Demand responseProject AGL Demand Response
This report describes AGL’s progress against the objectives of the ARENA Demand Response Trial in NSW.
As Australia’s energy markets continue to evolve, the nature of the supply and demand relationship is changing. Customers are playing an increasingly important role, driving a shift away from the traditional linear electricity supply chain to a more decentralised and bi-directional market.
The ten pilot projects funded by the Australian Renewable Energy Agency (ARENA) and the Australian Energy Market Operator (AEMO) under the Demand Response Initiative demonstrate one way in which Australia’s future energy markets could empower customers to participate in the ongoing management of Australia’s electricity system whilst supporting the distribution network and wholesale electricity market.
Australia’s National Electricity Market (NEM) was established on the basis of thermal capacity and, in most cases, assumes that demand is relatively inelastic and that dispatchable thermal generation is able to meet demand. The increased penetration of renewable energy is now revealing the limitations of the NEM’s thermalcentric design. As the generation mix changes to incorporate a growing amount of renewable energy, demand for energy services and supplementary markets will become increasingly important to ensure security, reliability and system resilience.
In the future, the grid could facilitate a range of service markets for customers rather than simply enabling the consumption of electricity delivered from centralised plant. As one such service, demand response could play an increasing role in balancing supply and demand.
In the national energy policy debate, policymakers are continuing to assess how best to facilitate demand response in the wholesale market. While policymakers need to carefully balance the role of demand response in managing exposure to peak demand against the costs of procuring these resources in advance of high demand events, it is likely that demand response will play an enduring role in Australia’s future energy markets.
The development of a mature demand response market is also fundamentally about enhancing customers’ energy experience and ensuring that customers can realise the value of customer-owned distributed energy resources. AGL considers that innovation and competition in technology and business models will be a primary means of aligning the interests of energy services providers with those of the customers they serve. The effectiveness of any demand response programs therefore depends upon the extent to which these service offerings can harness and respond to customer behaviour to incentivise participation.
In October 2017, AGL was awarded funding under the Demand Response Initiative to deliver 20MW of demand response in NSW by 2020. This report is the first Knowledge Sharing Report as part of the three year project. The project has already revealed a range of insights in residential and commercial and industrial demand response that could be built upon to enhance the effectiveness of demand response programs in the future.