Save energy and earn revenue

What if businesses were told that they could use less energy and get paid more for it? Demand response programs in Australia and New Zealand can do just that; Jeff Renaud, Director, ANZ, of EnerNOC, explains how they work.

Turning off unused lighting, migrating from desktop computers to Energy Star laptops and using office equipment with high energy ratings can improve efficiencies and reduce utility bills. Energy reductions are good business practice, but beyond the savings that organisations realise through their own initiatives, there are larger, more immediate opportunities that exist to engage in smart and effective energy use. Demand response (DR) programs are available in many parts to the world to help businesses turn short-term reductions in consumption into additional revenue streams for their organisation.

Demand response is a broad term used to describe the act of modifying energy use in response to supply signals. Instead of generating more power when the demand for electricity increases, many electricity operators are now operating DR programs where they pay to engage commercial and industrial organisations to perform energy reductions. Organisations participating in the DR program can realise financial benefits both in the form of lower energy prices and significant participation payments.

The varying needs of the grid have led to the creation of several different types of markets and corresponding DR programs, each with its own functions and benefits. Some markets can offer more than one program at a time, which provides extensive opportunities for interested businesses to participate in multiple programs simultaneously. This may seem confusing at first, but organisations can quickly realise the many benefits from participating in DR programs, so it is worth gaining a better understanding of what opportunities are available in the local electricity markets.

DR programs in Australia and New Zealand

In Australia:

Capacity markets, such as the one in Western Australia (WA), are electricity markets that forecast how much energy is needed to meet projected demand. To ensure that there is always enough supply, the market operator also incorporates ‘reserve capacity’, which includes the use of peaking power plants and DR resources. When electricity use spikes to risky levels, posing the threat of a supply interruption, these reserve resources are ‘dispatched’. While both resources are reliable, DR is a cleaner alternative as it reduces demand instead of generating more supply - after all, the greenest kWh is the one never used.

Programs in capacity markets provide advanced notification of potential grid emergencies, typically four to six hours ahead, allowing organisations to prepare for dispatch participation and the impact of supply interruptions, eg, brownouts and blackouts. This type of DR program suits a range of industries - everything from small dairies to large mining sites, commercial property buildings and manufacturing facilities. Methods of participation may vary, but many facilities choose to reduce energy by shutting down non-essential equipment or processes, or switching to on-site generation through the dispatch period.

In Eastern Australia, network programs, developed jointly with local transmission and distribution (T&D) companies, implement DR to address network constraints. These constraints typically occur over infrastructure maintenance periods and can help prevent unexpected and otherwise unavoidable supply failure and costly upgrades. These programs are seasonal in nature and often exist for only one to two years. Similarly, companies across virtually any industry can participate. Response times usually vary by program but can be as long as 24 hours advanced notification for DR dispatches. Participation in network programs is usually limited to specific geographic locations, as reductions are most effective closer to the constraint itself.

In New Zealand:

In the Lower North Island (LNI) of New Zealand, electricity trading is conducted in real time, creating what is known as an energy market. This type of exchange allows for DR programs to directly affect the price of electricity. When demand is reduced, the price of electricity will follow, which benefits both the participating organisation and wholesale market at large. Organisations are provided with an average of two hours’ notice and are dispatched for a few hours at a time. Again, a range of industries are well suited to participate. Retail properties, plastics manufacturing facilities and data centre companies are just some of the different types of organisations that participate. Reductions are designed to work around critical load and core business operations. Alternatively, facilities can choose to use on-site generation of energy.

Ancillary services markets service the delicate balancing act of frequency on the grid. If grid frequency varies from its optimal point, it can cause generators connected to the grid to go ‘out of phase’ and trip, causing a major event such as a blackout. Energy reduction plans are implemented within one second to one minute of this change to quickly help keep it in balance, through the use of sophisticated DR technology. This program predominantly attracts industrial organisations, such as paper and pulp manufacturers and cold storage facilities, which are able to turn off grinders, pumps and fans to quickly remove load temporarily. This has little impact on operations, as business functions resume normally when the frequency returns to normal, and can happen within a minute or a maximum of 30 minutes. In addition to the financial benefits, DR programs in these markets also support the continuous use of renewable, intermittent sources of energy, like wind and hydro, in New Zealand.

Why participate in DR programs

Demand response programs help keep the electricity grid stable by providing an alternative to the standard supply = demand equation. By reducing demand rather than increasing supply, DR helps contribute to more efficient grids and lower electricity prices. For businesses, DR provides the opportunity to take proactive steps towards protecting your operations while yielding additional revenue. It’s important to remember that there are a number of ways your organisation can participate without compromising your deliverables, and energy management specialists are available to help make the most of the DR program available.