EXECUTIVE SUMMARY

The RACE for 2030 Cooperative Research Centre (RACE for 2030) has commissioned an opportunity assessment on flexible demand and demand control (Research Theme B4). The opportunity assessment aims to identify priority research areas to accelerate adoption of Flexible Demand (FD) in Australia’s electricity system.

FD is a resource in the electricity system that involves energy end-users modifying their electricity demand in response to an incentive. This shifts demand to times of low price and/or away from periods of stress on the electricity supply infrastructure. Using FD is a win-win-win; businesses pay less for electricity, electricity network operators reduce infrastructure costs, and electricity supply becomes more reliable. Enabling FD gives businesses increased choice and control over their costs.

The opportunity assessment identified large untapped potential for low-cost FD across industrial and commercial energy end-use applications. Activating these FD opportunities would put downward pressure on electricity prices for all electricity consumers. However, a number of barriers are impeding uptake of FD. Research is required to address these barriers and to develop tools to support FD deployment.

What is flexible demand and why is it valuable?

FD includes moving electricity consumption to a different time of day or switching off equipment altogether. The former is attractive when there is some form of storage (including inventory management) in the end-use process and flexibility to schedule equipment operation for different times of day. It is less feasible for processes that operate continuously at high capacity. Switching off equipment may be attractive when electricity is expensive or unreliable, or if paid incentives outweigh the corresponding costs of production.

Four forms of FD are generally recognised:

• Shape—Moving demand routinely according to a standard long-term pattern. • Shift—Moving demand sporadically in response to an external signal. • Shimmy—Moving demand over very short timescales in response to an external signal. • Shed—Switching off equipment.

These four forms of FD have relevant use cases across different components of the electricity supply system. For example, Shift can be used to reduce demand and reduce pool price in the wholesale electricity market during high price events. Shape, Shed, and Shift can reduce demand on electricity networksduring peak demand periods, reducing the need for infrastructure upgrades and increasing network security. Shed is the dominant provider in the Australian Reliability and Emergency Reserve Trader(RERT) scheme. Shimmy can be used to provide short-term supply and demand balancing in the Frequency Control Ancillary Services (FCAS) market.

FD has its own technical and operational characteristics distinct from those of traditional electricity supplyside solutions (generators, network poles and wires). These FD characteristics can add value across each component of the electricity system. AEMO (2019) found that 8.5% of forecast peak demand is a reasonable contribution from FD resources.

While FD is not a drop-in replacement for traditional solutions, existing electricity supply industry rules were designed on the implicit assumption that customers would have little interest in participating actively in the