DEMAND RESPONSE………WHAT IS IT?
To help understand what Demand Response is, let me first explain Peak Demand, what it is and how it happens. The term Peak Demand refers to a point in time when demand for electricity outweighs the amount of power available. The problem for consumers is that if there is insufficient power available during Peak Demand, then quite simply the power goes off. Whole suburbs, or in extreme cases, the entire state could turn off. Currently, in order to avoid peak events, energy companies build excess capacity for reserve to meet the infrequent demand. Currently 10% of our present electricity network is built for these ‘just in case’ scenarios. This type of solution is what has driven electricity prices skywards. The cost of energy automatically hits its maximum price of $12,500 per 5 minutes during such events, using these excess power generators.
HOW DO WE STOP PEAK DEMAND?
Hypothetically, it’s simple, just turn things off! But in reality, it is not quite as easy as that. How do we, as consumers, know when the grid is under stress? When is Peak Demand likely to occur? Consumers have been left in the dark for too long, with the answers to these questions as elusive as the political rhetoric which surrounds them. We rely on the powers that be to manage this. The Australian Energy Market Operator [AEMO] is this power. The AEMO say that Demand Response is an increasingly common approach that is used worldwide to alleviate Peak Demand. But what is Demand Response? What does it mean for the normal household?
Essentially, Demand Response allows consumers to play a significant role in reducing the strain on the electrical grid during peak times whilst enjoying financial incentives. Under the Demand Response tariff scheme, electricity users will be paid to reduce their usage during times of Peak Demand. The AEMO predict that these events will be as infrequent as 10 times per year and will last no longer than four hours at a time. While Demand Response tariffs need to be implemented by Energy Retailers, for households to sign up to, the AEMO is responsible for the payment of incentives and to control when Demand Response events are required. Accordingly, there would be significantly lower tariff charges on homes which will be an enormous incentive for more people to jump on board.
SO, WHAT IS HOLDING UP DEMAND RESPONSE TARIFFS?
Demand Response tariffs are not readily available here in Australia. A major reason, as to why the practical option of Demand Response tariffs have been overlooked, is that there is significant resistance from the large energy companies who are responsible for building the costly generation plants. These energy companies have a significant say in the policy debate, and are imparting their influence for their own benefit. The Australian Energy Market Commission [AEMC], who make up the rules for the electricity and gas markets, was appointed by federal and state governments five years ago to review alternative options. Yet again, to the detriment of consumer’s, very little actually came from this expensive initiative. So far, the Australian Renewable Energy Agency, (ARENA) have commissioned a trial program in some states to implement Demand Response as an option to combat Peak Demand. The problem is………………..
With peak demand in Australia growing at a rate of around 7% per year. The fixation with building new infrastructures to meet our changing needs means:
- wasting billions of dollars developing new underutilised power stations
- multiplying our greenhouse gas emissions
- facing continuous energy price hikes for householders and businesses
With these facts in mind, Demand Response seems like the most effective way to combat the growing problem.
See how Gswitch can help you reduce your Peak Demand and decrease your power bills in my next blog post.