Get smart: AEMO unveils 200MW "virtual power plant"

"These demand response projects will help manage spikes in peak demand in a cost-effective way using our existing electricity infrastructure and clever new technology"

The Australian Energy Market Operator has signed up for 200MW of demand response capacity, creating a “virtual power plant” twice the size of the Tesla Big battery to deal with heatwaves and supply failures – and prevent blackouts – in the heat of summer.

The result of the much awaited demand response tender will see 143MW made available this coming summer, and the rest by 2020, in a crucial addition to AEMO’s ability to meet extreme demand peaks and supply shortfalls, and transition the grid to a smarter, faster and cleaner machine.

The projects feature a range of monitoring, control and storage technologies, to be installed in homes, businesses and large manufacturers, who will be paid to moderate demand, or switch their use to a different time.

This new "virtual power plant" will add to the Tesla big battery being built in South Australia – in total it will be effectively twice the size – and other measures put in place to ease the strain on the grid created by the recent closure of Hazelwood  brown coal power generator.

The tender, funded by the Australian Renewable Energy Agency (ARENA) and the NSW government, was won by 10 different pilot projects – out of 26 shortlisted – mostly through commercial and industrial customers, who will get paid for reducing their demand at critical times.

AEMO considers demand response – relatively undeveloped in Australia – a critical tool to deal with unexpected outages from coal and gas plants, particularly when they struggle in prolonged heatwaves.

It says it is far cheaper, and smarter, than building new gas plants – which has Australia’s traditional response for the last few decades, and it signals a major shift in the way the grid is managed.

AEMO chief executive Audrey Zibelman said the projects would undergo testing by AEMO in November and would be up and running by December.

“These demand response projects will help manage spikes in peak demand in a cost-effective way using our existing electricity infrastructure and clever new technology,” she said.

“It is clear that demand response has untapped potential to manage demand during extreme peaks in Australia, just as it does in other countries,” Zibelman said.

“We’re hopeful this will create the proof of concept for a new market mechanism that will ultimately be to the benefit of Australian consumers.”

Indeed, Zibelman has said that demand response initiatives could account for 30 per cent of peak demand, as it does in other countries.

ARENA will commit $28.6 million to the operational costs of the project, while the NSW government will pitch in $7.2 million for the 80MW of NSW-based projects. ARENA boss Ivor Frischknecht said more capacity had been achieved at a lower cost than expected.

“Through this initiative, we’ve been able to build a virtual power plant the size of two of Tesla’s giant 100MW batteries in a matter of months for a fraction of the cost of building new supply,” he said.

"Demand response will not only ease the strain on the electricity grid and prevent blackouts. These projects will also put money back into the pockets of Australian businesses and households, helping to reduce their energy costs and emissions."

The projects have been put together largely by energy retailers tapping into a range of services offered by Australian and international companies, and incorporate a range of technologies and services, including voltage control and intelligent thermostats, and "app" notifications.

Large-scale industrial and commercial businesses – such as cold storage facilities, manufacturing plants and commercial buildings – will take part, including tens of thousands of households who will voluntarily sign up to participate in exchange for incentives.

One of the biggest winners will be EnergyAustralia, which will provide 50MW across three states using Wattwatchers monitoring technology and load curtailment devices, Redback Technology's VPP technology for aggregation and GreenSync's smart battery storage systems.

EnergyAustralia will provide 20MW of this capacity in NSW, 11MW in South Australia and 9MW in Victoria from commercial and industrial businesses, and residential customers.

Another big winner was Enernoc, which won two projects totalling 50MW in NSW and Victoria, while AGL Energy (smart meters, and controlled load), Zen Ecosystems and Powershop also won tenders.

United Energy will use voltage control devices installed at substations in Melbourne and Mornington Peninsula to "slightly lower" the voltage across its whole network of 600,000 households and businesses, and will use smart meters to ensure the voltage remains at a safe allowable limit. That will deliver 30MW.

The one major energy user to win a contract directly was Intercast & Forge, a South Australia metal foundry which has installed sophisticated energy systems that allow it to provide dispatchable demand response by powering down furnaces during peak events.

The Powershop initiative will encourage customers to "curb their power", reducing energy usage for 1-4 hours, in exchange to the equivalent of a weekend of free electricity. It will also draw on 1MW of Reposit enabled batteries installed in Powershop customers' homes and on a 1 MW co-generation facility at Monash University as a backup.