Showcase - Demand response initiative

Case studies of ARENA’s work in 2017-18 are provided in this section to demonstrate our purpose, performance and impact.

Case study
Demand response initiative
  • Size:

    143 MW by Dec 2017, 200 MW by 2020

  • Location:

    NSW, VIC and SA

  • ARENA funding:

    $28.6 million for 10 pilot projects

  • NSW Government matching funding:

    $7.2 million

  • ARENA investment priority:

    Delivering secure and reliable electricity

  • Tech:


It only happens a few times each year, but when Australia’s summers sizzle, households and businesses send electricity demand sky high by simultaneously switching on their air conditioners. When this happens, we use 46 per cent more electricity than average. The challenge for the Australian Electricity Market Operator (AEMO) is to find the most cost-effective way of meeting the occasional spike in the demand for electricity.

Diesel generators or gas-fired peaking power stations have often been used for this. ARENA is helping to develop and commercialise newer technologies and approaches that can fill a similar ‘flexible capacity’ role in a lower-emissions electricity system.

A cost effective way to reduce demand during peak periods, and relatively quick to implement, is to pay some energy consumers to voluntarily cut or shift their use of power to better match supply. This ‘demand response’ approach lowers the amount of electricity required from the grid during peak periods to reduce the likelihood of a blackout, and can ramp up demand during off-peak periods – or when renewable energy output is high – to use excess electricity more efficiently. It can even help to bring down wholesale electricity prices, which increase when demand is high.

Demand response is a proven method that is successfully and cost effectively used elsewhere in the world, such as in some parts of the United States, as well as in Taiwan and Korea. One of ARENA’s investment priorities is to deliver affordable low emission electricity solutions that keep the lights on as we shift to a higher share of renewable electricity. As part of our work on this priority, we teamed with AEMO and the NSW Government to fund a $35.7 million, three-year trial featuring ten creative demand response projects from eight companies across Victoria, New South Wales and South Australia. ARENA’s share of the funding is $28.6 million with $7.2 million provided by the NSW Government.

Together, these projects will help change behaviour and shift electricity use, freeing up around 200 MW of capacity by 2020.

Businesses, large companies and individual householders participating in the projects will have the opportunity to receive incentives in exchange for limiting or shifting their electricity use during peak demand times such as heatwaves, when the grid is under stress and at risk of blackouts. The economy overall will also benefit from a more efficient electricity system that has avoided the cost of having to build unnecessary new infrastructure.

The ten projects span a diverse range of technologies, innovative ideas and geographic locations. They include electricity retailers such as AGL and Powershop, poles and wires businesses like United Energy, the smart thermostat maker Zen Ecosystems, the demand response aggregator EnerNOC, and the Adelaide-based metals manufacturer Intercast and Forge.