The energy market on the east coast of Australia has been on a rocky road in recent weeks. It begs the question: how can the market change to avoid the next crisis?
The discussion has largely focused on the need to generate more energy. But there is another way to unburden the system: using less energy.
Last week, residents of New South Wales were asked to find safe ways to use less electricity during the evening rush hour, such as not running the dishwasher until after bed.
When deployed on a large scale, such actions can make a big difference in sustaining short-term inventories.
But Australia has only scratched the surface of what’s possible when managing energy demand.
As the transition from fossil fuels continues, we must scrutinize every bit of electricity consumption to ensure it’s needed. It’s not about going without but making the best use of what’s available.
Small changes like running appliances overnight can make a big difference. Photo: Getty
Smart use of energy consumption
Asking people to reduce electricity consumption is known as ‘demand control’ in energy circles.
Sometimes it’s about paying consumers to use less power.
After all, offering financial rewards is much cheaper than blackouts or marketing more emergency reserve supplies.
The demand response system is aimed at large energy consumers, such as industrial installations.
AEMO has several mechanisms through which it pays large energy consumers to shut down when the system is struggling.
But more can be done to encourage households to reduce their electricity demand.
Some energy stores offer incentives to encourage households to reduce their consumption at certain times. It could mean people turning down the heating, using appliances outside peak hours, or using rooftop solar energy stored in house batteries instead of drawing power from the grid.
Households that have signed up for the scheme will receive a text message asking them to propose reducing energy consumption ahead of an expected supply shortage. Credit is paid when the household achieves the reduction.
Reducing household electricity demand will become easier as home appliances become more internet-enabled and controlled remotely. For example, it allows people to switch off a household appliance at work.
In the future, people could even opt for a scheme where a retailer temporarily turns off appliances in thousands of homes when they are not occupied.
Currently, only a few households participate in schemes, but retailers see much more potential. For example, Origin Energy proposes to scale its plan to 2000 megawatts over the next four years, a capacity comparable to a large power plant such as Loy Yang A in Victoria.
Just zero and beyond
There are many ways to improve how we currently manage demand – many of which could lead to lower consumer bills.
Time-of-use tariffs, which provide cheaper electricity outside peak hours, are an important potential measure.
Some homes are already taking advantage of the lower nightly electricity rates to heat their hot water. But traditionally, large energy consumers make the most use of these incentives.
Time-of-use rates can help manage energy usage.
As households increasingly use smart meters – devices that measure energy consumption digitally – it will become easier to choose these rates.
Devices, lighting, and heating connected to the Internet can greatly increase the broader power of demand management.
Companies could offer services such as monitoring the wholesale electricity market and turning on electric water heaters remotely when prices are lowest.
Controlling energy demand is crucial for the longer-term transition to zero emissions.
As sectors such as transport and industry are electrified or switch to green hydrogen (produced by renewable energy), new supply challenges will arise.
For heavy industry, reduced energy consumption – as part of a broader shift from fossil fuels – will lower operating costs and increase competitiveness.
A new report, to which we contributed, shows that a coordinated transition can also lead to wider benefits, such as thousands of new jobs and reductions in greenhouse gas emissions.
The challenge for AEMO is integrating renewable energy generation and storage, and much greater use of demand management, into its next plan for the national electricity market.
And a lot can be done at the household level. Millions of Australian homes are expensive to heat or cool because they are poorly insulated and designed.
All levels of government could support the proposed revision of the National Building Code to raise energy performance standards.
Managing demand makes sense after a crisis.
Doing it right will go a long way in creating the clean, affordable, and reliable energy system Australians need.
The potential for demand response only increases as renewable energy makes the electricity system more decentralized and technology allows consumers to participate more actively.
The Energy Security Board is taking the right steps by working on themes such as elastic demand and consumer technology choices.
The next test is how well the country’s energy ministers embrace the power to manage energy demand.
Anna Malos, Australia – Country Lead, Climateworks Center
Emi Minghui Gui, Head of Energy System Climateworks, Monash University
This article is republished from The Conversation under a Creative Commons license.