Markets - 29/October/2018

Power On Demand

Consumers will become more active market players as the amount of renewable energy in the grids increases, providing, for a fee, greater flexibility for power systems and increasing decarbonisation

Managing power systems so that supply and demand are in balance has always been the overriding concern for power system operators. Imbalances compromise the reliability and the security of power systems and can cause power outages. In traditional power systems dominated by large, conventional generators, the burden of keeping the system in balance largely falls on the supply side, with power plants expected to ramp production up and down to meet changes in consumption. Demand is seen as being largely inelastic, or unresponsive to variations in price.

Yet demand has already proven to be far more flexible than once thought. Demand response is defined by the Federal Energy Regulatory Commission (FERC) in the US as: “Changes in electric usage by demand-side resources from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardised.” It has been used in some countries for decades, often with time-of-use tariffs designed to encourage changes in demand patterns.

But the growth of renewables is giving a new push to demand response efforts and sharpening the focus on demand response capacity that can be dispatched at the request of power grid operators. And alongside its traditional roles of levelling loads and shaving peak demand, demand response is increasingly being used to actively shift demand to times when green energy is being produced. In addition to “demand turn up”, another new development is the use of demand side management for short-term balancing needs that until recently were routinely provided by natural gas or coal-fired plants, says UK-based energy consultant David Milborrow. ...

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