Australia’s market operator contracts Enel X for VPP flexibility

Enel X Australia has secured a contract from the Australian Energy Market Operator (AEMO) to provide 120MW of flexible demand capacity to the Western Australia wholesale energy market.

This contract, part of the Non-Co-optimised Essential System Services programme for the years 2024-2026, sees the company enlisting commercial and industrial customers to participate via its virtual power plant (VPP) programme.

The VPP aggregates the energy savings of these participants, providing additional capacity to the grid when required.

Curtailing electricity usage briefly serves as an alternative to activating backup generators; customers commit to reducing consumption when called upon during peak hours, a measure that may only be invoked on rare occasions to maintain power supply during emergencies.

This practice is hoped to enhance grid reliability during high demand periods and generate revenue for participating businesses that can offer flexible demand capacity.

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Commented Bill Johnston, energy minister of Western Australia: “This is a good opportunity for businesses to support grid reliability as we undergo the transition to new, lower emission sources of supply and manage the phase out of state-owned coal-fired plants.

“Western Australia’s main electricity grid, the South West Interconnected System, needs new forms of power capacity to keep the energy system stable and to keep the lights on during critical times.”

Necessity of demand response

Prior to their contract with Enel X Australia, AEMO issued its 2023 Wholesale Electricity Market Electricity Statement of Opportunities in August 2023, which underscores the necessity of the new programme.

The statement outlines the urgency of developing new generation, storage, demand management and transmission projects to reinforce grid reliability.

According to the statement, approximately 1.3GW of coal-fired generation capacity is expected to retire in Western Australia by 2030-2031, representing roughly 27% of the current market capacity.

As demand rises over this period, this shift is anticipated to result in a capacity gap of 4GW by 2032-2033, equivalent to approximately 83% of the current capacity serving the south-western WA wholesale electricity market.

Said Carl Hutchinson, country manager of ANZ for Enel X: “The energy market needs new ways to provide extra capacity at peak times to balance renewables and businesses need new ways to reduce energy costs.

“The Enel X VPP achieves both those goals, by orchestrating large energy users to curtail their energy usage for short periods a few times each year, in return for revenue.

“This approach to balancing supply and demand is much easier and cheaper than building new transmission infrastructure and generation assets, for the few occasions it is needed.”