The Australian Renewable Energy Agency (ARENA) and the Australian Energy Market Operator (AEMO) jointly announced 10 pilot projects have been awarded funding under the demand response initiative to manage electricity supply during extreme peaks.
In total, the $35.7 million initiative will deliver 200 megawatts (MW) of capacity by 2020, with at least 143 MW to be available for this upcoming summer.
Over three years, the pilot projects will be trialled in Victoria, South Australia and New South Wales to free up temporary supply during extreme weather – such as prolonged summer heatwaves – and unplanned outages.
On behalf of the Australian Government, ARENA has committed $28.6 million in total to fund set-up and operational costs for the projects, with $7.2 million to be matched by the NSW Government for NSW-based projects.
Successful funding recipients include energy retailers, an energy distributor, a demand response aggregator, a smart thermostat developer and a South Australian metal foundry.
Demand response involves paying an incentive for energy users to reduce their power consumption, switch to backup generation or dispatch their energy storage for short periods when electricity reserves reach critically low levels.
From Texas to Taiwan, demand response is commonly used overseas to avoid unplanned or involuntary outages, ease electricity price spikes and provide grid support services. In other countries, up to 15 per cent of peak demand is met with demand response.
The pilot projects will engage large scale industrial and commercial businesses – such as cold storage facilities, manufacturing plants and commercial buildings. Tens of thousands of households are also expected to voluntarily sign up to participate in exchange for incentives.
In the coming months, the pilot projects will be engaging customers and installing hardware to remotely monitor and control their energy usage. Household hardware will have optional user overrides.
This program, which was launched in May and run as a competitive round, is the flagship initiative of ARENA and AEMO’s collaboration to test proof of concept projects to support grid security and stability.
AEMO Managing Director and Chief Executive Officer Audrey Zibelman said the projects would undergo testing by AEMO in November and would be up and running by December 2017.
“These demand response projects will help manage spikes in peak demand in a cost effective way using our existing electricity infrastructure and clever new technology.
“It is clear that demand response has untapped potential to manage demand during extreme peaks in Australia, just as it does in other countries,” Ms Zibelman said.
“We’re hopeful this will create the proof of concept for a new market mechanism that will ultimately be to the benefit of Australian consumers,” she said.
ARENA Chief Executive Ivor Frischknecht said the funding round had well exceeded the 160 MW initially hoped for, and cost less than expected.
“Through this initiative, we’ve been able to build a virtual power plant the size of two of Tesla’s giant 100 MW batteries in a matter of months for a fraction of the cost of building new supply.
“We are also trialling an innovative range of technologies and behaviour change programs from voltage control to intelligent thermostats to app notifications,” Mr Frischknecht said.
“Demand response will not only ease the strain on the electricity grid and prevent blackouts. These projects will also put money back into the pockets of Australian businesses and households, helping to reduce their energy costs and emissions,” he said.