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Dispatching Demand Response by a third party, based on Price

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Energy Users who participate in this category of Demand Response follow dispatch instructions from some third party in response to some form of pricing signal.  That’s different than these other methods, where the price response is triggered (dispatched) internally.

The way we see this “third party dispatch” category, there are essentially two separate methods through which this dispatch could be effected:

Method #1 – the Demand is Dispatched

Perhaps the “purest” form of demand response would be for the energy user to register as a Scheduled Load with the AEMO and participate in the dispatch process.

In this method, which has been available since the start of the NEM and is further discussed here, a load:

  • places bids with the AEMO to consume for each dispatch interval; and
  • receives dispatch instructions from the AEMO (i.e. which amount to instructions for how much to consume).

Since the start of the NEM until 2019, there have only been three types of loads register as Scheduled Loads with NEMMCO/AEMO:
Type #1 – for a brief period of time at NEM start, the Aluminium smelters in Victoria registered as Scheduled Loads
Type #2 – there are currently three pumped storage hydro facilities in the NEM.  The (sizeable) pumping loads are registered as Scheduled Loads
Type #3 – starting with the Hornsdale Power Reserve, all battery storage facilities larger than 5MW must register as a linked pair of DUIDs, with one of the DUIDs being a Scheduled Load for their charging component.

However the ongoing evolution of technology is meaning that the barriers to significant expansion of this registration

Method #2 – a “NegaWatt” is Dispatched (based on assumed demand profile)

In this alternate method, instead of dispatching consumption (i.e. telling an energy user how much to consume), some third party dispatches avoided consumption (or “Negawatts”) – by telling an energy user how much to not consume.

Central to this alternative method of dispatch is the need to modify a demand profile from what actually can actually be measured.  An assumption is made on the Demand that would have otherwise occurred had some response not been triggered, with the measure of that response then taken account of, as a notional supply-side contribution, in the dispatch process.

With this unbundling approach, a single demand trace becomes three different traces over time:
Trace #1 = the hypothetical “Demand that would have otherwise occurred” (which cannot actually be measured, but which is generally established through some form of Baseline methodology);
Trace #2 = the “what actually happened” net demand trace, which can be measured – but which effectively takes less importance; and
Trace #3 = the assumed (NegaWatt) Demand Response (which again cannot actually be measured, but is calculated as the difference between the assumed Trace #1 and measured Trace #2)

Focusing specifically on the “dispatching of NegaWatts” method of Demand Response, there are essentially two ways that this might happen:

Method #2a = bundling the three traces together – via a Retailer

It already is possible for the parties engaged in a commercial arrangement that encompasses control of all 3 traces to engage in the dispatch of NegaWatts.  In the NEM, this is (by definition) between the Retailer and the Energy User.

Since the early days of the NEM, a significant number of commercial & industrial (C&I) energy users have participated (at least commercially) in arrangements through their retailers for curtailability arrangements with their retailers.  In all cases we have come across, these arrangements are optional (for the energy user) and the benefits are shared.

This method (including some warts we have encountered in how it operates) is further discussed on this page.

Method #2b = unbundling Trace #1 (Retailer) from Trace #3 (Market Operator)

Since the creation of the NEM, there have been a number of attempts made that would have the effect of:
Change #1)  Changing the nature of the commercial arrangement between the retailer and the energy user such that the retailer invoices the energy user for consumption based on Trace #1; and at the same time
Change #2)  Frees up the notional NegaWatt dispatchable contribution (i.e. Trace #3) to be separately dispatched into the central wholesale market by some third party.

As at January 2019, this method is not currently supported in the design of the NEM – but some general notes are included here, for completeness.

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