Load management has been a concern for electricity networks since the very beginning. In the late 19th century, before the advent of tiered electricity tariffs, it was common for a quarter of the load on distribution systems to occur for fewer than two hours a day.
So, in 1888, only a few years after the world’s first electric utility company was launched, the British generator manufacturer R.E.B Crompton led calls for the creation of “off-peak” loads to keep the furnaces burning and supply costs down. Use of electricity started being promoted for non-lighting purposes like cooking, heating and industrial processes and, thus, “demand management” was born!
Throughout the world, and for the best part of a century, the early problems were largely solved by introducing stable overnight loads from sources like street lighting and water heating that took advantage of cheap off-peak power, coupled with electrification of domestic, commercial and industrial processes during the daytime.
Enter the “Duck Curve”
Fast forward 130 years and our electricity networks once again face significant challenges. The proportion of electricity coming from renewable sources like solar and wind is increasing while fossil-fuelled generators are retired. Demand for air conditioning is growing rapidly, and previously large and stable loads from equipment and appliances are dropping as their efficiency improves.
The evolving daily demand profile has a name: the “Duck Curve”. Typically, demand on the network rises in the morning as households and industry wake up and then it drops during the middle of the day due to the contribution of photovoltaic (PV) panels (tail to back). It then rises again to a peak late in the afternoon (the head) as residential and commercial users continue to draw large volumes and the generation from PV panels drops away. The situation varies from location to location and according to the time of year, but that is what causes the duck curve and it is a huge threat to grid stability, it drives up infrastructure costs, and it devalues the contribution of renewable energy.
Is there a solution?
Happily, yes! And it holds the promise of lower bills, fairer distribution of benefits, and a fast-track to a cleaner, more sustainable, environment.
As was the case in the late 19th century, innovation around pricing and an efficient transfer of savings will be key. Currently the wholesale price of electricity on the Australian National Electricity Market (NEM) – the price that electricity generators and retailers trade electricity at to sell to consumers – is extremely volatile. It can range from less than $50/MWh (<5¢/kWh) when demand is low to $15,000/MWh ($15.00/kWh) at times of peak demand. This 300X spread in pricing, which can happen within a period of hours, reflects the fact that consumer demand is generally unresponsive to price signals because consumers pay fixed contract rates for their electricity. Furthermore, wholesale electricity is traded in half-hour blocks, even though system components (including batteries) can add and remove load in seconds.
In Australia, all this is about to change. From October 2021, the wholesale market will be opened up to commercial and industrial customers (through intermediaries) who will be able to bid ‘demand response units’ into the market as a substitute for electricity generation. What? Play that again?
Electricity consumers will be able to sell the electricity they avoid using for premium rates as though it were generation.
And in addition to that, the market will shift from half-hourly settlements to 5-minute settlements. Combined, these changes will lead to the emergence of a genuine two-way market that will operate in near-real-time, unlocking the full potential of information technology, emerging generation and storage technologies, new business practices and human ingenuity.
What will this mean for buildings?
Large buildings with complex or centralised heating ventilation and air conditioning (HVAC) systems can, and should, play an integral role in the future electricity system. Just like batteries (both stationary and those contained in electric vehicles), buildings have capacity to draw, store and release energy in a managed way.
During the middle of the day, when PV generation rises and wholesale prices drop, buildings can increase their demand on the network by driving more fresh air through their systems for better ventilation and thermal comfort. Later in the day they can trim loads by using the stored energy in building fabric and chilled water reticulation systems. Furthermore, with forewarning based on advanced data science and machine learning, the most sophisticated building operators will adopt strategies to take advantage of market price fluctuations to cut their cost of electricity to below zero.
And that is the truly exciting part. Active efficiency strategies designed to minimise cost will also accelerate progress to net zero carbon as loads are shifted to clean renewable electricity and away from the expensive and highly polluting technologies of yesteryear.
This contributed piece by Craig Roussac, CEO of Buildings Alive, first appeared in Flick the Switch – the ebook.
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