The Australian Renewable Energy Agency and the NSW Government have announced $15 million in funding to pilot demand response in NSW this summer.

The NSW Government has committed $7.5 million to be matched by ARENA, bringing the total ARENA funding for its demand response competitive round to $30 million.

This will expand the demand response pilot program to be rolled out this summer to a total of $37.5 million in funding over three years.

This competitive funding round is a joint initiative with ARENA and the Australian Energy Market Operator which will reduce demand on extreme hot days or during emergencies, to avoid unplanned outages.

This $15 million funding pool will be reserved for NSW projects, with the aim to generate 60-70MW of demand response capacity to be available during extreme peak demand days and emergencies.

ARENA has committed up to $22.5 million over three years in grants to trial demand response technologies and implementation models in the National Electricity Market, with a focus on South Australia and Victoria.

ARENA will allocate the original $22.5 million to projects outside of NSW, with the aim to provide about 100MW of demand response in the rest of the NEM.

Hot and bothered

In May, the NSW Energy Security Taskforce in its initial report identified that extreme weather can create spikes in demand which can result in energy supply falling short.

In its initial report, the taskforce recommended the government take precautions during energy emergencies including providing guidance on how to reduce demand effectively during peak periods.

ARENA and AEMO’s pilot program to trial demand response has also been endorsed by Chief Scientist Alan Finkel and his team in the final report of the Independent Review on the Future Security of the National Electricity Market.

The competitive funding round for applications to be part of the pilot program will close on July 17.

ARENA chief executive officer Ivor Frischknecht said the matched funding from NSW allowed the pilot program to be expanded.

“With the support of the NSW Government we are able to scale up the pilot program by more than 50%, which we expect will offer more than 160MW of innovative demand response across the NEM – of which more than a third will be available for NSW,” Frischknecht said.

“And this is just the beginning. This pilot program will provide proof of concept for how innovative and flexible demand side resources can help provide security and reliability as we transition to an electricity system powered by more variable renewables.

“A well-designed demand response program will provide a contingency in case of emergencies without relying on fossil fuels.

“Long term we expect electricity use to increase when renewable energy is plentiful and decrease when it is in short supply. This will make better use of our existing electricity infrastructure and help reduce energy costs for businesses and households,” he said.

How it works

The joint initiative between ARENA and AEMO will involve paying energy users to reduce their energy consumption, free up stored supply or switch to distributed generation on request when reserve capacity falls to critically low levels.

The funding round will be open to a wide range of demand response technologies and methods from demand response aggregators to smart thermostats to battery storage to behavioural demand response projects.

ARENA funding will provide grants to fund technology for energy users to become demand response-enabled, including metering, monitoring, storage and distributed generation equipment and other set up costs.

If demand response providers are called upon, AEMO will pay for usage through its existing Short Notice Reliability and Emergency Reserve Trader (RERT) scheme.