How demand-side flexibility can contribute to security of supply

Large scale consumers provide most of the demand-side flexibility reported

Curtailing large consumers’ demand accounts for almost 46% of the available flexible capacity reported – around 210MW (Figure 3). This form of DSF is often the result of a contract between large-scale electricity consumers and a generator. While there are only a small number of large industrial consumers in Aotearoa New Zealand, these agreements tend to represent a significant amount of megawatts of demand response.

Retail agreements are including hot water control

Figure 3 also shows the large potential contribution ripple control (~110MW) and hot water control (~50MW) could make to DSF. These two categories use different technologies to switch off hot water cylinders. On the one hand, ripple control has long been used by distribution companies for grid and network control. On the other hand, hot water control is emerging specifically as a form of demand response in the retail market thanks to recent technological developments.

These numbers confirm a recent trend that sees the control of hot water cylinders starting to move away from pure distribution control to more commercial arrangements. Public examples include Contact Energy’s ‘Hot Water Sorter’ initiative and Octopus Energy’s hot water trial. This shift suggests the emergence of market-based mechanisms to incentivise this form of DSF and to share the benefits directly with consumers. However, it also means that the use of these resources will have limitations which are based on how much and for how long consumers will agree to switch off their resources.

Demand-side flexibility is a distributed resource and can work with a variety of consumers

The reported DSF from electric vehicles and batteries was spread across the country. Its amount remains limited, but we expect these technologies to rapidly scale up.

Small-scale commercial and industrial resources are still a small provider of DSF, but their contribution is expected to grow, with more facilities such as data centres, cold storage, and manufacturing plants joining DSF schemes.

Consumers still have their say with demand-side flexibility

Although the survey responses indicated there is 450MW of DSF theoretically available in the market, its availability can vary depending on customers’ preferences. For instance, large consumers often put restrictions on the usage of the resource and require several days’ notice before making the capacity available. Additionally, ripple control is quickly available but can only run continuously for a few hours to ensure households are not noticeably affected. Finally, electric vehicles need to be plugged in and connected to the distribution network for them to be used as DSF, so the development and distribution of smart chargers will also affect its potential use for DSF.

The Authority is committed to facilitating demand-side flexibility

We recognise that consumers, large and small, and aggregators (entities that groups together different resources) have different incentives and mechanisms to take part in the wholesale electricity market.

The Authority is committed to working with industry to enhance demand-side participation in the market to promote both competition and flexibility.

We encourage anyone who may have additional DSF and/or would like to discuss ways to increase DSF uptake to contact us at OperationsConsult@ea.govt.nz