Demand Response addresses the energy trilemma

The energy trilemma is not an easy equation to balance, but Virtual Power Plants (VPP) providing Demand Response ticks all three of those boxes – energy security, affordability and sustainability.
 

Business owners who are waking up to the economic proposition of Demand Response should also count on its legitimate corporate social responsibility credentials.
 

In this interview, Managing Director of Enel X Asia and Oceania, Jeff Renaud, shares the benefits of Demand Response and insights into useful applications that are benefiting Enel X customers. 

 

With Demand Response, you’re looking for flexible capacity, the ability to effectively change the amount of power a facility is using from the electricity grid, which could come from turning certain equipment down for a short period or some form of energy storage – chilled water or battery – or from utilising backup generation.

Depending on what the customer has, the answer would be different. The flexibility in proportion to their total energy usage will vary by industry. To be economically viable, you’re looking for about a few hundred kilowatts or greater of flexible capacity to enroll in a VPP.
 

VPP participation is broadly available to a lot of industry sectors in different ways. Sectors that are very well suited include food, from agriculture to food production to logistics and refrigerated warehouses – all for different reasons. The water sector is well suited, as are some of the new technology-driven sectors, such as data centres. Certain types of commercial buildings can be good: hospitals and the healthcare sector more broadly, universities, shopping centres, airports. You’re looking for industries that have processes that are well suited to VPP participation, or anyone who has back-up generation can also be a good fit.

Food and beverage manufacturers are well suited to Demand Response. Learn more in our article here.

What we focus on is utilising their backup generation infrastructure, which is critical for protecting patients in the case of a grid emergency. What we do is typically augment that backup infrastructure and test it more frequently through VPP participation so they get more active, more often real-world validation that their backup infrastructure is working well – and they get paid for their troubles. It’s a financial and an operational benefit.
 

It’s still a change in perspective for many of these organisations to think about utilising this infrastructure when they still have grid power, and there are operational considerations to work through to make sure this is done in a safe and effective way. But it can be done, and that’s the reason they do it.

 

Learn more about our work with hospitals in this Echuca Regional Health case study here.

The basic proposition is saying that there’s an opportunity to effectively create a new revenue stream for your business by utilising the assets and the infrastructure you already have – meaning no capex – and that revenue stream, given the way the Australian energy market is changing, can be quite significant. It could amount to a 3% to 5% to 10% reduction in your energy cost. That’s relatively compelling. But then there are the details: how do we do that, how does it impact our operation, are we sure we can implement the controls and the engineering to make that a reality. That’s where the hard work comes in.

 

You see use cases for Demand Response on the grid that are quite different. At one end of the spectrum we participate in the frequency control market that AEMO runs, which is designed to protect the grid from sudden outages in large plants or transmission lines. We are delivering a resource to the market that can respond in a few hundred milliseconds. In that case we have end-to-end automation, with local intelligence installed at the customer’s site that might immediately shutdown some equipment or turn on backup power generation.

 

At the other extreme you have emergency resources that either a network utility or AEMO would procure to protect themselves on extreme days of very high demand, such as multiple days of 40-degree weather. In that case it can be more of a manual process, because we typically get one, two or three hours advanced notice. When called upon we can support a lot of processes at the customer facility, which can involve manual operator action.
 

Third, using Demand Response directly in the wholesale energy market, which is maybe the most interesting type of case in the long run. That’s providing DR to the energy market and being paid the spot price of energy when you do that.

 

That’s the nice thing about VPP participation. As a business you can join completely independently of your retail purchasing arrangement. If you’re happy with how you’re buying power today, and you’re happy with the structure of the tariff, with the price you’re getting from the retailer, and you like them, great – you don’t need to change a thing about that. You can do Demand Response in addition to and completely separate from your retail arrangement.

 

Frequency control is technically a 24/7 market; those events can happen at any time because they are not correlated to anything other than maintenance issues at power generating plants, which can occur at any time. There is no discernible pattern to when those disturbances occur, but in that market customers have flexibility to choose when they are participating.
 

The other two cases are much more predictable and pretty correlated to each other: emergency events, such as 40-degree days, which would typically occur in the mid-to-late afternoon into the early evening hours, and; using Demand Response directly in the wholesale energy market. The most attractive times for doing that will be the mid-to-late afternoon into the early evening hours, and also the possibility in the early morning hours, around 7am to 10am. That’s an economic opportunity versus an emergency reliability commitment.

What makes Australia unique is the pace of renewable deployment and what that’s doing to the energy market here. Australia is at the leading edge of what any market around the world is seeing in terms of renewable disruption and therefore the need for innovative new forms of capacity. It’s wreaking havoc on the energy market. In the long run the transition to renewables is what everyone wants – it’s important and critical – but in the near term it’s creating volatility in the energy market and challenges for grid management. In that sense the Australian market is one of the best in the world for Demand Response in terms of the contribution it can make and therefore the revenue streams businesses can access.

 

This feature originally appeared in EcoGeneration Magazine.