Automated energy demand: How digitalisation could transform the way we use energy
Demand side flexibility enables an electricity grid to smooth peaks in energy demand, but how can its value to a renewable energy system be unlocked?
Until recently, the balance of supply and demand in energy systems has rarely been front of mind. Yet, in December 2022, high temperatures in Argentina led to record electricity consumption which overwhelmed the grid and caused power cuts. In February 2023, Australia’s energy market operator warned of insufficient electricity supply to meet record levels of demand in Queensland, during an ongoing heatwave.
With energy prices rising and grid infrastructure struggling, how can policy makers and energy providers create systems that reward users for their part in restoring the balance?
Could you begin by explaining what demand side flexibility means?
Laura Glover: It’s the ability of end-users to adjust their energy demand in response to what the grid needs. This could mean reducing it, increasing it, or shifting their usage to different times of day. When overall demand for energy is high, customers can decrease their usage or use on-site generation like solar panels rather than using the grid. They could even provide energy to the grid. If there are excess renewables on the system, users can increase their usage or use batteries to soak these up.
Energy accounts for almost 75% of global emissions, so decarbonising the energy system is essential to achieving Net Zero. What role does demand side flexibility play in the fossil fuel transition?
Mauricio Riveros: You normally balance supply and demand in a power system by adjusting supply. In a fossil fuel-based system you can adjust the amount you burn. But as you replace fossil fuels with renewables, the electricity supply becomes more variable. We can’t turn sunlight or wind up when we need to, which makes the system less flexible. In a Net Zero system, reliant on renewables, there’s less flexibility coming from the supply side; looking to the demand side for flexibility becomes very important.
Bogi Hojgaard: It’s also about capacity. Even when the sun is shining, we can’t always harness this energy as the grid only has a certain number of cables. Demand side flexibility helps us make better use of renewable generation, as users can capture this energy using their own solar panels for instance.
Laura Glover: And finally cost. We'll need a mixture of all forms of flexibility, including batteries, interconnectors and hydrogen storage, to reach Net Zero in the most cost-effective way. However, demand side measures are the cheapest. In the UK, the Carbon Trust’s systems modelling work found that a fully flexible system can bring savings of £9 -16 billion a year by 2050. We modelled a scenario which took away all the demand side flexibility, and it raised the costs to the UK system by about £4.5 billion. To maximise savings, flexibility needs to be scaled alongside decarbonisation of the power, heat and transport systems.
Given the current energy crisis, why focus on the demand side rather than trying to secure the supply of as much cheap energy as possible?
Laura Glover: A driving factor of this energy crisis is the cost of gas. If this goes up, the cost of meeting energy demand goes up, especially in providing reserve power. Influencing peaks in demand is quicker and cheaper than relying on current gas power stations or building alternative forms of flexibility. In the UK, the National Grid has launched a demand flexibility service in response to the crisis. When demand is really high, like on cold winter days, they're paying customers to reduce their energy consumption. This has been rolled out in a matter of months, even weeks, and they're seeing reductions of around 100 megawatts almost instantaneously, which is super impressive. That’s roughly enough to power 30,000 homes.
Bogi Hojgaard: The more we can leverage demand side flexibility, the less we have to turn coal-fired power plants back on, which was the UK government’s other contingency plan. Coal may be cheaper than gas, but it's still not cheap and obviously much dirtier. The National Grid has to pay for a power plant to be on standby, even if it doesn’t generate anything, as you still have to cover fixed overheads.
Mauricio Riveros: More broadly, demand side flexibility should always be a priority. It’s not just about decarbonisation or energy crises. Generally, as countries develop, demand for energy increases. If you unlock some capacity from demand side flexibility, you’ll need to spend less on installing new generation and reinforcing the grid. That means fewer construction projects and as a result, less disruption to the local environment and community.
It’s important for countries to scale flexibility while ramping up renewables. In Latin America, for example, renewable capacity is expected to increase by 45% in the next five years. Can you quantify the value demand side flexibility could bring there?
Mauricio Riveros: It’s a huge opportunity for Latin America. The Carbon Trust’s work supporting Colombia’s smart grid deployment found that the country will need 81GW more power capacity by 2040 to meet their decarbonisation targets, but by introducing demand side flexibility, they’ll only need 34GW. Essentially, demand side flexibility would allow Colombia to expand renewable capacity at lower costs, use renewable generation more efficiently, spend less on distributing energy, and decarbonise the whole system by 2040. All of this, we found, could deliver savings of up to $730m per year by 2040. The same could be seen elsewhere. Chile, for instance, has the right kind of geography for deploying lots of renewables and their grid greatly needs reinforcing.
