IRENA On Demand Flexibility
- Feb 28, 2020 9:00 pm GMT
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In the opening section of its report, Demand-side Flexibility for Power Sector Transformation, the International Renewable Energy Agency (IRENA) highlights the obvious. It says, “Decarbonization of the energy sector comes with a set of challenges. The energy transition is linked to increasing penetration of variable renewable energy (VRE) together with an increase in the electrification of end-use sectors.” That much is already known. “If not well-planned, however, large shares of VRE together with the rapid expansion of electrification could affect the reliability of the power system.”
That explains why IRENA, an agency whose primary mission is to promote renewables, is interested in flexibility, and not just on the supply side.
What IRENA says next is what many have been saying for some time, namely, “… an increase in flexibility is necessary to mitigate potential mismatches in supply and demand induced by these changes.,” adding that this “… flexibility must be harnessed not only on the supply side but also on the demand side, an approach that is referred to as demand-side flexibility.”
This editor could not agree more. Demand flexibility is the topic of 3 symposia in 2020 (box) to explore exactly what is demand flexibility and how it can be profitably harnessed at scale.
Exploring demand flexibility: Florence, Melbourne & San Francisco
Traditionally experts in the power sector predicted demand and dispatched generation to meet it. In the future, they will increasingly be predicting variable renewable generation and schedule demand to match it.
This represents a significant expansion in the role of flexible demand in balancing supply and demand in conjunction with flexible generation – peaking plants – as well as energy storage as the proportion of variable renewable generation rises in many systems across the world.
But how much flexible demand exists and how to capture it remains largely unexplored. Last year Ryan Hledik and colleagues at the Brattle Group quantified the potential for flexible demand in the US at around 20% of the peak demand but pointed out that to get to that potential many challenges have to be overcome.
How flexible demand can be aggregated and managed to meet variable renewable generation will be explored in 3 symposia in 2020 as noted below:
- 19 Feb, Florence, Italy, organized & hosted by the Florence School of Regulation;
- 3 Apr, Melbourne, Australia, organized & hosted by the Victoria University; and
- 21 April, San Francisco, CA, organized & hosted by the Brattle Group. n
Further details of the first symposium may be found at
Results of the Brattle Group study may be found at
IRENA defines demand-side flexibility “ … as a portion of the demand, including that coming from the electrification of other energy sectors including heat or transport via sector coupling that could be reduced, increased or shifted in a specific period of time to:
- Facilitate the integration of VRE by reshaping load profiles to match VRE generation;
- Reduce peak load and seasonality; and
- Reduce electricity generation costs by shifting load from periods with high price of supply to periods with lower prices.”
Net load and California Duck Curve
It says, “Different sources of demand-side flexibility can be combined to form innovative solutions. These include sector coupling – power-to-heat, power-to-gas and smart charging of electric vehicles – together with smart appliances in residential and commercial buildings and industrial demand response. These solutions can have different suitability depending on the end-use sector ….”
IRENA’s report goes on to present 6 different cases for demand-side flexibility emphasizing “different maturity levels” and “timescale impacts.”
As others have observed, IRENA notes that demand-side flexibility is not a new idea and has been applied to various degrees of success in different parts of the world but has a long way to reach the full potential of the resource.
2016 vs. 2050
IRENA refers to an estimate by the International Energy Agency (IEA), which puts the potential – expressed as the sum of flexible loads at each hour of the year – at 457 GW today and expected to reach 800 GW by 2040. As a point of reference, total installed capacity in the US is around 1,000 GWs.
IRENA identifies several reasons for the growing urgency for developing flexible demand.
“First, a high penetration of VRE sources, which are characterized by variability and uncertainty, poses a challenge to the power sector across different time scales, from the short to the long term. An example widely referred in the literature is the ‘duck curve’ (visual above) that first appeared in California.”
The second challenge is increasing electrification of end-use sectors, namely buildings, industry and transport. These will be required as economies push towards net zero carbon targets.
According to REmap, IRENA’s decarbonization scenario, electrification of these sectors is expected to increase the share of electricity in the final global energy consumption from roughly 20% today to around 49% by 2050. The IEA and others project similar shifts to electrification over time.
Increased demand flexibility will be needed for the power system to cope with the variability and uncertainty that solar and wind generation introduce at different times, which vary from the very short to the long term while minimizing renewable curtailment – well-known topics.
Historically, flexibility was primarily provided on the supply side, for example, using flexible thermal plants and natural gas fired peakers. In the future, we need to look more closely at demand-side flexibility.
But how can flexible demand be cultivated? IRENA provides examples of successful schemes such as New Zealand’s efforts with hot water ripple control since the 1950s, which allows Transpower to switch off customers’ electric water heaters periodically when required. Other examples include the Spanish interruptible scheme managed by REE and a similar one in Germany managed by TenneT.
IRENA acknowledges that estimating the potential of demand-side flexibility in different countries and sectors is a complex task requiring quantitative analysis but points to examples in the literature including the recent estimate by the Brattle Group reported in the Feb 2020 issue of this newsletter as well as box on page 7.
A 2016 study by the Directorate-General for Energy came with the theoretical potential in the European Union in 2010 at 95.7 GW, roughly 1/6th of the peak demand; 120.8 GW in 2020 and 160.9 GW in 2030, partly attributed to the rise in energy consumption in heat pumps and EVs.
Power-to-heat and the other usual suspects
IRENA does a good job of describing many of the sources of demand flexibility, including the usual suspects (visual on right) and points out that they can only be captured though what it calls “controllable technologies.” As described in a companion article on page 18, as more devices become smart and connected that will pretty soon include virtually all in-front-of and behind-the-meter assets, whether they generate, consume or store energy.
Many controllable loads have been around for very long time – such as electric water heaters with a storage tank – while others such as electric vehicles are only now being added at a fast pace. Others including power-to-hydrogen have huge potential, but also face significant challenges. Smart and connected appliances, large and small, are another promising category provided they can be aggregated in large numbers and remotely managed. Large-scale industrial demand flexibility is another true and tested option, already exploited in some but not all markets.
The future of demand flexibility, however, may be in the hands of new and emerging aggregators whose business models are to scale up and deliver services to multiple stakeholders while maximizing profits from multiple revenue streams (visual below).
Next come the aggregators
Of course, not every customer or scheme delivers the same level or type of flexibility. Some schemes can only deliver small amount of flexibility for short durations while others can deliver a lot and over long periods of time – as is true with storage technologies.
The Texas market operator, ERCOT, for example, has allowed the participation of demand in the ancillary services market since 2002 when the market was opened to competition and large industrial customers were encouraged to participate. ERCOT has succeeded in getting up to 25% of such resources to participate in the responsive reserve service or RRS. Over time the maximum share for load participation in RRS has increased to 50% in 2005 and 60% in 2018.
Industrial demand flexibility in ERCOT
The majority of loads that provide RRS are, unsurprisingly, from the industrial sector such as chemical plants, air separation, natural gas compression sites, oil fields and others – energy-intensive customers as well as a few large commercial sites such as data centers. In 2018, ERCOT had over 300 load resources registered to participate in RRS accounting for a total capacity of 4,200 MW (visual on right).
Electric water heaters, which are extensively used in many European countries, offer another source of demand flexibility – if they can be aggregated and managed in large numbers.
The majority of households in France, for example, are on a simple time-of-use (TOU) tariff, with peak and off-peak prices, which incentivize consumers to set their electric water heaters to run during off-peak while avoiding peak hours. This has been a main factor behind the reshaping of the French demand curve since the 1950s (visual below).
The demand-side flexibility inherent in electric water heaters, apart from flattening the French demand curve over the years, has also flattened electricity prices by heating water during low price/low-demand periods instead of during high price/high-demand periods. More recently, the same pricing scheme allows the integration of more renewable generation by shifting water heating to hours with high VRE penetration and low prices – a practice that is likely to proliferate.
French water heaters have changed France’s load shape over time
The most promising source of flexible demand, of course, is electric vehicles, with their large batteries – which can store and potentially discharge large amounts of energy as their numbers grow.
This has been already applied by the grid operator in California, CAISO, through the deployment of 6,000 EV chargers managed by eMotorWerks, a company recently acquired by Enel. In the successful pilot project, eMotorWerks was able to create a virtual battery with 30 MW of capacity. EVs can be deployed to soak up the excess solar generation when the prices are low – a practice called grid-to-vehicle or G2V. California, which aims to have as many as 5 million EVs by 2030 if not sooner, is in a position to scale up the storage capacity of large fleets of EVs.
Even more promising is the reverse, called vehicle-to-grid (V2G), which allows EVs to discharge stored energy back to the grid during peak demand periods. While still in its infancy, Nuvve, has demonstrated the concept in different countries, including the company’s first commercial project in Denmark in 2016, in collaboration with Nissan and Enel. Under this project Nuvve installed 10 V2G chargers for the Danish utility Frederiksberg Forsyning with a maximum power of 10 kilowatts each. The chargers were aggregated under one platform that allowed the EVs to become active participants in Denmark’s power system.
An increasing number of EVs are expected to be deployed worldwide – as many as 1,166 billion by 2050 according to IRENA. How and when these many EVs will be charged and potentially discharged is a big challenge and an even bigger opportunity.
Other sources of flexible demand include district heating – already prevalent in Europe. For demand flexibility to flourish, however, many remaining barriers must be removed, and new incentives introduced. IRENA identifies 4 major areas as highlighted in the visual on page 12.
Market design consists of new market structures and changes in the regulatory framework that encourage flexibility. The most relevant market design innovations include time-of-use tariffs, innovative ancillary services, market integration of distributed energy resources (DERs) and increasing the granularity of prices by time and location in electricity markets.
Much more is needed before flexible demand can flourish
System operation refers to innovative ways of operating the electricity system, allowing the integration of higher energy shares of VRE. This includes cooperation between transmission and distribution system operators, the expanded role of distribution system operators, virtual power lines and advanced forecasting of variable renewable generation, according to IRENA.
If there is a single lesson one can take from IRENA’s report is that the potential for demand-side flexibility is enormous and it can be expected to grow over the coming decades due to the electrification of transport and buildings as well as the massive opportunity presented by rapid uptake of electric vehicles. n
This article originally appeared in the March 2020 issue of EEnergy Informer, a monthly newsletter edited by Fereidoon Sioshansi who may be reached at firstname.lastname@example.org"