As the world adopts renewable energy guidelines, incorporating alternative technologies into the ecosystem puts strain on the electrical grid. Independent aggregators are set to play an important role in creating the necessary versatility in the system and giving rise to the significance of demand response.
The transition towards renewable energies is becoming a reality in different parts of the world. Countries are adopting clear guidelines for this transition, as stated in the Paris Agreement of 2016 and the European Green Deal of 2020. Incorporating renewable technologies, primarily wind and solar, into energy ecosystems has increased, but this dependence on climate conditions generates uncertainty and volatility in the electrical grid. The electrical system must be flexible to manage these imbalances. The need for flexibility has given rise to the importance of demand response.
The importance of flexibility in the electrical system
Flexibility is the capacity of a system to handle changes. The electrical system must manage imbalances between electricity supply and demand. Such discrepancies can occur during sudden changes in temperatures or events that cause an accumulation of people. Flexibility mechanisms are designed to ensure the grid's reliability and manage this imbalance.
Traditionally, when there was an imbalance between electricity supply and demand, it was supplemented by the aggregation of generation sources. However, these reserve generation sources are based on fossil fuels and do not help to achieve decarbonisation objectives.
The rise of demand response
Demand response is a greener alternative to provide flexibility to the electrical system. Instead of generating more energy, reducing consumption during a system stress situation achieves the same result without increasing the use of fossil fuels. To lower consumption, it is first necessary to identify which parties can make reductions during a particular interval and, secondly, to reimburse them for that availability. The use of storage elements, such as smart batteries, also serves users and the market when required.
France, the United Kingdom, Australia, and some US states, such as California, have mechanisms that allow the participation of demand resources in various electricity markets. In the "independent aggregator" category, different consumption is grouped under the same umbrella, allowing for more efficient and agile operations when activating demand resources. This allows small and medium-sized industries, businesses, and housing communities to participate in the markets on the demand side.
The democratisation of the electrical system
The level of democratisation and access of the various demand resources to electricity markets measures the maturity of the electrical system. The importance of the aggregator lies in its ability to unlock access to available demand resources without capacity limitations. Each country has its regulations, and those still working on them will have to go through the transposition of directives and the need to define new rules to accelerate the development of this regulatory framework.
Unlocking access to meet energy needs
The need for flexibility in the electrical system has highlighted the importance of demand response. Not only does this flexibility reduce consumption during a system-stress situation but it does it without increasing the use of fossil fuels. With independent aggregators as key players in these models, they unlock access to the available demand resources without imposing capacity limitations, thus meeting the energy transition needs.
About the authors behind the article
Francisco Ruiz has more than 20 years of experience in strategy consulting within the energy, utilities, and infrastructure sectors. He is an Associate Partner in Madrid. Tania Sepulveda is also based in Madrid as a Principal.