The Energy Efficiency Council (EEC) has welcomed action from the NSW Government to support users to voluntarily reduce their electricity consumption to improve energy system stability.
The NSW Government has contributed to a $15 million pilot program run by the Australian Energy Market Operator (AEMO) and the Australian Renewable Energy Agency (ARENA).
The pilot, which initially focused on South Australia and Victoria, is securing 'demand response' capacity by next summer to improve system reliability during extreme weather events, or unplanned generation outages.
The investment brings total funding for the program to $37.5 million. Ramping up effort on demand response was one of the key recommendations of the Finkel Review, which was released earlier this month.
EEC CEO, Luke Menzel, said the pilot is proof that Australia is making the transition to a 21st century energy system.
"We are emerging from a long period of inertia in Australia, which saw tools like demand response being left in the toolbox, despite the fact that they can bring down costs and improve reliability," he said.
The NSW Government has committed $7.5 million in funding to be matched by ARENA, bringing the total ARENA funding for its demand response competitive round to $30 million.
This will expand the demand response pilot program to be rolled out this summer to a total of $37.5 million in funding over three years.
This competitive funding round is a joint initiative with ARENA and the Australian Energy Market Operator (AEMO) which will reduce demand on extreme hot days or during emergencies, to avoid unplanned outages.
This $15 million funding pool will be reserved for NSW projects, with the aim to generate 6070 megawatts of demand response capacity to be available during extreme peak demand days and emergencies.
ARENA has previously committed up to $22.5 million over three years in grants to trial demand response technologies and implementation models in the National Electricity Market, with a focus on South Australia and Victoria.
ARENA will now allocate the original $22.5 million to projects outside of NSW, with the aim to provide approximately 100MW of demand response in the rest of the NEM.
In May, the NSW Energy Security Taskforce in its initial report identified that extreme weather such as Sydney’s February heatwave can create spikes in demand which can result in energy supply falling short.
In its initial report, the Taskforce recommended the Government take precautions during energy emergencies including providing guidance on how to reduce demand effectively during peak periods.
ARENA and AEMO’s pilot program to trial demand response has also been endorsed by Chief Scientist Alan Finkel and his team in the final report of the Independent Review on the Future Security of the National Electricity Market.
The competitive funding round for applications to be part of the pilot program will be extended by one week and will now close on July 17, 2017.
NSW Minister for Energy Don Harwin said that this pilot showed that energy security is a key priority.
“We need national market reform through the Finkel Review to secure a clean, affordable and reliable energy future. Part of that is reforming the market so we have smarter ways to ensure security, and this pilot will help accelerate the case for national reform," he said.
ARENA CEO Ivor Frischknecht said the matched funding from NSW allowed the pilot program to be expanded.
“With the support of the NSW Government, we are able to scale up the pilot program by more than 50% which we expect will offer more than 160 megawatts of innovative demand response across the National Electricity Market of which more than a third will be available for NSW," he said.
“And this is just the beginning. This pilot program will provide proof of concept for how innovative and flexible demand side resources can help provide security and reliability as we transition to an electricity system powered by more variable renewables.
“This will make better use of our existing electricity infrastructure and help reduce energy costs for businesses and households."