Melbourne, 27 November 2023 – The potential early closure of Australia’s largest power station1, Eraring, has triggered the NSW Government to accelerate an innovative program to keep the lights on.
Australian Energy Market Operator’s (AEMO) latest ten-year NSW Energy Security Target Monitor report calls for extra ‘firming’ capacity to meet peak electricity demand when the sun isn’t shining, or the wind isn’t blowing. This will be partly delivered by an innovative program that intelligently orchestrates businesses to use less energy at key times, with very low to zero emissions.
Commercial and industrial energy users will be invited to participate in the program, which involves reducing their energy consumption or switching to backup supply when needed. This will make more energy available when the grid is under stress. Participants will be linked together in a network, known as a Virtual Power Plant (VPP), which will release ‘spare’ energy into the grid when called upon — just like a physical generator. This is known as ‘demand response’.
Demand response participants will be paid for using less energy, as an incentive to encourage their participation. This approach provides extra capacity without the need for any infrastructure or investment. This makes it a quick, reliable and low-cost solution to plug gaps in energy supply and demand.
The VPP, Australia’s largest2, is operated by Enel X — a global energy company focused on accelerating the transition to renewable energy. Enel X has been awarded a contract to supply 95MW of ‘demand response’ firming capacity via its VPP to help meet the NSW energy security target — equivalent to adding 19,000 residential 5KW batteries to the grid.
The contract was awarded to Enel X after a competitive tender process that considered a range of technology and battery solutions to increase reliability by firming the state’s renewable energy generation into the future. Enel X’s demand response solution was chosen alongside three large scale batteries, for its low cost, reliability, and availability from 2025-26.
Paul Moy, AEMO Services Chair, commented that “Firming capacity is a key aspect of the energy transition as the state’s coal generation exited the industry. This tender is a first step in meeting this challenge at a reasonable cost to consumers. Combined, the projects in this tender will have the equivalent capacity to supply 8% of the total 2023 NSW summer peak demand. The combination of a highly competitive tender and an innovative contract design are in the long-term financial interest of consumers.”
Penny Sharpe, NSW Minister for Climate Change and Energy, said: “These projects are critical for energy security in NSW as we transition to a cheaper, cleaner energy system. We have no time to waste as coal-fired power stations retire. We must get more renewable energy into the grid – backed by storage and flexible demand – to keep the lights on and meet our net zero targets.3"
In addition to providing a new source of revenue, the program will help participating businesses achieve their sustainability and decarbonisation goals, by supporting the transition to renewable energy. Enel X is now recruiting businesses in the greater Sydney area to join the program.
Carl Hutchinson, Country Manager of Enel X Australia, said “The closure of coal fired power stations is essential to meet emissions targets, but it also means we need innovative thinking and new funding models to avoid the risk of blackouts. The result of this highly competitive tender proves that demand response is a cost-effective solution to meet this challenge. Using energy assets intelligently at key times keeps the lights on and rewards businesses. Demand response is a simple and proven solution that benefits the participating businesses, so we are excited to be awarded this contract to help increase grid reliability in NSW.”
1. Australian Energy Market Operator (AEMO) says there will be enough capacity to replace Eraring, February 2022
2. National Electricity Market (NEM) Registration and Exemption List, November 2023
3. Capacity Investment Scheme supports NSW to deliver 1GW of cleaner, cheaper, more reliable energy for NSW, November 2023