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The four types of DR in the NEM

How different types of Demand Response help to maintain grid reliability and security

Demand Response (DR) is used globally as a cost-effective way to maintain grid reliability and security. Energy users including businesses, government agencies and households can participate by lowering their electricity consumption – either through reducing demand or switching on an onsite generator – in response to an incentive or signal. There are four types of Demand Response:

  • Wholesale
  • Ancillary services
  • Emergency
  • Network


Wholesale DR 
involves energy users reducing demand or increasing generation based on the wholesale electricity price, which fluctuates in response to supply and demand. In today’s volatile electricity market, power prices can spike to $15,100 / MWh.

With Enel X, energy users have two options to offer wholesale DR.

  1. The first involves running your backup generator to capture spot market revenue when prices are high. Learn more about our program here.
  2. The second involves reducing demand to capture spot market revenue when prices are high. This new market, called the Demand Response Mechanism, allows demand response capacity to be offered directly into the wholesale energy market in the same way that generators currently offer to supply energy. The Demand Response Mechanism will commence on 24 Oct 2021. Learn more here.

 

Ancillary services DR is used to keep the frequency of the electricity system stable. Energy users are paid to provide Frequency Control Ancillary Services (FCAS), by reducing demand to keep the grid operating within its usual frequency range of around 50 Hertz.

Enel X provides ~30% of the total frequency reserves today. We directly contributed to reducing Australia’s FCAS prices when we entered this market (AEMO, 2018). Our portfolio responds to an event by immediately dropping the majority of client consumption. This brings the grid back into the normal frequency range by balancing demand against supply. Learn more about our program here.


Emergency DR
 is used when there’s not enough electricity supply to meet consumers’ needs. This is usually called on if a major generator breaks down, or during summer when demand is very high.

Energy users can reduce their demand for electricity in return for incentive payments to keep the grid stable and avoid power outages.In Australia Emergency DR is largely provided through the Reliability and Emergency Reserve Trader (RERT). The Australian Energy Market Operator (AEMO) calls on electricity users to reduce grid power when demand outstrips supply. We participate in this program by offering AEMO our clients’ energy load during grid emergencies, who are paid for their contribution.

 

Network DR involves lowering energy use to reduce the strain on the electricity network, such as when lines are reaching their capacity. This has an added benefit of avoiding expensive new network investment. Electricity networks are offering more incentives to consumers to reduce demand, particularly during network peak periods.

 

Businesses and some government agencies are already being rewarded for one or more forms of Demand Response.
 

To learn more about your options, get in touch with one of our experts.