The Australian Renewable Energy Agency and the Australian Energy Market Operator will pilot a demand response initiative this summer to manage electricity supply during extreme peaks.

The three-year program will be trialled in South Australia and Victoria to free up temporary supply during extreme weather and unplanned outages.

The program will initially aim to secure 100MW of demand response capacity with potential to be scaled up in years ahead.

ARENA expects to commit up to $22.5 million over three years to fund the pilot, based on an assessment of the current market.

Turn it down

Demand response involves paying consumers to reduce their energy consumption on request during peak periods or emergencies, freeing up electricity supply.

AEMO chief executive Audrey Zibelman said this pilot program will help the electricity system to manage peak demand in real-time, without the need for new fossil fuel generation.

Demand response programs are common in other countries, Zibelman said.

“From Texas to Taiwan, demand response has been proven to be a cost-effective way to manage demand at peak times and acts as a contingency to avoid disruptive power outages,” she said.

Scale it up

ARENA chief executive Ivor Frischknecht said demand response would help to facilitate Australia’s transition to renewable energy.

“We need to find new, smarter ways of coping with spikes in demand and volatility as we move towards an electricity system with more variable renewable energy supply,” he said.

“Instead of building a power plant that is only switched on a few hours or days a year, demand response will allow us to reduce energy consumption during peak demand while also reducing energy costs and emissions for consumers. It’s a win-win.”

The program will aim to ward off system-wide emergencies but has potential to be used to smooth out frequency disturbances, network disruptions or price peaks, Frischknecht said.

How it works

Under the program, energy users who subscribe will receive incentive payments to be on standby in emergencies or peak demand days funded by ARENA.

During an emergency or extreme peak, those who participate could be called upon by AEMO to switch off or reduce their electricity use temporarily, and would receive a further compensation payment.

The program is expected to be open to demand response aggregators, large industrial and commercial users, battery storage and smart thermostat companies and will involve both commercial and residential consumers.

Less at last

Energy experts have applauded the announcement of the program.

“This is a breakthrough moment,” said Luke Menzel, CEO of the Energy Efficiency Council, the peak body for energy efficiency and demand response experts.

“Where demand response gets exciting is when you can do it quickly, and at a scale. The technology now exists for sophisticated and substantial demand response, enabled by aggregators that combine many different sites together into ‘portfolios’ that provide flexible, secure and stable demand response,” he said.

“This approach is common in energy markets around the world but has long been underutilised in Australia’s National Energy Market because the right structures and incentives for aggregators to do this work haven’t been put in place.”