C&I demand response grows half a world away from its starting point
Navigant Principal Research Analyst Brett Feldman looks at recent demand response initiatives in the commercial and industrial sectors in Australia and Japan.
While the Northern Hemisphere finishes up another uneventful winter for demand response (DR), things have been heating up, literally, in Australia. The summer of 2017/2018 has broken heat records around the continent, leading to record energy prices in some areas as well. The Australian Energy Market Operator (AEMO) has several initiatives underway to support reliability, including a DR trial run in cooperation with the Australian Renewable Energy Agency (ARENA) and with the support of the New South Wales Government.
Over 3 years, the pilot projects will be tested in Victoria, South Australia and New South Wales to free up short-term supply during extreme weather — such as prolonged summer heatwaves — and unplanned outages. The pilot projects will engage large-scale C&I businesses like cold storage facilities, manufacturing plants and commercial buildings.
In a separate but related development, EnerNOC, an Enel Group Company, announced in November 2017 that it is providing frequency control ancillary services (FCAS) to help maintain system stability in Australia's National Electricity Market (NEM). Contingency FCAS can help the power system remain stable and rebalance the grid when the regular flow of energy on the grid is disturbed.
This is the first time that distributed demand-side resources have provided grid balancing services in the NEM. Some options offered by EnerNOC can restore the balance between supply and demand on the grid in less than 100 milliseconds. Demand-side customers participating in the program include facilities from multiple industries, including cold storage, manufacturing and forest products.
Going back to the heat wave this past summer, the high prices should have incentivized price-responsive loads to self-dispatch, although there is no official measurement of such response. Reliability DR was activated one time on November 30, 2017, but this was before the AEMO/ARENA program went live. It was not utilized during the heatwaves, though AEMO came close on one day before a cool front came in. A coal plant tripped offline on January 18, 2018, leading to an opportunity for alternative resources to respond in the market.
DR moving beyond pilots in Japan
Back on the northern side of the equator but still far east of the prime meridian, Japan has been dabbling in DR for several years, primarily after the tsunami in 2011 that wiped out much of the country’s nuclear capacity. It had a number of small pilot programs with various DR providers, but activity ramped up in 2017. This timing coincides with the opening of competitive retail power markets, which adds momentum to the growth.
In April 2017, Japanese regulators opened a new DR market called the NegaWatt Market. Tokyo Electric Power Company (TEPCO) is partnering with multiple DR providers to utilize DR resources to ensure grid reliability during severe weather conditions and to reduce procurement costs for power resources, especially aging thermal power stations.
The partnerships aim to demonstrate how transmission, distribution and system operators in Japan can make use of DR measures to ensure grid reliability. The partnerships are designed to meet TEPCO and TEPCO customer needs, including capacity programs dispatchable within 2 hours and fast-response programs with a response time below 30 minutes. Fast-response programs can activate flexible load in case of a grid emergency or at times of high electricity demand. Fast frequency control is expected to open to DR in 2019.
In February 2018, EnerNOC announced that it was awarded the delivery of 165 MW of DR following the completion of a tender for balancing reserves launched by a group of Japanese utilities, when the new programs begin in July 2018. This recent tender is a transitional step toward a market for ancillary services, which is expected to be in place by 2020.
DR market evolving, leading to growth globally
These trends, along with other international and U.S.-focused drivers and barriers, are detailed in the new Navigant Research report Market Data: Demand Response for C&I. In the mature region of North America, C&I DR is expected to grow relatively slowly due to market saturation and tightening market rules in the traditional wholesale markets. The well-documented capacity performance issue in PJM is the most significant of these cases.
However, there are still many drivers globally that are expected to lead to overall C&I DR growth. While traditional forms of DR continue to be deployed today, newer forms of DR are emerging in the industry and are being integrated with other distributed energy resources such as energy storage and electric vehicles. As renewable energy adoption continues to increase, DR provides a key benefit in its ability to help integrate renewable resources by taking advantage of low cost, off-peak energy when wind and solar are abundant. The move toward targeting DR to specific distribution-level areas with high load growth or infrastructure constraints plays a growing role in grid planning.
Now it is time to start preparing for the summer DR season back in the north!