How the correlation between electricity prices and emission intensity affects the economic and ecological potential of industrial demand-side flexibility measures

In the scope of the energy transition, many studies proclaim the high potential of industrial demand-side management for providing flexibility to support the integration of volatile renewable energies into the energy system. By shifting loads from times with high emission intensity of the electricity mix to times with lower emissions, demand-side flexibility further contributes to an indirect reduction in greenhouse gas emissions. Although contributions to climate neutrality are welcome for marketing purposes, corporate decision-making processes are mainly driven by cost-based factors. Consequently, flexibility measures are primarily managed with a view to maximizing cost savings. In order to investigate the relationship between cost savings and the emissions reduction potential of flexibility measures, this study analyses the correlation between price signals of the day-ahead market and the emission intensity of the German electricity mix. In addition, the deviations in the cost and emissions savings of flexibility measures are evaluated by optimizing them with regard to the highest possible cost savings and the maximum reduction in emissions. While there is a strong correlation between the day-ahead price and emission intensity, the two optimization approaches show considerable differences in cost and emissions savings. The results indicate that a purely electricity price-driven management of flexibility measures does not exploit a large part of the potential emissions reduction. This gap can be closed by providing suitable incentives to prioritize emissions reduction more strongly in the management of flexibility measures or by taking better account of the current emission intensity of the electricity mix in electricity pricing. • Electricity prices do not fully reflect the emissions intensity of the energy mix. • Cost-driven energy flexibility management reduces the potential to cut emissions. • Emission-based management is unattractive as potential cost savings are unmet. • A large potential of energy flexibility in industry still remains unused.