The people-powered grid

Lachlan Blackhall explains how empowered electricity customers are transforming Australia’s electricity supply and management systems.

When you come home at night and turn on the lights, watch TV or cook dinner you probably aren't thinking about the electricity system: an extraordinarily complicated technical and financial system that generates and transports the electricity powering your home.

The electricity system in Australia is a major piece of national infrastructure that has been evolving since “first light” was recorded in NSW in the 1860s. For the past 70 years, it has developed around a centralised design. Large, centralised generators, typically burning fossil fuels, supplied energy to residential and industrial customers through the transmission and distribution networks.

Today, however, the electricity system is in a period of unprecedented change as we transition to renewable energy generation and install more distributed energy generation and battery storage. How we evolve our electricity system in response to these changes is going to determine the electricity system we have 70 years from now.

What is driving these changes?

To begin with, we are seeing the closure, or mothballing, of large centralised coal and gas-fired generation as it reaches its end of life. These assets are not being replaced and it is widely accepted that we will not see a coal-fired power station built in Australia again. At the same time, we are seeing a massive increase in the adoption of large-scale renewable solar and wind generation.

However, these changes in the generation mix are being dwarfed by the revolution led by residential and industrial energy customers. These customers, who represent the bulk of our energy demand, are often referred to collectively as the demand side of the grid.

The growth of renewable generation in Australia is, in fact, led by residential electricity customers through their accelerating adoption of solar photo-voltaics (PV) generation. There are already 1.8 million houses with solar generation, the highest per capita deployment of solar globally, and this is predicted to double by 2020.

Alongside this increase in solar PV generation, we are seeing more interest in energy storage. At the residential scale, small-scale energy storage is being more widely adopted, with a predicted one million residential batteries installed by 2020.

Residential solar and storage (often known as distributed energy resources, or DER) aren’t the only additions to our homes, however. They will be augmented by devices to better manage and control large loads in our homes, like air conditioning, hot water heaters, pool pumps and eventually electric vehicles.

We can alter when and how much energy these devices can consume in response to market need or changing conditions on the electricity grid. This ability to better manage customer loads is typically referred to as demand response.

On the demand side, the changes are a response to the overwhelming customer desire to drive down CO2 emissions that contribute to climate change, and to reduce the cost of electricity – which has risen by 63 per cent over the previous 10 years, according to the ACCC. As an industry, we must ensure that as these changes occur we continue to provide energy sufficiency, reliability, and security for residential and industrial customers alike.

Clearly, the evolution of our electricity system is one of the great challenges of our age. Where do we begin?

One of the most pressing issues is the change from a largely centralised electricity system to a highly-distributed system led by the generation, storage, and devices now proliferating on the demand side of the grid. These demand-side resources have not previously existed, let alone participated, in the operation of the electricity system.

It leads us to the following critical questions:

1. How will we integrate these demand side resources into the electricity system alongside the existing market, network and generation assets and systems?
2. How will we co-ordinate and orchestrate large numbers of distributed energy generation, storage systems and demand response capability to ensure energy reliability and security?

Two key areas of work currently under way to address these questions are the development and deployment of virtual power plant technology, and discussions and debates about the role and function of a distributed systems operator.

Virtual power plants

In the past, a large centralised generator could deliver hundreds of megawatts of capacity. The increasing rollout of residential solar PV, battery storage, and customer load management (i.e. demand response) means effective methods of aggregation are needed. The ability to aggregate lots of small generation and storage assets is called a virtual power plant (VPP).

Through sophisticated software, communications, and control systems, a VPP makes all the small and distributed assets act like one large energy asset.

Virtual power plant technology therefore plays a vital role in allowing demand-side participation in the electricity system. It allows customer-owned devices to participate in energy markets, like the national electricity market (NEM) that underpins buying and selling energy and ancillary services in NSW, Queensland, the ACT, South Australia, Victoria and Tasmania.

VPP technology also lets demand side resources deliver energy and power to distribution and transmission networks, alleviating voltage issues and addressing thermal and capacity constraints.

It’s clear, then, that VPPs are crucial for demand-side resources to participate fully in the evolving electricity system. However, on its own, VPP technology won’t allow us to completely replace those large centralised energy generation assets – we need something else.

Distributed systems operator

Large centralised generation is not only key to the generation of energy, it also ensures energy reliability and energy security. Ultimately, this relates to ensuring the electricity system delivers the energy needed, when and where it is needed, and that the system remains stable.

Large centralised generation is connected to the electricity system via high-capacity transmission lines. Demand-side resources and their aggregation into VPPs, on the other hand, are connected through the distribution network. The lower capacity of the distribution network means that there may be times when distributed energy resources and VPPs may have to reduce the energy and power they can output to the grid.

So how do we adequately co-ordinate the actions of demand-side resources and VPPs? We need this co-ordination to guarantee the delivery of energy and power to energy markets, transmission and distribution networks when and where it is needed, without exceeding the capacity of the distribution network.

The complicated job of this coordination will fall to a new system commonly called the distributed systems operator (DSO). The DSO will ensure demand-side generation and storage, and virtual power plants, composed of thousands – or even tens of thousands – of devices, can all work together and keep the grid stable.

We are only in the early days of discussions about how the DSO will function, what roles it will play and who will have the responsibility of running it. But if we want to take advantage of demand side resources and VPPs deployed all over the country, we will need to work faster.

While VPPs and DSOs won’t – and can’t – resolve all the challenges that the electricity system is facing, they will ensure that demand-side resources can be equal participants in the operation and evolution of our electricity system.

If we get it right, these new demand-side systems and capabilities will be vital in ensuring we have secure and reliable power, while addressing climate change and reducing costs for both residential and industrial customers.

Ultimately, VPPs and DSOs, demand-side generation and storage resources will be crucial for a future electricity system that will still allow customers to come home at night, turn on the lights, watch TV or cook dinner and not think at all about the extraordinary electricity system that powers our society.