Customer-centric demand response a key solution for Japan’s energy transition challenges

Japan’s electricity sector is facing the triple challenges in the energy transition of energy security, cost and decarbonisation, writes James Tedd from GridBeyond.

Since the 2011 Great East Japan Earthquake, the nuclear power generation fleet has had its output been effectively mothballed with output below 20% of earlier levels. While there has been growth in the solar sector, most generation is provided by gas and coal. Imported fossil resources contribute to all three of the challenges of the energy transition.

This raises several questions which must be discussed together including: How can we prepare the electricity grid for such a structural change in both supply and demand of electricity? Is the network ready to sustain such a huge and abrupt increase in consumption in the transition to electrification technologies? Can we keep a safe supply of electricity with the phasing out of coal and gas plants and being replaced with high amounts of renewables that only produce electricity when the wind is blowing or the sun shining? Can we control or at least manage the levels of volatility in electricity prices?

As Japan faces its international commitments of 46% decarbonisation in energy by 2030 and over 80% by 2050, decision makers will look to combine proven technologies and international policy measures, with localised measures for their industrial and residential mix.

As a new entrant to Japan, GridBeyond is excited to work in this changing regulatory environment. We are excited to implement the customer centric demand response solutions tailored to demand types and capable of sub second reaction which we have experience of in Europe, USA and Australia.

Demand side measures

Japan’s Ministry of Economy, Trade and Industry (METI)’s Agency for Natural Resources and Energy has outlined a strategic plan which has a heavy focus on demand side measures. Together with energy efficiency requirements for the industrial sector, new systems to encourage the energy transition of the demand side are being developed. New frameworks are being put in place to allow large users to be rewarded for optimising their energy demand in response to the fluctuation of energy supply. Greater sophistication of the secondary energy structure including effective use of distributed energy resources such as batteries is targeted, specifically promoting aggregation businesses utilising these resources.

As renewable generation grows, the fluctuations in the energy market will grow. The 74GW of installed solar energy drive the familiar duck curve of low midday prices and steep ramping rates in the evening. This effect will be amplified as solar installations are doubled this decade and wind deployments make meaningful inroads into the system.

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Electricity supply and demand need to be perfectly balanced for the safe delivery of electricity. Traditionally, fossil fuel-based synchronous generation could guarantee this balance by adapting to the levels of demand in a given period by turning up or down the rate of fuel burnt. However, with the increasing non-synchronous renewable energy in the system (where the level of electricity is dependent on wind/solar resource in a given moment), the less the generation side can reliably guarantee this balance.

Hence, the importance of incentivising the demand side to take an active role as a grid balancing service provider. A combination of existing large demand loads and new demand from electrification technologies in transport and industrial processes can deliver this balancing enabled by smart automation, control and decision making.

New balancing and flexibility products

Other countries and electricity systems have faced these challenges and Japan is able to take the best of elements of these systems in developing their suite of services for the sector.

A whole host of balancing and flexibility products are being developed over the current years. This includes:
● A capacity mechanism which will go live in 2024 after initial advance auctions from 2020. Comparisons can be made to other capacity mechanisms such as PJM and UK with similar advance auctions and product requirements.
● In 2021 the reserve product replacement reserves for FIT was opened to demand aggregators, with day ahead bidding and availability payments for central 45 minute dispatch instructions.
● In 2024 a suite of faster operating providing frequency response will commence. These services will require onsite reaction to changing frequency.

But how will these services be delivered? Every electricity consumer (industrial, commercial or residential) that has flexibility to actively adapt their consumption profile to help keep the grid balance stable can be a demand response provider. This way, for instance, consumers can contribute to avoiding a blackout by actively turning down their consumption in a given hour of the day where there isn’t enough electricity generation.

Additionally, consumers can also actively shift their consumption away from the peak hours of the day (which are typically the hours of highest fossil fuel-based generation), with a customer centric demand response solution able to help these consumers manage their energy at the facility or the individual asset level.

The big incentive in all of this is that consumers that optimally manage their flexibility and respond to these grid balancing events and energy market price signals will save money or even generate actual revenue from the grid operator that will partially offset the monthly cost on the electricity bill.

Further optimisations can be achieved when the consumer has additional types of energy assets on site like a battery, solar PV, electric fleet charging, or new electrified process assets which can allow more tailored control. This gives the companies GridBeyond works with a competitive advantage over their peers.

ABOUT THE AUTHOR

James Tedd is Head of Market Strategy and Risk at GridBeyond. He has over 18 years of energy experience, managing teams, leading innovative projects and applied research in flexibility, storage, solar PV, offshore wind, wave and automotive technologies. He graduated in mechanical engineering from Cambridge University and MIT and has a doctorate in civil engineering from Aalborg University.

GridBeyond has been providing fast demand response services in the UK and Irish markets for many years and after launching in the USA in 2020 launched in Japan in 2021.