Reverse Demand Response?
- October 17, 2017
When the electricity grid is peaking, demand response programs compensate you to curtail your energy demand. But what do utilities do when growth of electricity use has flattened, renewable energy generation continues to grow, and there’s excess renewable generation available leading to negative pricing? This opposite scenario calls for an opposite strategy – reverse demand response, where end users are incentivized to actually turn up demand, rather than turn down. Arizona Public Service recently proposed this new program to help balance their grid during times of excess renewable generation. Read on to learn more about how reverse demand response would work, and how battery storage can play a role.
According to the Department of Energy, growth of total electricity use has slowed from averaging 2.5 percent annually in the late 1990s, to averaging 1.0 percent annually from 2000 to 2008, to remaining roughly flat since then. Couple this with the continued growth of renewable generation, particularly solar and wind, and you get times of the year where there is more renewable generation than there is demand from the grid, which can lead to negative prices. Wind generation tends to peak overnight when load is flat (and low), so some utilities have created rate structures that offer free electricity overnight if you can shift your load as an end user (see our article Free Electricity at Night?).
On the other hand, solar obviously peaks during the middle of the day, coincident with the grid. When there is ample solar production that displaces traditional fossil fuel generation, this presents a problem for grid operators who have to balance the generation mix, specifically the steep ramp of non-renewable generation to meet the demand when solar production declines (e.g. late afternoon 3pm-6pm). Traditional generation requires long periods of time for startup/shut down, so power cannot be easily scaled down and up again over short periods. Below is an illustration of this steep ramping condition, also called the “duck curve” (because it looks like a duck!).
“Oversupply is when all anticipated generation, including renewables, exceeds the real-time demand. The potential for this increases as more renewable energy is added to the grid but demand for electricity does not increase. This is a concern because if the market cannot automatically manage oversupply it can lead to overgeneration (damages equipment connected to the grid), which requires manual intervention of the market to maintain reliability. During oversupply times, wholesale prices can be very low and even go negative in which generators have to pay utilities to take the energy.” For these reasons, Arizona Public Service (APS) has proposed a reverse demand response program.
Rather than curtailing renewable production, APS would pay customers to take the energy through this reverse demand response program in order to keep renewables online and smooth the curve. This is similar to load shifting, but since it is less predictable relative to on-peak /off-peak price arbitrage (due to the intermittency of renewables) the APS program would be specific to dispatchable non-essential loads. For example, electric vehicles with smart charging could offtake the free energy when reverse demand response is activated, and smart appliances (e.g. dishwashers, washing machines, dryers, etc.) can be set to run during these times as well.
As of now, there are only a few utilities in the country that have proposed a reverse demand response program (mainly applicable when a duck curve is present). As utility-scale solar grows, the duck curve will likely be seen in markets such as Georgia, Nevada, North Carolina, and Texas, and we could see similar programs proposed in these markets. However, since the program is only applicable to non-essential load (i.e. can’t be air conditioning for a senior center or equipment at a hospital), energy storage will play a much larger role (long-term) in smoothing the curve and balancing the integration of renewables on the grid.
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