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:
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.
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 more than 15% of the total frequency reserves. 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 normal range by balancing demand against supply.
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.
Wholesale DR involves energy users changing demand based on the wholesale electricity price, which fluctuates in response to supply and demand.
When consumers reduce demand during peak price periods, it reduces their electricity bills and puts downward pressure on electricity prices for all energy users.
At the moment, not many Australian electricity users face price signals that reflect the wholesale electricity price, so they’re not exposed to incentives to undertake wholesale DR.
The Australian Energy Market Commission (AEMC) made a draft rule in July 2019 to introduce a mechanism that will give energy users more opportunities to offer wholesale DR. The mechanism is due to be finalised in June 2020.
Businesses and some government agencies are already being rewarded for one or more forms of demand response.