Demand response a key element for a reinvented grid to reach net zero

Demand response and energy management are a crucial part of the solution to make Australia’s fast-changing electricity sector work reliably, writes Diogo Cabral, Senior Business Development at GridBeyond.

Renewable energy, green mobility, electrification of heavy industries, green hydrogen production and net zero carbon targets are some of the most important vehicles and simultaneously the most common topics of discussion when someone tackles the topic of climate change.

However, people and businesses often treat these themes in an isolated manner and leave out some crucial questions like: 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 from the switch to electric? Can we keep a safe supply of electricity with the phasing out of coal and gas plants and being replaced with such high amounts of renewables that only produces electricity when there is wind blowing or when the sun is shining? Can we control or at least manage the levels of volatility in electricity prices?

The amount of planning and monitoring required for guaranteeing the safe supply of electricity to everyone’s homes is often underestimated and more so in the current times where we are seeing unprecedented structural changes in electricity sector. For example, if you double the amount of daily electricity consumption by electrifying some of the big industries but you don’t increase the supply of electricity proportionately you will most surely have recurring blackouts.

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Similarly, if you rely too much on one single source of energy generation you will face bigger uncertainty in the quality of delivery of electricity. Hence, all variables have to be in perfect balance to guarantee a reliable and safe electricity system and to avoid high levels of volatility in electricity market prices.

Australia’s electricity sector

The Australian electricity sector is no exception to this trend – despite still having a large amount of fossil fuel backed generation, price volatility and unstable energy supply are partially fuelling a large growth in renewables namely large-scale solar PV and roof top solar PV for commercial businesses and households.

From 2022, Victoria and South Australia will start to experience higher prices in June and July. Winter has many evenings of moderately high demand that generation supplied by rooftop PV and small-scale storage cannot serve. Expensive gas generators must be switched on, resulting in higher prices.

Australia has one of the most decentralised markets in the world and is expected to continue that trend into the future with more solar PV and storage expected to be installed across the market. This together with the fact that the retiring of coal is being done faster than previously anticipated, will further increase the exposure to non-synchronous generation and consequently potential more frequent grid imbalances and more extreme price peaks.

Additionally, the country is seeing more extreme weather events which put in danger people’s businesses and lives ultimately, hence the rush to these types of decentralised solutions that allow to better control both the cost and the quality of electricity supply from the grid.

Despite being a positive change towards sustainable sources of energy, these changes also result in a smaller size of the average electricity generation plant, increased complexity for managing the electricity sector and more reliance on nature-sourced types of energy.

Demand management

This is where solutions like demand response and energy management become a crucial part of the solution to make this fast-changing sector work reliably.

As mentioned previously, 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 simply by turning up or the amount of fuel to be burnt. However, with the increasingly more 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 allowing the demand side to take an active role as a grid balancing service provider.

But how? 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). Demand response aggregators and energy management companies help these consumers to manage their energy and help them access the energy markets for providing demand response services.

“Australia has some similarities to both Ireland and UK in terms of geographical situation and also in terms of how the grid system is structured, especially in what concerns fast frequency response services, which are present in Australia and which are a key part for the grid balancing in Ireland and the UK,” comments GridBeyond MD Mark Davis.

The big incentive in all of this is that flexible consumers that respond to these grid balancing events will save money or even generate actual revenue from the grid operator that will partially offset the monthly cost on the electricity bill.

Increasingly higher optimisations can be achieved when the consumer has other types of assets like a battery and/or solar PV generation at their consumption access point as these additional assets provide additional flexibility for moving away from high prices of electricity or even for choosing when to consume electricity from the grid.

About the author

Diogo Cabral has a bachelor’s degree in Business and Administration and a MSc in Finance, both from Nova Business School of Lisbon. He has more than 14 years of relevant professional experience, including in the Renewable Energy space in M&A and Business Development international roles.

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 and Japan in 2021 is continuing its global expansion plans in Australia.