Perth, 03 October 2023 – The Australian Energy Market Operator (AEMO) has awarded Enel X Australia (Enel X) a contract to supply 120MW of flexible demand capacity to the WA Wholesale Energy Market under the Non-Co-optimised Essential System Services (NCESS) program for the capacity years 2024-2026.
The contract signals the return of demand response or ‘demand side management’ in WA, in which participating commercial and industrial customers agree to curtail their electricity use during peak demand periods. This increases the security and reliability of the grid in peak demand periods and provides a revenue stream for participating businesses able to provide capacity through ‘flexible demand’.
Enel X is recruiting commercial and industrial customers to participate in the NCESS program via its VPP, which aggregates their energy savings to provide a source of extra capacity to the grid when needed. Curtailing demand for short periods is an alternative to switching on a generator. Customers commit to curtail consumption of a set amount of electricity when called upon. This may only be required a few times each year to keep the lights on in emergencies.
AEMO has highlighted the need for the new program in its 2023 Wholesale Electricity Market Electricity Statement of Opportunities (ESOO), released in August 2023. The statement calls for urgent development of new generation, storage, demand side management, and transmission projects to bolster reliability and support a rapid and orderly energy transition to a cleaner and more sustainable energy future.
The ESOO states that around 1.3GW of coal-fired generation capacity will be retired in WA by year 2030-20311, which is equivalent to around 27% of the current market capacity. This drop in supply, and an increase in demand over this timeframe, has led to a forecast capacity gap of 4GW by year 2032-2033 — equivalent to around 83% of the current capacity serving the wholesale electricity market in south-westWA2. Demand response will help provide some of that urgently needed capacity, by curtailing demand from large energy users for short periods.
Bill Johnston, Energy Minister of Western Australia, said “It’s great that Enel X will be able to provide much-needed capacity to our electricity grid through Demand Response via their Virtual Power Plant. This is a good opportunity for businesses to support grid reliability as we undergo the transition to new, lower-emission sources of supply and manage the phase out of State-owned coal-fired plants. Western Australia’s main electricity grid, the South West Interconnected System, needs new forms of power capacity to keep the energy system stable and to keep the lights on during critical times. Demand Side Management is an essential part of all modern energy systems; it is a good time for the SWIS to take advantage of this important initiative.”
Kate Ryan, Executive General Manager Western Australia and Strategy, Australian Energy Market Operator said “The rapid energy transition is now fuelling very strong forecast growth in electricity demand. At the same time, we’re transitioning to new, lower-emissions sources of supply and managing the phase out of coal-fired generation. This year’s reliability outlook highlights the need for significant and sustained investment in additional capacity, fast-tracking the pipeline of generation, storage and demand-side projects. It’s critical that this pipeline of energy projects is developed in a timely way to alleviate forecast reliability challenges and support the ongoing energy transition.”3
Carl Hutchinson, Country Manager ANZ for Enel X, noted that “The energy market needs new ways to provide extra capacity at peak times to balance renewables, and businesses need new ways to reduce energy costs. The Enel X VPP achieves both those goals, by orchestrating large energy users to curtail their energy usage for short periods a few times each year, in return for revenue. This approach to balancing supply and demand is much easier and cheaper than building new transmission infrastructure and generation assets, for the few occasions it is needed. Utilising flexible demand is a very cost-effective way to help accelerate the transition to renewables.”
1 Government of Western Australia, State-Owned Coal Power Stations to Be Retired by 2030 as Move Towards Renewable Energy, 17 August 2023
2 AEMO ESOO, WEM Electricity Statement of Opportunities, August 2023
3 AEMO ESOO, WEM Electricity Statement of Opportunities, August 2023