The New South Wales government is launching a $50 million plan to create a virtual battery through household demand response.
The plan would involve participants feeding excess electricity into the grid at certain peak demand times, such as during heatwaves, and getting paid as much as $1000 over a three-year period for the service.
How? This would be done by turning off pool pumps, air conditioning units and other power hungry devices, as well as discharging batteries.
The government will seek expressions of interest in the Smart Energy for Homes and Businesses program up until Christmas before deciding on the final outline of the plan.
“Smart technologies play a critical role in maximising the potential of our energy system – allowing us to access and co-ordinate stored energy for when and where we need it most,” Don Harwin, Energy Minister, said.
Devices likely to be eligible will need to be remotely controllable, as is already the case with many air conditioners and some pool pumps. Batteries, including those used by some electric vehicle manufacturers – but not Tesla – are also likely to be candidates.
The NSW government is hoping to establish the business model for a potential expansion, particularly as more households add batteries to the solar PV systems.
About one in six new PV systems going up on rooftops are already adding storage, a ratio expected to grow as battery prices fall.
Funding for the three-year program, expected to begin next year, will come from the government’s $222 million Climate Change Fund.
The advantages of demand response
1. No extra generation capacity investment needed
The great thing about demand response is that it does not require extra generation capacity investment. All it involves is flexibility by the end user.
2. Financial compensation
Demand response, which could also be described as voluntary rationing, usually offers lower net pricing for each unit of electricity in exchange for lower energy consumption.
On the flipside, energy users who cannot scale back their demand would have to pay ‘surge prices’ which would go towards subsidising the voluntary cutbacks.
3. Smart integration
The rolling out of smart meters and smart appliances is also helping to boost the popularity and feasibility of demand response schemes.
Because digital meters can exchange information in real time with the smart grid, businesses can be notified of any changes that come into play in terms of demand reduction.
When hooked up to smart appliances, demand reduction action can be taken by the system to ensure that your consumption stays below the threshold.
What are the challenges?
1. Human expectation and habits
People are used to flicking on a switch and having access to power. We take it for granted and we are used to it being there when we need and want it.
The astronomical increase in power bills that Australian businesses are faced with today have been something of a wakeup call. But behaviour is hard to change.
Even if it is something as simple as leaving a light on, energy users find it very hard to break old habits. But if they are paid to do it, either through direct cash payments or reduced electricity rates, then they might just be willing to take it up.
2. Network infrastructure
Technology is advancing at an incredible rate, but the network is not. This could lead to a situation where we could invent every gadget under the sun to be fully compliant with smart demand response, but the network would not be compatible.
Until smart meters are rolled out, then businesses will have to take the old-fashioned approach: Turn off the lights or turn off air conditioning units manually. But once the smart meters are online, it will be a whole new ball game.
What remains to be seen is whether appliances and machinery will be universally compatible with the smart grid and meter system.
Where are we at?
1. We’re behind the US, Japan, Korea and others
Demand response has proven to be very effective in other parts of the world. Japan, for example, employed demand response when it was responding to the nuclear disaster at Fukushima.
Some US states can already scale back demand by up to 7% in times of need. South Korea legislated to make demand response part of its laws in 2014. So where are we at?
2. Baby steps
The truth is that demand response is still in its infancy in Australia. AEMO CEO Audrey Zibelman registered success with its use in New York and immediately advocated its adoption when she took up her post over here.
Demand response Pilot projects
Under a trial program announced in May, ARENA is offering $30 million over three years to support demand response demonstration projects across the national market. Another $7.5 million will be invested by the NSW Government for projects in that state.
The money will be paid to electricity users that agree to be available to cut use when called on by AEMO. Under the initial program, it is expected that electricity users would be paid up to $12.5 million a year to have 160MW capacity on standby to take offline.
Those who sign up could be large industrial operations – water companies willing to temporarily shut down some pumping, for example. They could be commercial users willing to delay or shift production for a few hours. And they could be energy retailers that would themselves sign up households to be involved.
Businesses could sign over control of some appliances, so retailers could turn them off if necessary. The payment for the shutdown time would be made by AEMO, at a market-set rate and in addition to the $37.5 million already dished out by ARENA and the NSW government.
It is understood that Victoria introduced for the first time on a very limited trial on the weekend of 2-3 December as a result of scorching temperatures. The concept is also being put into practice by energy suppliers, and users can be compensated directly from them, but things are still moving slowly in this regard.
2. Western Australia
Commercial operators are signing clients up in Western Australia to become part of their ‘virtual power stations’. When the South West Interconnected System (the region’s electric grid operator) needs more supply to meet demand, it dispatches signals to the demand response network.
This network is made up of local organisations that have agreed to reduce energy during times of high demand.
Organisations help ease stress on the grid and earn payments year round just for being on standby, plus additional payments based on actual reductions during a dispatch.
Want to find out if your business can earn money through demand response?
Demand response is not only a good way to stabilise the power grid, it can be a source of income. If you want to find out if your business can earn cash through demand response programmes, contact one of our experts today.