitted via the
power grid. When the unit receives the high-frequency signal, the load is switched off. Controlling
the devices through ripple control gives the system operator a direct control over the customer’s
appliances. A smarter control of the ESWH can be achieved by installing an electronic thermostat
with a controller. With smart control the customer can allow the unit to be controlled automatically by
local optimization or remotely by a third-party. An ESWH is 10-20 per cent more expensive with a
smart control system installed.3 Smart control can also include two-way communication where it is
possible to observe the state of the ESWH and whether it is on or off, increasing the control precision.
The tank temperature can be raised temporary to add energy content to the tank as a flexibility
measure.4 This requires a thermostatic controller where the setpoint change can be activated, as
well as a mixing valve diluting the hot water supplied to the end user to avoid scolding. A higher
temperature in the tank will incur somewhat higher heat losses, depending on the required tapping

2 Source: OSO Hotwater, assuming source water temperature of 10 °C
3 Source: OSO Hotwater
4 The hot water temperature in ESWHs in Europe is often limited to 55 °C due to calcareous groundwater, but

the damage would be minimal if a temperature increase is rare.

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

pattern. According to the current Ecodesign regulation (EU) No. 814/2013 and the test standard EN
50540, ESWH with ‘smart control’ can get an efficiency bonus. ‘Smart control’ includes adaptive
control that lowers the tank temperature when the ESWH is not in use over a longer period of time.
This type of smart control lowers the energy content for flexibility of the typical ESWH by up to 50%.
However, the impact of a change in the temperature setpoint on the flexibility potential is outside the
scope of this report. The assumptions on the availability of flexibility provision from ESWHs are
based on previous studies.
Standard ESWHs are either off or charging at full power capacity. There is no technical limit to how
often the power element can be switched on and off nor any technical requirements for intermittent
resting period. Thus, ESWHs are flexible loads with short latency and high cyclicity, this is a clear
distinction to other technology types used for water heating. ESWH can operate both by reducing
and increasing the consumption, depending on the charging state, without directly affecting the user.
Manufacturers can implement electronic modulation or stepwise charging through multiple elements
for adjustment of power use if there is a market for such functionality. Such functionality may however
significantly increase the costs of the ESWH.

Load management strategies
The technical characteristics of ESWH as a flexible resource enables different strategies to control
the ESWH to deliver various types of flexibility.
▪ Load shifting: The charging of an ESWH can be shifted to a desired time period. The user
 profiles and the storage capacity (cf. Figure 1) suggest that it is possible to shift the charging
 profile significantly without any loss of comfort to the users (desired hot water supply). Load
 shifting can for example be achieved by preventing the power element from starting in high
 price periods.
▪ Flattened energy consumption: The energy consumption within a time period (kWh/h) can be
 reduced with an intermittent operation of the power element where the charging period is
 doubled by turning it on and off for shorter time periods. Alternatively, the consumption can be
 flattened by reducing the charging power (kW) if possible.
▪ Fast regulation: The ESWHs can react fast if given a signal and can operate both up and down
 making ESWH suited for fast regulation.
In a report about the flexibility in the Nordic electricity market, Statnett (2018)5 has calculated the
maximum response a small household can provide without loss of comfort. The resulting flexibility
with two different load management strategies are shown in Figure 2. The figure shows that, if not
controlled, the ESWH contributes to the peak load of the household in the morning and the afternoon,
and that it represents a significant flexible load if controlled.

5 Flexibility in the Nordic power market 2018–2040. Analysis report. (In Norwegian.)

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

Figure 2: Examples of load management strategies and response of ESWHs

Source: Statnett (2018)

2.3 Mapping of flexibility potential from ESWHs in Europe
In addition, the total amount of flexible capacity of ESWHs in an area is determined by the prevalence
and characteristics of the ESWH stock and their grid connectivity. Water heaters are installed in
virtually all buildings. However, not all water heaters are heated by electricity, and electric dedicated
water heaters include both electric storage types (ESWHs) and electric instantaneous types (EIWHs)
without the storage ability and hence limited flexibility. The electric dedicated water heaters are
located in the low voltage grid (230V- 400V). Thus, ESWHs in Europe represent extremely
distributed flexibility source in the electrical energy system, but the prevalence of ESWHs in Europe
varies between countries.
An overview of the stock of ESWHs (columns) and the share of ESWHs (diamonds) in the dedicated
primary water heater park in European countries are presented in Figure 3.

Figure 3: ESWHs in the primary water heater park per country (2014)
 16,000 100 %
 14,000 90 %
 80 %
 12,000
 70 %
 10,000 60 %
 8,000 50 %
 6,000 40 %
 30 %
 4,000
 20 %
 2,000 10 %
 0 -
 Austria

 Latvia
 Croatia
 Czech
 Denmark

 Finland
 France

 Italy

 Romania

 Spain

 UK
 Belgium
 Bulgaria

 Germany
 Greece

 Ireland

 Netherlands

 Poland
 Estonia

 Lithuania

 Slovenia
 Slovakia
 Portugal

 Sweden
 Norway
 Hungary

 ESWHs - Primary water heaters (>30L) in '000 units Share of primary water heaters that are ESWHs (>30L)

Source: European Commission/VHK (2019) and Multiconsult (2017)

Primary water heaters are the main, central water heaters in a building. In addition, a household can
have secondary water heaters which are smaller water heaters with storage tanks less than 30 litres.
Electric water heaters with larger storage capacity are more flexible than ESWHs with smaller
storage volumes. Hence, our estimated flexibility potential is based on the primary water heater park.
The average volume of primary ESWHs (storage capacity >30 litres) in the EU is 147 litres. From
Figure 4 it can be seen that France and Finland have the largest average volumes.

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

Figure 4: Average storage volume of ESWHs >30 L per country (2014)

Source: European Commission/VHK (2019

ESWHs with historically traditional thermostats (bimetal) have an average lifetime of 15–30 years,
while an electronical thermostat has an expected lifetime of 6-11 years. The stainless-steel tanks for
pressurized water supply (>8 bar) used in typical ESWHs in Norway have an average lifetime of 20–
30 years and more when used with the normal Norwegian water supply, very slightly acidic surface
water. Typical warranty periods for the stainless-steel tank are at least 10 to 12 years.

Total flexibility estimates
In France, 80 % of the 15 million ESWH units deliver flexibility to the electricity network by active
demand-side management via an adapted tariff offer using ripple control. The 11–12 million
managed units represent an annual energy consumption of 25 TWh and an installed capacity of 18
GW, of which approximately 50 % can be shifted each day, providing a daily flexible capacity of 8–
9 GW and a controllable daily storage capacity of more than 50 GWh.6
The numbers from France can be used to estimate the flexibility potential in the EU. As the average
volume for primary ESWHs in all of EU is 147 liters, while it is 258 in France, the available capacity
per ESWH in the EU is assumed to be 40 % lower than in France. The 57 million ESWH units in the
EU (from Figure 3), assuming 80 % contribute with demand-side management and 50 % of the
consumption can be shifted, there is a potential of 20 GW of daily flexible capacity and a controllable
daily storage capacity of more than 120 GWh from Electrical Water Storage Heaters in the EU.7 A
daily flexible capacity of 20 GW from ESWHs in the EU corresponds to a third of the nuclear capacity
in France or the entire installed capacity of Czechia. The daily controllable storage capacity
corresponds to the total storage capacity of the batteries of 3 million Nissan LEAF EVs.8
The flexibility potential from ESWHs estimated in this report is a theoretical potential assuming that
the units can be controlled when available. We do not have data on the share of ESWHs that are
currently controlled or equipped with smart control.

6 EDF position paper on review studies for Ecodesign and ecolabelling regulations for water heaters and
storage tanks (2020)
7 Calculation: 57 ∗ 80% ∗ 8.5 ∗ 60% /

11.5 = 20 
8 Based on the standard Nissan LEAF from 2020 with 40 kWh battery.

https://www.nissanusa.com/vehicles/electric-cars/leaf/features/range-charging-battery.html

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

3 FLEXIBILITY BEHIND THE FUSE

The energy transition changes household load patterns. Notably, induction hobs, more
electrical heating, high pressure washers, some heat pumps without soft start and
electrical vehicle (EV) charging implies higher peak loads, and roof-top solar PVs imply a
demand for storage when household generation exceeds household consumption. While
EV charging can provide flexibility as well, the interaction with ESWHs can provide
additional flexibility at a low cost, in particular during evening peak hours. By storing
excess PV generation as hot water, studies show that self-consumption can increase as
much as 60 percent. Thus, ESWH flexibility and storage can interact beneficially with EV
and PV behind the fuse, indirectly also reducing the need for grid capacity expansion.

Relevant changes in consumption patterns in residential buildings include use of energy efficient but
power consuming appliances like induction hobs, electrification of transport and the installation of
EV charging and installation of roof-top solar panels. Both trends imply that the customers’ load
pattern and maximum load increases. These changes may translate into higher demand for grid
capacity but may also be managed by flexible charging “behind the fuse”. In this section we describe
how utilisation of a flexible ESWH unit can be used for load shedding and shifting within the users’
main fuse. For a prosumer, shifting the charging pattern of its ESWH can balance own production
and give better utilization of in-house energy resources.
Figure 2 (see section 2.2) shows that the ESWH electricity consumption can be a major contribution
to the morning and evening peak consumption within a household, but also illustrates that it is a very
flexible load that can be used to shift load away from peak load hours.

3.1 Use cases
In order to illustrate the value of ESWH flexibility and storage behind the fuse, we describe two
relevant use cases: co-optimization with EV charging with EV charging and utilization of in-house
distributed energy production from PV. In addition, ESWHs can also interact with other (stiff) loads.

3.1.1 Interaction with electric vehicle charging
Unrestrained EV charging at home can significantly increase peak consumption within the
household, especially since charging when returning home would increase the common “afternoon
peak” in household electricity consumption. The power level of EV chargers ranges rather widely,
where the residential charger typically is between 3.3 kW and 7 kW but can go up to 22 kW for three
phase fast chargers. For consumers wishing to use higher power levels for charging at home,
upgrades of the connection with the local grid are often required.9
ESWH can interact with EV charging as ESWH “charging” can be shifted in order to make room for
EV charging at times when the ESWH would normally also be charged. Thereby, a consumer with
an ESWH can install EV charging without having to increase the maximum capacity by the
upgrading the grid connection and fuse size.
An example of a consumption profile for a Norwegian household with a 7kW EV charging can be
seen in Figure 5.

9Amsterdam Roundtable Foundation and McKinsey & Company, The Netherlands 2014, Electric vehicles in
Europe: Gearing up for a new phase?

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Figure 5: Hourly consumption in a week for a large Norwegian household with EV-charging
 15

 10
kWh/h

 5

 0
 1:00
 6:00
 11:00
 16:00
 21:00
 2:00
 7:00
 12:00
 17:00
 22:00
 3:00
 8:00
 13:00
 18:00
 23:00
 4:00
 9:00
 14:00
 19:00
 0:00
 5:00
 10:00
 15:00
 20:00
 1:00
 6:00
 11:00
 16:00
 21:00
 2:00
 7:00
 12:00
 17:00
 22:00
 Household including EV-charging EV-charging only

According to this profile, the main EV charging for the consumer occurs 4-6 times a week in the
evening, increasing the peak load by 7 kW up to 15 kWh/h. The peak load contribution of the EV
charging depends on the capacity of the EV charger. Assuming the EV charging coincides with hot
water consumption, the peak load can be reduced by shifting the reheating of the ESWH to later in
the evening when the EV charging has completed. With a 3 kW ESWH the peak load could be
reduced from 15 kWh/h to 12 kWh/h. With enough storage capacity in the ESWH the load can be
shifted without loss of convenience to the user. Another possibility is to shift or reduce the capacity
of the EV charging but this option may be more restricted due to user characteristics, i.e., involve a
greater degree of inconvenience. Controlling the charging of the ESWH and the EV can be combined
to flatten the consumption with minimal loss of convenience to the user. Thereby, the consumer can
install EV charging avoiding electrical upgrades.

3.1.2 Interaction with PV generation
Instead of feeding excess PV generation into the grid, e.g. on sunny summer days when electricity
consumption is low, the PV electricity can be used to heat water in the ESWH water tank instead of
having to be curtailed due to insufficient feed-in capacity in the grid or excess system power supply.
Fronius, an Austrian technology company, has launched a consumption regulator designed to use
excess solar power to heat water. The product, called Fronius Ohmpilot is optimizing self-
consumption of PV generation through intelligent control of heating elements, including hot water
storage tanks. Solar power can thus provide a family home with average water consumption with
most of their hot water during spring and summer.
According to Fronius, the result is maximum self-consumption, a reduction in the household’s CO2
footprint, and less wear on the building’s main heating system during the summer months.10 Figure
6 illustrates how installation of a Fronius Ohmpilot can reduce curtailment of excess PV generation
by using it in the water heating system instead. Fronius claims that the consumer’s self-consumption
can be increased to over 60 % by heating water with excess solar energy as illustrated in the figure
below.

10https://www.fronius.com/en/solar-energy/installers-partners/technical-data/all-products/solutions/fronius-
solution-for-heat-generation/fronius-ohmpilot/fronius-ohmpilot

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THEMA-Report 2020-17 Value of flexibility from electrical storage water heaters

Figure 6: Illustration of how the Fronius Ohmpilot reduces curtailment of PV generation

Source: www.fronius.com

Avoiding energy curtailment has both private and socioeconomic value as the resource do not go to
waste.

3.2 Evaluation
The interaction between ESWHs as a flexible storage facility and other loads and resources behind
the fuse can reduce the maximum capacity, and hence the necessary fuse size and grid connection
capacity for a household. Interaction with distributed generation can increase self-consumption of
renewable energy. The reasoning also suggests that ESWH provides a flexibility potential for local
energy communities and within smaller grid areas where resources are aggregated and shared
locally.
The flexibility giving benefits behind fuse could also be provided by alternative solutions, such as
other flexible loads, e.g. heat pumps and EVs and others energy storage solutions such as batteries
installed behind the meter. In the future electricity system such local flexibility solutions are expected
to all contribute to the balancing of local systems, and to be optimized according to the specific
situations and system demands.
If the end-user or prosumer can avoid increasing the fuse size when installing new energy efficient
power consuming appliances, EV charging or solar panels, this implies that an additional value
accrues to the grid company since it reduces the maximum load of the consumer (due to load shifting
and storage). Flattening the load profile may also reduce the balancing cost of the DSO and TSO.
In several countries part of the grid tariff is based upon the size of main fuse in the building, to keep
the main fuse as low as possible but as high as necessary in order to avoid electricity faults and
overheating of the electrical components, is an imperative motive.
The value of the flexibility from ESWHs behind the fuse is not quantified here as most of the value
of reduced peak load is likely to accrue to the grid company. This is not to say that if will not be
attractive for end-users to charge ESWHs flexibly. Benefits can accrue to the end-user in the form
of control systems installed by aggregators, enabling energy savings, and/or through reduced grid
tariffs or remuneration for flexibility services rendered to the distribution or transmission grids. Such
remuneration or tariff reductions should however reflect the value of increased quality and security
of supply for the grid companies. The value of flexibility from ESWHs for the electrical power system
will be covered in the following chapters.

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4 FLEXIBILITY IN THE LOCAL DISTRIBUTION GRID

Different flexibility resources, if used in a grid-friendly manner, can contribute to reduced
investment costs in distribution grids. ESWHs have the necessary characteristics – well
defined storage, high cyclicity, short resting time – to provide all the relevant distribution
grid flexibility services: voltage control, grid capacity management, and congestion
management. By aggregating several ESWHs and ESWHs and other sources of demand
side flexibility, studies show significant potential cost savings. The value of ESWH as a
flexibility resource depends on the cost of alternatives, ranging from investments in grid
elements, including storage, batteries, EVs, heat pumps and other demand-side flexibility,
and distributed generation. DSO markets for flexibility are in their infancy and current
market prices are weak indicators of the value of flexibility for DSOs. Different battery
solutions have comparable characteristics as ESWH and probably provide the best basis
for assessing the alternative value of flexibility from ESWH.

While flexible loads such as ESWHs can provide benefits to the individual grid customer in terms of
avoided costs related to fuse size and connection capacity, larger benefits of demand-side flexibility
are likely to be realized in the distribution grid.
Historically, the need for electricity infrastructure has grown in tandem with economic growth. The
focus of distribution companies has been to expand grid capacity accordingly. With ample capacity
in distribution grids and ample flexible generation in the central system, the balancing of the system
has been the responsibility of system operator. Now, a number of trends changes this logic:
 • Grid capacity expansion is less economic: Peak load increases more than energy demand
 due to energy efficiency advances and technology development, reducing the utilisation
 rate of grid capacity in general, and of new grid capacity in particular, thus increasing unit
 costs. The trend to increasingly require underground cables instead of overhead lines,
 especially in urban areas, also imply increased unit costs for grid capacity expansion.
 • Loads can be used to balance the system: New technologies make it possible to exploit
 consumer flexibility at lower cost. Individual and small loads can be automatically
 controlled. Maximum peaks can be managed by other means than ample capacity margins
 or rationing.
 • Connection of distributed generation: Increased distributed generation poses new flow
 patterns and new challenges in the operation of distribution grids.
In addition, ambitious climate policies have increased the uncertainty in demand forecasting. As
stated in an analysis by Carbon Trust (2016)11 “the need to invest despite uncertainty creates the
possibility for regret, where decisions turn out to be suboptimal and have long-lasting negative
consequences.” Actively using flexible resources can be used as a ‘least-worst regret’ solution. While
traditional grid investments are costly and non-reversible decisions, demand flexibility can offer a
safer path until the uncertainty is resolved. Moreover, “(a)dditional flexibility can also provide ‘option
value’, whereby small investments in flexibility can postpone decision-making on larger investments
until there is better information, hence reducing the need to make potentially high regret decisions.”
Massive investments are expected in European electricity grids in the decades to come. The
European Energy Industry Investments report 202012 refers to projections in World Energy Outlook
(2014) and EC Energy Roadmap 2050. Both imply that infrastructure investments will increase and
that the bulk (75 % plus) of needed investments relate to distribution infrastructure. According to the
Roadmap, the biggest share of the costs for distribution is related to “upgrade and extension of
distribution networks and the development of smart grids”. In the most likely and feasible scenarios,

11 An analysis of electricity system flexibility for Great Britain, Imperial College London
12 https://www.eesc.europa.eu/sites/default/files/files/energy_investment.pdf

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estimates vary from 40 to 50 % increase in annual investment needs above 2011-2020 levels.
Clearly, if these costs can be contained by smart use of cheap flexibility resources, the benefits can
be substantial. This is also a rationale for the interest in flexibility solutions such as batteries and in
the establishment of aggregators, and in the EUs emphasis on engaging consumers in the electricity
market and facilitating the participation of aggregators in different markets. Mechanisms for the use
of flexibility resources and demand-side management in distribution grids are currently not wide-
spread, although several different studies and pilots have demonstrated potentials, possible
technical solutions, and the extent to which consumers respond to different price schemes.

4.1 Use cases
In order to assess the potential value of ESWH for local distribution grids, we first describe relevant
use cases and then go on to estimate the costs of alternative solutions.
We distinguish between three typical use cases for flexibility in distribution grids, based on the
categorization in a report by CEER (2020)13.
▪ Voltage control, where demand-side flexibility is used to manage power quality issues
▪ Grid capacity management, where demand-side flexibility is explicitly taken into account in
 network planning, i.e., the use of demand-side flexibility is planned as part of normal grid
 operation
▪ Congestion management, where demand-side flexibility is used to manage temporary network
 challenges that are either planned or unforeseen.
The challenges have different characteristics which translate into characteristics that the resources
providing the flexibility services must exhibit in order to represent a relevant alternative to grid
expansion. An overview is shown in Table 1.

Table 1: Flexibility characteristics relevant for DSOs
 Characteristic Description
 What time of the year, day(s) of the week, hours during the
 Time period
 day?
 How predictable is the issue and how fast must it be solved?
 Does it happen at certain temperature levels, or is it impossible
 Time
 Response time to predict? How quickly must flexibility respond to solve the
 dimension
 challenge? Can one be notified a day / hour before, or must the
 shutdown be instantaneous?
 Is the issue happening often? Or does it happen very rarely,
 Frequency
 e.g. only in unusual network error situations?
 How much capacity fixes the problem? How big is the voltage
 Capacity
 Volume challenge?
 Energy need / duration How long does the grid issue last? Minutes, hours or days?
 Where do the Where in the grid is the issue located? How does the flexibility
 Location
 challenges occur? response affect the surrounding grid environment?

4.1.1 Voltage control
Voltage control is essential for the quality of electricity supply. Electric appliances are designed to
work within a limited voltage bandwidth around 230/400 V and may be damaged if the voltage is
higher or lower. Voltage quality may be challenged by feed-in of distributed generation in the

13 CEER Paper on DSO Procedures of Procurement of Flexibility

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