Demand response – how to unlock energy efficiency

Three key impact areas of demand response are large energy users, energy aggregator models and electric vehicles.

Energy companies are under increasing pressure to accommodate energy efficiency, control load and integrate distributed energy resources such as renewables into the grid.

Demand response is an essential cornerstone in enabling this energy network of the future with its potential to add flexibility. But it is imperative for demand response to pay in order to ensure its success and to enable consumers to play a significant role in the efficient operation of the electric grid and utilities to deliver an engagement platform.

For example, in the UK if just 5% of the current peak electricity demand was met by demand side response, the energy system would be £200m a year cheaper to run and end-users could benefit by up to £790m, according to the UK National Infrastructure Commission’s Smart Power report.

Engerati has identified three key impact areas for demand response success – large energy consumers, energy aggregator business models and electric vehicles (EVs).

Large energy consumers

With their large energy consumption, commercial and industrial customers offer huge potential for demand response, says Jelle Meersmans, Head of New Business and Product Development at French energy supplier Lampiris, now part of Total.

Meersmans points to the potential in this sector for both the key demand response mechanisms, load shedding and load shifting. Moreover remuneration opportunities are available through both capacity-based products (i.e. provision of ancillary services, demand reserve) and energy-based products (i.e. exploiting power market and balancing market volatilities)

Various industry sectors have demand response potential.

Example industry sectors with demand response potential

As an example, Meersmans drills down into the cement industry pointing to several opportunities for demand response. For example, mill operation can be shifted to off-peak hours with no loss of production to minimise bottlenecks in the subsequent rotary kiln part of the cement creation process.

Another example is waste water treatment, similarly with different sources of flexibility including blowers in aeration tanks, cogeneration plants, pump stations and centrifuges.

“In conclusion for industrial applications a first step would be to look to optimise the energy efficiency,” he says. “Then follow up with demand response measures for added benefit.”

Demand response aggregation

Third-party energy aggregators engage users to participate in demand response curtailment and sell the combined load reduction to utilities and ISOs. The aggregator takes a percentage of the demand response incentive as compensation, passing the rest on to the end user.

“Aggregators are critical to demand response success,” says Patrick Liddy, Director for UK and Ireland at EnerNOC.

As an example, he compares the New Zealand and Australian NEM markets. In New Zealand’s North Island, 74% of the frequency response services is provided by demand response and specifically by aggregators, whereas in Australia’s NEM where aggregators are not allowed, the corresponding figure is less than 5%.

“Aggregators bring experience from all over the world,” says Liddy. “Each programme is slightly different but we can bring that learning and apply it in developing programmes in any jurisdiction. Ultimately we streamline the whole process and in turn we provide reliability.”

Electric vehicles

An important support in demand response programmes can be provided by EVs, which may behave as a load to the grid, a supplier of electricity to the grid or an energy storage device.

“We see a lot of local grid challenges ahead with EVs,” says Jorg Van Heesbeen, International Business Development director at Jedlix - an EV infrastructure company which was spun out from Dutch utility Eneco.

“Demand response is a necessity and smart EV charging is a key element in this.”

He adds that people don’t drive EVs for smart grid participation but for mobility and freedom. Thus, smart charging must come in the form of “a great product with an optimised user experience” to make it work.

Smart charging is “quite challenging” to enable, Van Heesbeen comments. In essence, it is achieved by aggregating assets including EVs and selling that flexibility into energy markets – but the fine details varying from one market to another.

In the future home storage could also be added to the mix.