Since the begging of the 20th century all power is generated from central power plants and transmitted along the transmission distribution grid until the end user. But, as we make the transition to a green path trying to reduce the emissions and the impact of fossil fuel combustion, and as we begin to integrate more and more renewable energy generation like solar and wind into our electric grid, the grid is slowly making the transition from a traditional, vertical integrated electrical grid to a modern power grid.
Also, due to the rise of the new connected technologies, consumer is becoming a prosumer as progressively people generate their own power through solar panels or drive electrical vehicles, and therefore, the border between the consumer and the generator will begin to disappear.
However, generation output by renewable resources is governed by environmental conditions inherently intermittent. On top of this, renewable resources are generally not able to respond to changes in demand. Consequently, it drives a greater need for authorities to procure more ancillary services for grid balance by having the demand adjusted to the production. This is the basis of Demand Response.
What is it?
Generally, when electricity demand rises in an area, or when an incident or condition disrupts the balance between customer needs with production capabilities and leaves a forecasted supply deficit, electric grid operators have historically had only two tough options either fire up some source like a gas or coal plant or even put more water through a hydroelectric dam; or neglect to meet demand by instituting blackouts.
Demand response represents a third alternative grounded in a more cooperative mentality: providing incentives to customers to cut their demand or to bring on additional grid capacity when the demand for electricity exceeds its existing supply and move that use to a later time when electricity demand is lower. So, Demand response frees up or adds to the electrical capacity so that it can continue meeting the needs of other users.
Why is it important?
Demand Response can effectively increase the active engagement by consumers within the energy sector, allowing them more flexibility. The use of smart meters, for example, facilitates a digitalization process, in which, the client has access in real time to invaluable information about generation, consumption, prices and time slots when it is it is more economically attractive to consume or even stop doing so.
Which type of equipment is eligible for Demand Response and how does it work exactly?
Any piece of equipment capable of receiving curtailment signals is eligible, from energy management systems and software to wired and wireless controls for lighting, thermostats, motors, pumps and more. Heating, ventilation, and air conditioning (HVAC) equipment like unitary air conditioners, variable refrigerant flow systems and chiller systems also typically qualify.
Let us imagine that there is a Demand Response event triggered by extreme outdoor temperatures that causes energy-intensive HVAC systems to work overtime. With Demand Response Programs (DRP), the enrolled equipment will automatically reduce its power draw when notified to do so by the utility. In the case of qualified thermostats, for example, this results in a change to the temperature set point of your facility by a few degrees. Options like pre-cooling your facility below your regular temperature set point help to ease discomfort during load reduction.
What are the needs and obstacles for this technology?
Although demand response has the potential to provide a diverse range of flexibility services and it is becoming a reality in energy markets, aggregated demand-side flexibility is not yet accepted as a resource in most jurisdictions around the world, neither in the balancing market nor in ancillary services, due to impeding deregulation on roles and responsibilities, access rights, baselining, measurement, pre-qualification, payment, and all other technical specificities that must be defined to enable such programs.
Analysis on Demand Response in Europe, highlight that one of the only Demand Response services that was legislated until recently were interruptibility contracts. These contracts were available for consumers with contracted power above 4 MW (i.e., large industrial customers) with varying availability and use payments, excluding the participation of small-scale consumers (e.g., residential, and small-scale commercial).
Nonetheless, even though these programs have been available for many years, they have not been activated by system operators, which leads to the conclusion that interruptible load programs were only considered as an add-on solution for emergencies.
According to the IEA, global demand response deployment slowed in 2019 as regulatory uncertainty loomed over key markets and a number of important market participants reduced their investment activity. Installed capacity increased in the United States, Australia and some European markets like Italy and Ireland.
They also say that unfortunately (and as we can see from the graph bellow) the demand response base is small relative to the magnitude of effort needed in the Sustainable Development Scenario (SDS). By 2050, the global inventory of flexible assets in the residential, commercial and industrial sectors needs to be ten times higher than it is today and, less than 2% of the global potential for demand-side flexibility is currently being utilized.
Demand Response Potential in the SDS, 2018-2040
How is Demand Response playing its part in the energy transition in Europe and in Portugal?
As part of the European Green Deal, the EU and its Member States have committed to achieve a significant reduction of their overall energy demand by agreeing on 32.5% energy efficiency targets for 2030 and 2050. Those targets set by the Energy Efficiency Directive (EED) are minimum targets for which the Member States have to pledge indicative national contributions.
Article 7 of the EED 2012/27/EU states that all Member States must achieve cumulative final energy savings, equivalent to new annual savings, from January 1, 2021 to December 31, 2030, of 0.8% of the average annual final energy consumption of the last three years prior to January 1, 2019.
In light of the above and to ensure that the goals and targets in the area of energy efficiency are met, in its PNEC 2030, Portugal stresses the importance of taking measures to increase demand-side management and the flexibility of the energy system. Therefore, it foresees that until 2022, all production facilities with more than 1 MW of installed power and that are already connected to the transmission and distribution grids must implement communication means to receive instructions from the System Manager to interrupt or reduce in real time the injection of energy they produce.
If we consider that the variability in output from wind is far less than the variability in demand, we then know that Demand response, once thought of only as a reliability resource, will have to evolve into a robust tool to provide the flexibility needed to integrate generation from variable renewables in other to benefit consumers, without undue administrative burden.
Getting the price signals and utility regulation right will enable more dynamic, efficient, reliable, and sustainable electricity systems in order to deliver power in response to predicted demand at the right time, in the right place, at the lowest cost and with the lowest emissions.