Everything you need to know about the Wholesale Demand Response Mechanism

Everything you need to know about the Wholesale Demand Response Mechanism

Earn revenue by participating in the wholesale electricity market from 2021

The Wholesale Demand Response Mechanism (DRM) is a new mechanism that will give businesses a new way to earn revenue from being flexible with the way they use energy.

Eligible energy users who join our program will be paid for reducing or switching off their power use, or switching to backup generation, when the grid needs additional capacity.

This will increase competition in the energy market as businesses offer their flexible capacity - a reduction in demand - into the wholesale energy market, much the same way generators currently offer to supply energy. This will place downward pressure on pricing, benefiting all consumers.

The wholesale market in the National Energy Market (NEM) will open up to demand response providers from 24 October 2021.


Benefits of the DRM

Direct benefits
Indirect benefits
  • Lower energy bills, simply by reducing demand 
  • Additional revenue, for being paid to reduce demand
  • A greater understanding of energy consumption
  • Improved business competitiveness
  • Lower wholesale and network costs by using lower-cost demand response to avoid the need for new generation and network investment


How to reduce demand with minimal operational impact

We currently work with customers in multiple overseas markets to support wholesale demand response, helping them understand how their business can best respond.

Businesses can:       

  • Make temporary adjustments to equipment electricity usage like pumps, chillers or compressors and/or
  • Switch energy use from the grid to on-site power sources, like backup generators or battery storage

These processes are generally automated and coordinated seamlessly by our team, with minimal disruption to operations.

How the DRM will work

Any company registered as a demand response service provider (DRSP) will be able to participate directly in the wholesale market. Enel X will register as a DRSP when applications open in mid-2021, which means we can bring together our customers’ energy flexibility to give back to the grid.

Offers for demand response will be dispatched by the market operator. This will occur where it’s cheaper to use demand response than generation to meet demand.

The DRSP (such as Enel X) will provide offers for every five minute dispatch period. If a customer does not want to provide demand response, their availability will be bid in at zero.

DRSPs will have obligations when participating in the market, like complying with dispatch instructions and providing information to the market operator. We manage this complexity on our customers' behalf.

DRSPs will be paid the variable spot price for any wholesale demand response they’ve provided. The revenue they earn will then be shared with customers in line with their agreed terms.

DRSPs will also need to reimburse a customer’s retailer for the costs the retailer incurs as a result of the customer providing demand response.

A key component of the DRM is working out the baseline level of consumption that would have occurred if the customer had not provided demand response.

This is needed to measure the quantity of demand response provided to the market, which is used to work out how much the DRSP should be paid. The market operator is currently developing a methodology for establishing baselines.

Have a question or want to know more? Get in touch with our team or email info.enelxanz@enel.com.

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