Expert view: Flexing demand helps businesses get closer to 100 per cent renewables 03 August 2021
By Dani Alexander and Chris Briggs
Energy users are reshaping the market by demanding more renewable energy. One of the key market innovations has been the emergence of corporate renewable power purchase agreements (PPAs) with over 80 organisations signing deals with solar and/or wind farms over the last five years.
Now, innovative businesses are seeking to use demand flexibility to get more out of their renewable PPAs.
Flow Power, as a retailer offering wholesale price access and PPA products, wanted to understand why this was important to the businesses and how other businesses could take advantage. So, Flow Power commissioned the UTS Institute for Sustainable Futures to take a closer look.
The result was a report titled More for Less: how businesses can flex their energy to get more from a Renewable PPA, which investigated three business case studies:
- The City of Sydney;
- Fruit product manufacturer AGRANA Fruit Australia; and
- The SA wine and spirits producer Pernod Ricard.
These case studies show how businesses can progressively unlock greater cost savings, and reduce risk and emissions as they become more “energy literate”.
Three lessons came through loud and clear for other businesses seeking to do the same.
1. Matching a PPA WITH YOUR DEMAND is the least-cost and lowest-risk way to “use” more renewable energy
The first step to building a successful renewable PPA is to find the right mix of solar and wind that matches a business’ energy consumption profile as closely as possible.
A close “match” reduces the risk of exposure to price volatility by reducing the amount of “market buy” needed. In other words, you know how much renewable generation costs in the PPA (you’ve negotiated it) so the more energy you use at that time will reduce the amount you have to purchase at the variable wholesale price. For buyers under contracts where the retailer provides “balancing supply”, it will also reduce costs as the retailer sets the “balancing supply” prices based on an assessment of the cost and risk for procuring electricity for them. This cost would typically be higher than what’s been negotiated in a PPA. Hence, where a PPA closely matches a business’ energy consumption profile, less “balancing supply” is needed, and the business has less energy costs.
The three case studies showed that greater than 75 per cent demand matching with the PPA saved the businesses 8-10 per cent of their energy bills in 2019. The City of Sydney was able to achieve a match of over 80 per cent, using more wind generation to suit its high street lighting loads at night.
Most of the untapped potential for extra demand flexibility are opportunities to shift more energy into times when demand was less than generation from the renewable PPA.
2. You don’t need to switch off your business: there are lots of low-risk options to flex DEMAND
There are many untapped “flexible loads” – appliances or equipment that use energy – which Australian businesses could unlock that would not affect their core operations.
Both AGRANA Fruit Australia and Pernod Ricard have flexible on-site generation (e.g. energy storage and diesel generators) and are rescheduling non-critical processes (e.g. wastewater treatment and refrigeration) for financial gains without any impact on their production. Their financial gains come from participating in the Australian Energy Market Operator’s (AEMO) Reliability and Emergency Reserve Trader (RERT) scheme which offers payment for reducing energy users’ electricity demand over a few hours when the electricity grid is under stress. AGRANA Fruit Australia responds to RERT requests by switching on its stand-by diesel generators to power its production site instead of using grid energy. The same outcomes could be achieved by using battery or thermal storage systems.
Smart energy technologies, like energy storage or monitoring, control and automation systems are increasing demand flexibility of systems. For example, Pernod Ricard is trialling Glaciem Cooling’s new “ice battery” at their Rowland Flat site in the Barossa Valley to be able to use more of onsite solar generation and unlock further market opportunities.
3. NEW market opportunities will increase the FUTURE value of DEMAND flexibility
Many more market opportunities are emerging for demand flexibility to better support renewable energy. A new Wholesale Demand Response Mechanism (WRDM) will launch in October this year to allow retailers or aggregators to bid in demand response from businesses to the wholesale electricity market. Further, electricity networks are beginning to explore new incentives for businesses under the Demand Management Incentive Scheme.
The report unveils many opportunities for the three case studies to further “flex their energy” to take advantage of these, and other new market schemes that may emerge. Pernod Ricard is already exploring these in South Australia, working with SA Power Networks – the state’s distribution network – to use its site to “soak up” excess renewable generation on the grid for additional bill savings.
Now is the time for other Australian businesses to embark on their energy management journey, as fast followers of these energy pioneers, and capitalise on the multiple benefits of the energy transition.
Research Principal, UTS Institute for Sustainable Futures
RACE for Business Program Leader, RACE for 2030 Cooperative Research Centre
Research Director, UTS Institute for Sustainable Futures
Technical Director, Business Renewables Centre Australia (BRC-A)
ABOUT The UTS INSTITUTE FOR SUSTAINABLE FUTURES
The Institute for Sustainable Futures (ISF) is an interdisciplinary research and consulting organisation at the University of Technology Sydney. It has been setting global benchmarks since 1997 in helping governments, organisations, businesses and communities achieve change towards sustainable futures. ISF utilises a unique combination of skills and perspectives to offer long term sustainable solutions that protect and enhance the environment, human wellbeing and social equity.
For further information visit www.isf.uts.edu.au.
This article was originally published in the August edition of Efficiency Insight.