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Recent advances in information and communications technology (ICT) have initiated development of a smart electrical grid and smart buildings. Buildings consume a large portion of the total electricity production worldwide, and to fully develop a smart grid they must be integrated with that grid. Buildings can now be 'prosumers' on the grid (both producers and consumers), and the continued growth of distributed renewable energy generation is raising new challenges in terms of grid stability over various time scales. Buildings can contribute to grid stability by managing their overall electrical demand in response to current conditions. Facility managers must balance demand response requests by grid operators with energy needed to maintain smooth building operations. For example, maintaining thermal comfort within an occupied building requires energy and, thus an optimized solution balancing energy use with indoor environmental quality (adequate thermal comfort, lighting, etc.) is needed. Successful integration of buildings and their systems with the grid also requires interoperable data exchange. However, the adoption and integration of newer control and communication technologies into buildings can be problematic with older legacy HVAC and building control systems. Public policy and economic structures have not kept up with the technical developments that have given rise to the budding smart grid, and further developments are needed in both technical and nontechnical areas.

Demand response is a form of demand-side 36 management for altering consumers' electrical 37 demand profiles by means of incentives such 38 as dynamic electricity prices [1]. According 39 to Strbac [2], demand response can reduce the 40 need for investments in electricity generation, 41 transmission, and distribution infrastructure, 42 as well as mitigate negative effects associated 43 with the large-scale introduction of generation 44 from intermittent and variable renewable en-45 ergy sources (RES). Among the multiple meth-46 ods to attain demand response, as discussed by 47 Gellings [3], this paper focusses on load shift-48 ing. In this paper, load shifting is employed to 49 avoid electricity demand at times when power 50 plants with lower efficiency are running and to 51 increase demand at times when renewable en-52 ergy sources are curtailed. There are various 53 methods to attain load shifting with minimal 54 to no impact on process quality [4], including 55 the process of providing heating or cooling in 56 a building context. Load shifting of heating 57 and cooling demand can either be performed 58 manually by the building occupants or auto-59 matically. As shown by Wang et al. [5] and 60 Dupont [6], automatic control achieves higher 61 participation in demand response than man-62 ual control. The smart thermostat, an en-63 abling technology to achieve automatic control 64 for heating and cooling demand [7], has drasti-65 cally increased its market share in recent years 66 [8]. Apart from improving energy efficiency [9], 67 some of these internet-connected smart ther-68 mostats already perform peak shaving while 69 maintaining thermal comfort [10].70 uate the potential benefits of load shifting from 75 an electric system perspective, authors typi-76 cally consider direct load control [11, 12, 13, 14, 77 15]. In this way, applying load shifting to res-78 idential buildings with heat pumps allows nu-79 merous benefits, such as balancing short-term 80 power fluctuations of wind turbines [11], pro-81 viding reserves [12] or voltage stability [13], re-82 ducing wind energy curtailment by up to 20% 83 [14], and reducing CO 2 emissions by up to 9% 84 [15]. 85 On the other hand, studies conducted from a 86 building owner's perspective typically consider 87 a wholesale electricity price profile and assume 88 the actions taken under load shifting do not 89 effect this price profile. For example, Kamgar-90 pour et al. [16] found that for a set of 1000 91 residential buildings, savings of up to 14% can92 be attained with respect to a wholesale elec-93 tricity price profile. Henze et al. [17] attained 94 savings up to 20% by employing the passive en-95 ergy storage present in an office building with 96 respect to an on-peak and off-peak electricity 97 tariff. Kelly et al. [18] also investigated the 98 use of thermal energy storage to shift electric-99 ity demand to off-peak periods, but reported 100 significant increases in energy use. In addition, 101 Kelly et al. observed a loss of load diversity 102 causing a peak d...

h i g h l i g h t sThe CO 2 -abatement cost of residential heat pumps is determined in a future setting. The impact on electricity generation is considered via an integrated model. Multiple building and heating system cases are modeled and compared. Active demand response contributes significantly in lowering CO 2 -abatement cost. Great reductions are achieved in CO 2 emissions, curtailment and peak generation. a b s t r a c tHeat pumps are widely recognized as a key technology to reduce CO 2 emissions in the residential building sector, especially when the electricity-generation system is to decarbonize by means of large-scale introduction of renewable electric power generation sources. If heat pumps would be installed in large numbers in the future, the question arises whether all building types show equal benefits and thus should be given the same priority for deployment. This paper aims at answering this question by determining the CO 2 -abatement cost of installing a heat pump instead of a condensing gas boiler for residential space heating and domestic hot-water production. The electricity system, as well as the building types, are based on a possible future Belgian setting in 2030 with high RES penetration at the electricitygeneration side. The added value of this work compared to the current scientific literature lies in the integrated approach, taking both the electricity-generation system and a bottom up building stock model into account. Furthermore, this paper analyzes the possible benefits of active demand response in this framework. The results show that the main drivers for determining the CO 2 -abatement cost are the renovation level of the building and the type of heat pump installed. For thoroughly insulated buildings, an air-coupled heat pump combined with floor heating is the most economic heating system in terms of CO 2 -abatement cost. Finally, performing active demand response shows clear benefits in reducing costs. Substantial peak shaving can be achieved, making peak capacity at the electricity generation side superfluous, hence lowering the overall CO 2 -abatement cost.