Demand response, Efficiency, Renewables

Decoding demand response: Grid programs reducing business costs

Huge savings can be made with efficient energy management and flexible responses to grid balancing events, writes Lisa Balk, Australian sales director at GridBeyond.

Demand response and energy management are critical components to ensure the reliability of the rapidly evolving electricity sector. GridBeyond’s latest white paper, “Decoding Demand Response” shows how grid programs are key to reducing business costs and supporting the transition to a greener future in Australia.

While discussions around climate change often focus on green mobility – for example, renewable energy and net-zero carbon targets – they frequently overlook the question of how to prepare the electricity grid for structural changes in supply and demand that accompany these initiatives. The phasing out of coal and gas plants, and their replacement with renewables, creates volatility in electricity prices.

In the Clean Energy Council’s “Clean Energy Australia Report”, released in April 2023, it notes more than 5GW of new renewable energy capacity was installed in Australia in 2022, and that renewable energy provided 35.9 per cent of Australia’s total electricity generation that year, up from 32.5 per cent in 2021. While this growth in renewables is clearly welcome from a climate change and sustainability perspective, one of the impacts of intermittent generation on the power system is increasing volatility in energy costs.

Wholesale electricity prices in the National Electricity Market averaged $93/MWh during the December 2022 quarter, dropping 57 per cent from the September quarter ($216/MWh), but remaining well above the Q4 2021 average of $52/MWh.

Demand response allows electricity consumers to take an active role in grid balancing by adapting their consumption profile to help keep the grid stable. Flexible consumers who respond to grid balancing events can save money or even generate revenue from the grid operator, partially offsetting their electricity bill.

Increasingly higher optimisations can be achieved when the consumer has other types of assets such as a battery and/or solar PV generation at their consumption access point. These additional assets provide flexibility for moving away from high prices of electricity, or even for choosing when to consume electricity from the grid.

Lisa Balk, Australian sales director at GridBeyond. Photo: GridBeyond.

Let’s consider a hypothetical scenario involving a manufacturing facility located in Victoria. The facility has annual energy consumption of 10,000MWh and recently implemented a renewable energy system comprising a 2MW solar photovoltaic system and a 1MWh battery storage system. It is also part of a microgrid connected to an industrial load of 1MW. The average electricity price is $0.27/kWh, and the facility incurs demand charges ranging from $15/kW to $20/kW based on the time of day.

To estimate its potential cost savings and revenues, we can analyse cost savings from reduced grid electricity consumption:

  • The solar PV system generates 12MWh of electricity per day (2MW x 6 hours).
  • The industrial load consumes 24MWh of electricity per day (1MW x 24 hours).
  • The facility’s total daily electricity consumption is 36MWh (12MWh + 24MWh).
  • With the battery storage system discharging 1MWh per day, the daily electricity consumption from the grid becomes 35MWh (36MWh minus 1MWh).
  • The daily cost saving from reduced grid electricity consumption amounts to $9450 (35MWh x $0.27/kWh).

Cost savings from avoiding demand charges:

  • Assuming the facility’s peak demand occurs for one hour each day and reaches 3MW.
  • Without the microgrid, the facility would face demand charges of $15/kW x 3MW, resulting in $45,000 per month.
  • By utilising the battery storage system and industrial load in the microgrid, the facility can reduce its peak demand by 1MW.
  • Consequently, monthly cost savings from avoided demand charges equal $21,600 ($15/kW x 2MW x 720 hours per month).

Revenues from excess electricity generation:

  • Assuming the solar PV system generates 12MWh per day, but the facility only consumes 10MWh per day.
  • The surplus electricity can be sold back to the grid at $0.10/kWh.
  • The daily revenue from excess electricity generation amounts to $200 (2MWh x $0.10/kWh).

Total estimated monthly cost savings and revenues from this microgrid installation example would be $37,050 ($21,600 + $9450 + $200 x 30 days). It is important to note these figures are approximations, and actual savings and revenues depend on several factors such as installation specifics, energy prices, demand charges and geographical location.

The integration of battery storage and solar PV systems alongside participation in demand response services offers businesses an innovative solution to mitigate energy price risks. By generating electricity, reducing grid dependence and storing excess energy, businesses can significantly reduce energy costs and enhance energy efficiency.

Investing in these technologies promotes energy independence, reduces carbon footprints and contributes to a sustainable future. Considering these benefits, battery storage and solar PV systems emerge as crucial investments for businesses aiming to hedge against energy price risks and maintaining competitiveness in an ever-evolving market.

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