4 minute read

How demand response works for commercial and industrial participants

Michael Zammit
10 October 2019

The ongoing transition to a renewable energy mix has raised the profile of demand response. But what is demand response and how is AGL embracing it to assist in overall reliable energy supply?

What is demand response?

Demand response means that a customer reduces their electricity demand at a particular time, upon request, in return for an incentive. The request to reduce electricity demand usually coincides with peak demand periods, high wholesale prices or an event which can cause (or has caused) stress on the grid.

The result is a reduction in energy consumption to lessen the load at peak times.

In the commercial and industrial (C&I) space, businesses like steel mills, cool stores, water utilities, data centres, and many others can reduce their electricity demand for one or more hours at a time with generally minimal impact on their business.

What’s the benefit of demand response?

Demand response offers support to the market operator AEMO by providing emergency reserve capacity for when there is not enough generation to match demand.

Demand response can also be offered to electrical network companies as an alternative to costly network upgrades, or to ease grid constraints.

Ongoing demand response programs

In 2017, AGL was one of eight businesses selected to participate in the joint ARENA / AEMO Demand Response Short Notice Reliability and Emergency Reserve Trader (RERT) Trial, with support from the NSW Government for NSW-based projects.

The joint $35.7 million initiative will deliver a total of 200 megawatts (MW) of capacity by 2020, with AGL contributing 17 MW of C&I demand response, as well as 3 MW of residential demand response.

The residential component is being progressively accumulated over three years and last summer we reached our target of 2 MW.

For the C&I portfolio, in our May 2019 test, AGL achieved 21 MW against the 17 MW target.

In October 2018, AGL won a milestone demand response contract with TransGrid, the NSW electricity transmission company. Of the 21 underground cables that supply the Sydney CBD and inner-south suburbs of Sydney, six have now reached the end of their economic life. As can be imagined, replacing a cable in the middle of the Sydney CBD is a daunting task, with considerable disruptions to traffic and businesses.

TransGrid, and the local distribution company Ausgrid, are planning to replace these older cables. To ensure the existing network isn’t overstressed in the meantime during summer, AGL was engaged to provide 20 MW of demand response in the required area for four years.

Meanwhile, TransGrid has commenced early works to install underground cable conduits which will bring a new 330 kV cable into the Sydney CBD by FY23.

The significance of the TransGrid demand response contract is that it is the first such agreement for AGL with a network company.


TransGrid has started to construct an underground cable conduit (orange) which will bring a new 330 kV cable into the Sydney CBD

Opportunities on the horizon

The energy rule-maker AEMC is looking at several reforms that would provide more opportunities for commercial and industrial participants to provide demand response. It has proposed that demand response from large customers should be able to be offered and scheduled directly into the wholesale spot market. It has also proposed that transmission companies should be able to access funding for innovative demand management projects that could help address network issues.

In the future, even more opportunities are expected for demand response, which can not only help improve grid stability and wholesale price, but also to support the booming renewable energy portion of the electricity supply mix.