The future is micro, nano and perhaps even pico-grids orchestrated to solve energy dilemmas at a local level, writes Shaun Scallan.
In an ideal world energy policy and regulation would support effective outcomes for all stakeholders, not just the incumbents with the most to lose. The proposed rule change announced by the AEMC in July to allow direct access to wholesale demand response by large energy users includes a third type of demand response, where “third parties can be allowed to bid demand reductions into the wholesale market as a substitute for generation”.
The fond and fervent hope when the NEM was created was that demand side participation would ensue. The promise remains unfulfilled for many reasons. The question is: will the AEMC rule change unlock value for big business? If businesses are able to access or develop skills in managing their energy usage, I believe it will. Due to the low-cost energy regime we have enjoyed historically, however, these skills are in short supply in all but the largest energy users.
Large aggregators like EnelX have captured a good share of the DR market, with 200-plus local clients and 390MW of what they term “flexibility” under management. Aggregators offer their clients a low pain way of extracting value from their energy usage and backup generation assets. But businesses generally have a fairly defeatist view about power bills. They feel there is little they can do about costs. Basics such as tariffs and demand charges are not always well understood. If a business can’t get the basics of billing right, what hope have they of managing their demand without specialist help?
Only when a business has sought specialist advice can it look at how DR can help. At that point, some questions will spring to mind: Will DR help balance supply and demand? Can it save our bacon this summer? Can it help flatten the duck curve?
Take the power back
Demand response is not a silver bullet but it has a crucial part to play in the distributed energy grid we are hurtling toward. This transition, coupled with the availability of new energy technologies, provides an option to take the power back (pun intended).
Yes, DR can help balance supply and demand, save our bacon this summer and flatten the duck curve, but not by itself. Managing the supply-demand balance requires visibility of all grid-connected assets, however nearly 8GW of rooftop solar is essentially invisible to the local network and grid operator. To put that in context, according to AEMO the NEM had strategic reserves of demand and generation resources of more than 1GW in 2017-18.
Making this resource visible would be a great start (and much work has been done in the Open Energy Network activities), and making it dispatchable would be an excellent next step. Storage, of course, is the solution to manage intermittency of solar and wind.
How will we see the grid and manage it? An avalanche of IoT-based technologies are powering democratised business models. The other development, noted by the AEMC, is that generation can be built much more quickly (less than two years for solar and wind) than the transmission (more than six years). We seem to be about to supercharge the deployment of distributed energy, with solar and storage increasingly common to unlock value for business and the grid.
I believe the future is micro, nano and perhaps even pico-grids orchestrated to solve the supply-demand problem at a local level. Aggregated up, this population of assets could provide a stable, reliable and affordable energy supply where value is shared by all who contribute. Sounds a bit socialist – but in a good way.
We are heading toward a third type of demand response, if the AEMC’s rule is accepted, and services provided should be valued, but from all market participants, in the broadest sense. Large licks of “undemand” from the big end of town will ease tension on the grid, but getting a hold of lots of existing “invisible” distributed generators would be a valid option as well.
As always, there are lots of options. We just have to take our power back.
Shaun Scallan is institutional program manager at Planet Ark Power.