The Australia Institute’s Dan J Cass explains why ‘demand response’ is proving so popular with energy market operators, Australian consumers and some of our country’s biggest businesses.
As the heatwaves hit Australia this summer, we should be watching Queensland to see a smart way to maintain electricity reliability during a scorcher.
The answer is not building more coal-fired power plants, but using energy more wisely.
Victoria faced a shortfall of around 700 MW of supply during its most recent heatwave, due to coal- fired generators being unavailable. Clever Queensland on the other hand has over 800 MW of supply derived from energy conservation.
Over 1.2 million households, or around 55% of energy users in the big sunny state, are signed up to government programs that pay them to save energy at times of peak demand.
This is known as ‘demand response’. It simply means saving energy, because a negawatt conserved is as good as a megawatt generated.
Consumers love negawatts, because they mean cheaper energy. On just one day, Queenslanders may save $100 million thanks to demand response lowering the price of peaks.
Queensland got ahead of the pack because, when consumers started to install air-conditioners in large numbers more than a decade ago, a very important choice was made. Faced with the prospect of spending billions of dollars to upgrade the grid to deliver enough energy to cope with higher demand peaks, the state-owned energy companies looked at ways to use energy more wisely while also building up supply and distribution.
Around 88,000 Queensland households have been rewarded for enrolling in the PeakSmart air conditioning programme. When people join they are paid a rebate of up to $400 and given a free signal receiver which connects their air conditioner to the demand response system.
Over one million households have signed up to have their hot water systems on smart tariffs. This shifts consumption to times of the day when there is more and cheaper energy in the system. There are even 38,000 residential pool pumps wired up to demand response.
Collectively, the demand response programs in Queensland are worth about 850 MW. Under the current rules, it is only available to reduce the stress of heat on the wires and transformers of their distribution network. If it could be used in the wholesale market as well, it could keep the lights on during a massive coalfail.
This has kept the grid going for the last two summers and is an integral part of Queensland’s Summer Preparedness Plan.
In addition, Queensland is home to Australia’s largest “virtual” power plant, called Yurika.
What makes Yurika “virtual” is that it is a computerised network of many energy devices, which act in concert to deliver supply.
Energy conservation is a winner and other states are following Queensland’s lead. The Liberal Government of South Australia was elected with a promise to invest $180 million to use energy more wisely, including a trial of demand response in that state.
Last year, The Australia Institute teamed up with the Public Interest Advocacy Centre and the Total Environment Centre, to call on the energy rule maker, the Australian Energy Market Commission, to open up the electricity market to demand response, in every state.
Our proposed change to electricity rule would allow you to sign up with a demand response provider to pay you when you can use less energy at peak time. Your retailer would not be able to stand in the way.
Submissions to the rule change have been published. Unsurprisingly, support for demand response comes from everyone who uses energy or regulates the market on behalf of consumers.
That includes the people who operate the grid across Australia (the Australian Energy Market Operator) and the peak economic regulator in the nation (Australian Competition and Consumer Commission). Bluescope Steel is on board and so is Tesla. The people who run the networks are for reform and so are welfare groups.
This tells you that the rule change is clearly in the interests of consumers, big and small.
The only people against demand response are the companies who sell us our electricity or who generate it. They profit from high prices and high demand.
The public is on-side already. Polling commissioned by The Australia Institute in 2017 showed that 2 out of 3 people prefer demand response to gold plating networks and building new generators, to meet peak demand.
Demand response is cheaper, faster and more popular than building new generation to cope with peak demand pressures. If Angus Taylor, the Federal Minister for Energy, is serious about reliable supply at the cheapest cost and getting it done quickly, then demand response will be part of his solution.
Dan J Cass is the Energy Policy & Regulatory Lead at The Australia Institute