Demand turn-up in electricity markets: Economic lessons from non-energy sectors

Electricity markets with growing shares of variable renewable energy face an increasingly acute challenge in balancing supply and demand. While demand-side flexibility has traditionally been framed in terms of demand reduction or shifting away from peak periods, these approaches need to be revisited to address periods of surplus renewable generation. This perspective paper conceptualises demand turn-up (i.e. mechanisms designed to raise electricity demand at specific moments or locations) as an economically grounded form of flexibility. It situates demand turn-up within the broader economics literature on flexibility, adjustment costs, and uncertainty, showing that flexibility has historically been treated as a supply-side attribute, with demand assumed to respond passively to prices. It then draws on evidence from other sectors, including capital-intensive manufacturing, waste and recycling markets, and shipping, where suppliers pay consumers to absorb surplus output. These cases share common structural features: inflexible supply, high shutdown or disposal costs relative to marginal operating costs, limited storage, and strong network effects. The paper argues that demand turn-up can be framed as a form of recurring economic response to surplus under structural rigidity. Applying this logic to electricity systems with high variable renewable electricity penetration, the paper suggests that explicitly incorporating demand turn-up into market design can improve the marginal utilisation of renewable assets.