What is Critical Peaking?
Our Virtual Power Plant (VPP) provides critical peaking services to protect the grid during supply shortages year-round.
Events occur on hot summer afternoons when demand is very high, during winter when there’s not enough supply to meet demand, or when large power stations or parts of the transmission network, including interconnectors between states, are experiencing outages.
In today’s volatile electricity market, power prices can spike to $15,100 / MWh. To put downward pressure on pricing, we operate our VPP capacity during extreme spikes - which often indicates a supply shortfall - and are paid for it.
What this means for businesses
By participating in our VPP, businesses can earn significant revenue for supporting the grid when there is a supply shortfall.
We register your backup generator with the market operator and are paid the real-time ‘spot’ price whenever it runs. This also means you can also be paid for conducting routine generator testing.
There are two ways to earn revenue:
- We activate our VPP when we expect critical peaks to occur and capture spot market revenues.
- We provide our VPP capacity as an ‘insurance policy’ to power retailers who are concerned about their ability to meet demand during critical peaking periods. We receive an ongoing standby payment based on the MW of insurance we offer and are required to deliver.
The second model is much more valuable because the earnings are more stable and predictable.
We started participating in Enel X's VPP as a new pathway to make cost savings. After a cost-benefit assessment, it was a clear way to earn new revenue. We didn’t have to overcome any obstacles to participate, and after the summer period we were paid for our participation which was straightforward. We simply power down our equipment in response to a grid need, and earn revenue for it.
Achieve a new standard of emergency preparedness
By joining in our VPP, you’ll have more confidence that your backup system will perform in the event of a grid trip or failure.
With our VPP you can thoroughly test your backup power systems with the safety net of grid power to switch back to, should any potential issues be identified. Participation also addresses common backup generator testing shortfalls, which often fail to fully simulate the response required during a power failure. Learn more about backup generator testing best practice with our VPP in our whitepaper.
We provide advanced notification of possible grid events, enabling you to proactively switch to backup power ahead of time. And by responding to a critical grid event, you can also meet routine test requirements where they overlap, meaning a site can be paid to test its backup power systems.
The key is, you’re being asked to run your generator when the grid still has power. It’s an excellent tool for testing and ironing out any assumptions made around reliability. We seamlessly transition to our backup generator so we don’t experience unscheduled interruptions during events. We can also defer our weekly test because we’ve met the requirements of the Australian standards to test them on load. The fact that joining the VPP allows us to also get paid to respond to these events is a win-win scenario.
The value of critical peaking will continue to evolve
Over time, the value of this program will change with the following market drivers:
- 5-Minute settlement: From October 2021, the market moves from 30-minute to 5-minute prices. Some generators will no longer be able to ‘ramp’ quickly enough to cover critical periods, thus increasing the value of insurance
- Wholesale DRM: From October 2021, third parties (including VPPs) will be able to participate in the wholesale electricity market. This will create an additional revenue stream for those participating in critical peaking.
- Coal retirements: Significant capacity is planned to shut down over the next five years. This will remove supply from the market, which leaves less supply available during critical periods.
- Interconnector capacity: Proposed new interconnections between states will reduce critical peaking issues.
Why our grid needs this critical support now
The National Electricity Market requires ~5,000MW of critical peaking resources under normal operation. As the daily renewable ‘duck curve’ grows with more solar production, and thermal power stations continue to retire, there will be an urgent need for new sources of critical peaking capacity.
We need the most cost-effective resources possible to ensure the lowest cost of energy is delivered to Australian consumers. This is where VPPs are important, especially those built from existing industrial equipment and backup generation.
To learn more about whether this opportunity is suitable for your business, get in touch.