The Australian Renewable Energy Agency (ARENA) commissioned Energy Synapse and NERA Economic Consulting to model the potential value of load flexibility in the energy transition.
The study considered a range of demand-side resources in Australia's National Electricity Market (NEM) over the next 20 years. This includes behind-the-meter solar and batteries, electric vehicles, orchestrated consumer devices, smart commercial buildings, electrification of industry, and green hydrogen.
The key findings are summarised below. You can download the full report for free from
ARENA.
1. Load flexibility greatly reduces system costs
The study estimates
$8-18 billion in savings from demand flexibility due to the reduced investment requirements for large-scale generation and storage capacity. This contributes to lower system costs and electricity prices for consumers. To unlock these savings, it is important that Australia addresses any inefficient barriers to demand-side participation.
2. Value of load flexibility increases as more renewable energy is added to the system
The savings grow across the 'States of the World' as more services are electrified and more variable renewable generation enters the power system. Load flexibility can help balance the market by taking advantage of intraday price spreads and by playing a role in mitigating occasional supply shortfalls. These benefits are proportional to the amount of variable renewable energy used.
3. Load flexibility puts consumers in control of their costs
In addition to reducing total system costs, load flexibility adds a new dimension to competition in electricity markets. Consumers with flexible demand resources can reduce their exposure to price spikes (scarcity pricing) and reduce the extent of generator ‘super profits’ that they would otherwise fund. This flows through to lower prices for all consumers.
4. Load flexibility can more than offset the costs of electrification
While electrification of transport and industry will inevitably increase the total costs of the power system, greater flexibility can offset this effect and result in lower prices (on a$/MWh basis) while electrifying.
5. Load flexibility improves network utilisation and efficiency
Load flexibility reduces the peak demand and peak generation flows at the transmission level, especially in high DER scenarios. An estimated peak load reduction of 6 GW in the State of the World 4 scenario is material and warrants further consideration by transmission planners.
6. Flexible charging of electric vehicles is the largest demand-side resource
Flexible charging of EVs, whether through deferred charging or vehicle-to-grid (V2G) services, was found to be the most utilised source of load flexibility. This is due to the very low marginal cost of delayed charging compared to other forms of load shifting or load curtailment. Behind-the-meter batteries could also play a major role if they are be deployed at scale and responsive to wholesale market signals.
7. Load flexibility generally favours wind over solar generation
Adding more flexibility tends to favour wind over solar generation. An important exception is high flexibility hydrogen electrolysers (operating at 60% or lower load factors) that are able to take greater advantage of lower cost solar as they can operate less of the time.
8. Greater load flexibility moderately reduces emissions
The modelled emission reduction benefits were negligible in the first three States of the World, as flattening the load profile allowed continued utilisation of thermal generation. However, as more DER enters the system in SoW 4, flexible load technologies can take advantage of the inherent flexible supply conditions and reduce the utilisation of thermal generators, thereby reducing overall emissions