New report identifies ‘virtual power plants’ could provide energy security faster and cheaper than new power stations, echoing parts of the Finkel review that have been largely ignored.

“Australian governments can fight all they like over what new generation capacity to build. Regardless of who wins, none of it will be built for years, while the energy security crisis will be back next summer,” said Australia Institute strategist and report author, Dan Cass.

[Full report see PDF below]

Instead, demand management can be rolled out rapidly. As the Finkel review said. 

‘Making better use of demand response in the NEM represents a low cost and as yet under-developed opportunity to maintain reliability.’

The Institute’s report outlines how modern computing technology allows thousands of electricity devices to work together like a ‘virtual power plant’. The grid operator can control them in real time, to deliver energy savings and increase grid security.

“Heavy industry, businesses and households can deliver peak reductions cheaper and faster than building new power plants, while increasing grid security and lowering emissions.”

Negative megawatts (often called ‘negawatts’) are a cheap way to provide the grid with megawatts when they’re needed most without expensive new generated power.

“If we open up energy to demand response then thousands of households can sell their negawatts into lucrative peak price markets and lower the price of energy for everyone.”

Australia’s low level of demand response was identified in the Finkel Review and is a major contributor to price fluctuation and grid instability.

“The International Energy Agency also agrees, asserting that these technologies have ‘the potential to become a game changer for electricity markets’ around the world.

“The demand response sector is forecast to grow almost four-fold by 2025, to be worth $48 billion and producing 144 GW of negawatts worth of avoided consumption.

“If governments act quickly, demand response could deploy hundreds of MW before the coming summer and potentially avoid blackouts.

Five Minute Settlement Rule

The Finkel Review also recommended that the Council of Australian Governments should support reforms to the National Electricity Market to enable greater demand response.

“The COAG Energy Council has to stop delegating and start governing in the national interest.

“One immediate reform that would open markets to demand response is the Five Minute Settlement Rule, which is an idea championed by industry having been initially raised by a Queensland smelter.

The Five Minute Settelment Rule would encourage investment in battery storage and increase competition from virtual power plants, improving energy security,” Dan Cass said.