Unlocking thermal flexibility through demand-side response: baseline methodology assessment and heating electrification in the Baltic region

• Assessment of eight baseline methods blends feasibility and performance criteria. • Validation on 39 Latvian loads shows data quality and load type drive suitability. • Baltic market simulations for 85 days show 50 MW DSR raises welfare by €4.3 M and cuts prices. • No single baseline fits all; a portfolio approach best matches assets and markets. • Study provides a base for market-ready baselines and flexibility-led decarbonization. Demand-side response (DSR) flexibility is gaining increasing attention across power systems undergoing the energy transition, where renewable generation now dominates supply patterns. However, its reliable integration remains constrained by baseline methods that fail to accurately capture the operational characteristics of distributed demand resources, particularly thermally driven loads. This research provides a practical, decision-oriented framework for baseline selection, combining a two-stage process of technical feasibility assessment and multi-criteria performance evaluation. Eight baseline-method families are systematically evaluated, with empirical validation using 39 Latvian consumption sites and a Lithuanian hybrid heat-pump and photovoltaic system demonstration. Results show that static historical baselines are insufficient to capture thermal inertia, cyclic heat-pump operation, and cyclic compressor behaviour, while adaptive, weather- and PV-sensitive methods substantially improve accuracy (MAE reduction from 6.65 to 3.62 kWh), ensuring robust and transparent flexibility quantification. Market welfare simulations using 85 days of Baltic 2024 summer day-ahead market data indicate that even modest volumes of price-responsive DSR (5–50 MW) can reduce scarcity-hour market-clearing prices by up to 33 €/MWh and increase substantial social welfare gains (0.59–4.3 million euros) highlighting the tangible economic benefits of improved baseline accuracy. Overall, the study establishes that accurate, integrity-preserving baselines coupled with digital metering infrastructure unlock significant short-term and intraday flexibility, bridging technical precision with system-level market and welfare outcomes.