How Demand Response works: turning your energy consumption into income

Renewables demand flexilibity. Demand Response is a programme that rewards businesses that consume energy more flexibly

Published on 9 July 2020

Demand response, the programme that rewards flexible energy consumption

Decarbonisation, digitalisation and electrification are demanding increasingly flexible energy systems. The growing impact of renewables is leading to an increase in the variability of energy supplies, a phenomenon that will only accelerate in the coming years.

The targets set for Italy under the National Integrated Energy and Climate Plan will see us become completely coal-free by 2025 with renewables growing in importance to the extent that they will account for over half of gross electric power consumption (55.4%) by 2030. It is because of this emerging picture that the Energy, Grids and Environmental Regulation Authority (ARERA) opened the market to dispatch service market (DSM) to commercial and industrial consumers through an innovative service known as demand response (DR). It is based on using resources different from traditional thermo-electric ones, such as renewables, storage, consumption and distributed generation.

The Authority has set itself a dual goal: to allow Terna, the national Transmission System Operator (TSO), to firstly ensure that the production and consumption of electricity is balanced (which guarantees secure, constant and reliable power supply despite the use of unplannable sources such as sun and wind), and secondly, to meet the new requirements of businesses which need a personalised, sustainable approach.

Demand response programmes offer businesses payment in exchange for flexibility, i.e. their willingness to adjust their own consumption or increase their production for short periods of time at the request of Balance Service Providers (BSP) which, like Enel X, manage said energy flows. This enables the TSO to keep the grid reliable and flexible, responding to peaks in either supply or demand for electricity by using the infrastructure and resources more efficiently.

Enel X leads the Italian demand response market with a 35% share of the overall market and a managed capacity of around 350 MW. Our DR service is aimed at commercial and industrial customers from the various sectors, including smaller ones (at least 300 kW), which are managed in aggregate form.

When a stability issue arises for the grid, the Terna TSO notifies the Balance Supply Provider (BSP) of the need for a balance order. As the BSP, Enel X must establish the load and/or generation capacity in its portfolio of customers that will be required to increase or decrease energy use. The customers can make their flexibility available through their systems or part thereof, by implementing (manually or automatically) modulation plans. The reduction or increase in the load is used by the TSO to balance the grid. In exchange for this, the customers receive payment for the modulation they have made from the BSP.

The current remuneration scheme provided for under Terna’s UVAM  (Unità Virtuali Aggregate Miste, or Mixed Aggregate Virtual Units) is split into two separate methods: fixed fee directly proportional to the capacity made available for modulation, and purchased at auction, and a variable fee based on the effective movement on the DSM.

In the context of the UVAM project, Italy is split into two separate areas which are in turn divided into 15 geographical perimeters within which each BSP can aggregate flexible resources from different clients. The sites that make up each Mixed Enabled Virtual Unit must be located within a single aggregation perimeter. The project will involve the assignment of a maximum capacity of 1,000 MW (800 MW for the North and North-Central Areas and Nord 200 MW for the South-Central, South, Sicily and Sardinia areas) through Dutch reverse auctions with a potential maximum fixed price of 30,000 euro per MW per year.

For the assignment period and with reference to each UVAM, the BSP commits to present the service dispatch market with rising offers for the balancing at prices of no higher than the strike price of 400 euro per MWh. This is for a resource amount that is at least equal to the amount of power assigned and for at least four consecutive hours within the time slot between 2 p.m. (14.00) and 8 p.m. (20.00) from Monday to Friday. The fixed daily price falls to a maximum value of 50% if and when the supply is formulated for an amount at least equal to the amount assigned for two consecutive hours in the same time slot. If the supply committed to is not honoured for at least 70% of the days of the month, the fee reduces to zero.

With over 50 years’ experience in the energy markets, Enel X offers 6,000 customers all over the world personalised demand response per programmes to ensure they maximise their remuneration from their energy assets and reduce costs without impacting or slowing their operational processes. Customers do not need to interrupt their own consumption in order to take part in the programme – all they have to do is guarantee a certain level of modulation.

We make a dedicated team available to our customers to help them pick customised DR solutions. The team can also help them in developing a plan for transfering the company’s energy to their onsite generation assets, in order to respond as effectively as possible to DR dispatch requests.

This is just one example of how Enel X helps its clients to turn their efforts towards decarbonisation into new business opportunities, opening the way to a greener and more sustainable future.

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