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Techno-Economic Modelling of Heat Pump and Flexibility Packages under UK Tariffs

Electrification of domestic heating through heat pumps introduces substantial peak electrical demand, necessitating integrated flexibility packages and thermal energy storage to protect grid stability. Dynamic time-of-use tariffs provide economic signals that enable automated control systems to shift thermal loads away from critical grid stress windows. Techno-economic modelling synthesises physical dispatch constraints and real-world price signals to quantify the operational, financial, and system-level feasibility of residential flexibility in the United Kingdom.

Goal of work

To evaluate the techno-economic performance of integrated heat pump and thermal storage packages under UK time-of-use tariffs.

Methodology

Techno-economic simulation and comparative synthesis of mathematical optimal control literature, dynamic UK tariff structures, and empirical demand data.

Scientific novelty

Bridges theoretical dispatch optimisation and realisable socio-technical constraints to quantify residential heat flexibility value across UK tariff archetypes.

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Master's Dissertation

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Techno-Economic Modelling of Heat Pump and Flexibility Packages under UK Tariffs

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Group

First M. Last

Advisor:

Dr. First Last

City, 2026

Contents

Introduction
Theoretical Foundations of Domestic Heat Electrification and Flexibility
Thermodynamic Principles and Thermal Energy Storage Dynamics
Economics of Time-of-Use Tariffs and Demand-Side Management
Socio-Technical Dimensions of Residential Flexibility Provision
Methodological Framework for Techno-Economic Evaluation
Mathematical Formulation of Optimal Heat Pump Dispatch and Storage
UK Tariff Archetypes and Domestic Demand Profiles Characterisation
Simulation Criteria, Boundary Conditions, and Sensitivity Parameters
Performance Analysis of Integrated Heat Pump and Flexibility Packages
Comparative Operating Cost Reductions across Dynamic Tariff Structures
Peak Load Shifting Efficacy and Grid Congestion Mitigation
Trade-offs between Thermal Comfort, Storage Sizing, and Marginal Economics
Strategic and Policy Implications for the UK Low-Carbon Energy Transition
Regulatory Barriers and Market Design for Domestic Flexibility Aggregation
Synthesis of System-Level Value, Policy Support, and Consumer Adoption
Conclusion
Bibliography

Introduction

Decarbonisation of residential space heating constitutes a central pillar of the United Kingdom strategy to achieve net-zero carbon emissions, accelerating the transition from natural gas boilers to domestic heat pump systems. While widespread electrification substantially curtails direct household emissions, it simultaneously introduces steep peaks in electricity demand during winter evening hours, exerting severe pressure on transmission and distribution networks [4].

Addressing these electrical peak loads requires the deployment of flexible residential assets, including thermal energy storage and smart automated control architectures, to shift heat pump operation toward lower-cost and lower-carbon generation intervals [1]. Dynamic electricity pricing mechanisms, particularly time-of-use tariffs, provide critical financial price signals designed to incentivise consumer load shifting without compromising domestic thermal comfort [4].

However, existing literature reveals a notable disparity between theoretical flexibility calculations and real-world deployment outcomes, driven by control sub-optimality, physical building envelope constraints, and socio-technical adoption factors [5]. Evaluating the economic feasibility and operational performance of domestic flexibility configurations across diverse UK tariff regimes remains essential to prevent network reinforcement bottlenecks and ensure consumer affordability [1], [5].

This paper establishes an integrated techno-economic assessment framework to examine how optimal heat pump scheduling and thermal storage packages interact with varied UK tariff structures. Synthesising mathematical dispatch algorithms, empirical tariff profiles, and socio-technical parameters, this research delivers critical insights into unlocking realisable demand-side flexibility to support national grid stability [1], [4], [5].

Trade-offs between Thermal Comfort, Storage Sizing, and Marginal Economics

The critical synthesis of recent techno-economic evidence demonstrates that deploying thermal energy storage alongside residential heat pumps fundamentally alters domestic load shapes under dynamic pricing structures. Optimisation frameworks applied to domestic space heating reveal that predictive control algorithms utilizing costate estimation can capture substantial operational cost savings under time-of-use tariffs, approaching the theoretical benchmark established by dynamic programming with perfect foresight (2025). Concurrently, empirical evaluations of dynamic tariff implementations confirm that price signals can effectively halve household electricity consumption during peak evening periods, validating the technical feasibility of shifting thermal loads on cold days across diverse building archetypes (2024). However, a pronounced research gap persists regarding the divergence between deterministic optimal control performance and realisable flexibility within uncoordinated residential clusters. While mathematical formulations demonstrate significant demand shifting (2025), empirical realisations depend heavily on automated response fidelity and sustained consumer tariff engagement (2024). Most existing analytical models presume uninterrupted consumer adherence to automated setpoint alterations and overlook the physical degradation of storage efficiency over prolonged cold weather periods. Furthermore, the present modelling framework is subject to methodological limitations, particularly the reliance on static building envelope thermal parameters and idealised household occupancy profiles that omit stochastic occupant behaviour. Addressing these identified limitations requires future research to integrate adaptive socio-technical feedback loops, thereby preventing uncoordinated rebound peaks when aggregated flexible heating assets resume normal thermal regulation simultaneously across local distribution networks.

References

  1. Optimal control of heat pumps with thermal storage under time-of-use tariffs
    James Fleming, Edward Barbour, Andrew Urquhart
    DOI Link
  2. Techno-economic analysis of demand side flexibility to enable the integration of distributed heat pumps within a Swedish neighborhood
    Monica Arnaudo, Monika Topel, Björn Laumert
    DOI Link
  3. Demand-side flexibility of electric vehicles and heat pumps in the Swiss electricity system with high shares of renewable generation
    Zongfei Wang, Evelina Trutnevyte
    DOI Link
  4. Decarbonizing Heat: The Impact of Heat Pumps and a Time-of-Use Heat Pump Tariff on Energy Demand
    Louise Bernard, Andy Hackett, Robert Metcalfe et al.
  5. Evaluating Electric Vehicle and Heat Pump Flexibility Potential: A Socio-Technical Perspective on Demand-Side Flexibility
    Regina Hemm, Viktoria Illyés, Bin Hu et al.
  6. Price-based demand side management: Assessing the impacts of time-of-use tariffs on residential electricity demand and peak shifting in Northern Italy
    Jacopo Torriti
  7. A bi-level model for the design of dynamic electricity tariffs with demand-side flexibility
    Patrizia Beraldi, Sara Khodaparasti
  8. Risk and Reward: Portfolio-based Dynamic Electricity Tariffs for Leveraging Demand-side Flexibility
    Justus Ameling, Gunther Gust

Bibliography

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