Energy costs can be reduced by managing your overall energy demand and the way it fluctuates from one period to the next.
Changing your consumption in response to real-time electricity prices can also result in savings or extra revenue.
Understanding how these opportunities arise enables you to develop a holistic energy procurement strategy.
Improving energy efficiency
Implementing energy efficiency opportunities reduces energy usage, lowering both demand and consumption charges.
Identifying energy efficiency measures requires a detailed assessment of your company’s energy use. This will provide an understanding of how energy is used within your operations and identify opportunities to improve energy performance.
Analysis can also assist to identify other demand side opportunities. An energy efficiency assessment is the best way to begin this process.
Substitution of energy source
Sometimes it can pay to switch your source of energy or use onsite generation to provide all or part of your energy requirements.
Before committing to a new energy source onsite, ensure you understand the financial and maintenance commitments for any onsite facilities. This includes the sourcing and storing of fuel to run them.
Industry case study: Bankstown Sports Club - demand side response
Bankstown Sports Club was approached by a demand side aggregator following pending network capacity problems in the local area. The club entered an agreement to provide network support using on-site generation as this was preferred to a potential loss of supply due to network outages.
The initial agreement included payment of a ‘standby’ fee and ‘dispatch’ fee and was extended for one summer period. The club’s ‘standby’ generators were dispatched twice under this agreement.
The initial agreement was modified to allow for dispatch by the demand side aggregator during periods of high wholesale market spot prices. The terms and conditions of the modified agreement were similar to the initial agreement and required the club to offer ‘standby’ and ‘dispatch’ services during hot summer periods.
The demand side aggregator installed and tested a remote, automatic start facility for the club’s diesel generators. This allowed them to remotely dispatch the generators at short notice during periods of high spot price. However, the club retained control over the generators. This meant they could be ‘locked out’ to prevent the remote start function, such as for routine maintenance.
Load shifting involves shifting energy consumption to another time period, typically when prices are lower. It can generate returns that compensate for the costs of lost production, training and administration of demand-side response measures.
Load shifting can be achieved through:
- rescheduling activities
- switching off unnecessary equipment
- onsite generation
- building product inventory to enable parts of the plant to be switched off when wholesale prices are high.
For example, a cement works might store surplus stock to continue production when turning off their crushers during peak periods.
Load shifting can help end-users reduce total demand charges but may not reduce overall usage charges. Additional power is often required at other times to undertake the rescheduled processes or return them to the appropriate temperature. However, end-users can still benefit if they are able to shift their load during times of high wholesale spot prices and capture the value of load shifting.
Capturing the benefits of load shifting
Demand bidding is an opportunity to capitalise on shifting load from a peak demand period to a period when demand and wholesale prices are lower.
The load you are willing to shed can be offered to the market through a demand side aggregator or your energy retailer. A higher risk approach with potentially greater rewards is dealing directly with a network service provider, wholesale energy markets or through financial contracts.
Demand side aggregators pay for shed loads in a variety of ways. In all cases, there is an actual payment for the load that is shed. In some cases there may be a standby charge for being available and willing to shed load.
Industry case study: Amcor - using demand side aggregators
Amcor entered into an agreement with a demand side aggregator which meant a financial benefit from reducing load or running onsite backup generators for short periods of time.
Amcor used their preferred demand side aggregator to provide demand side response services in South Australia, using 3 MW of back-up generation at their Gawler glass plant. The service provider combined individual items of Amcor’s capacity into a reliable portfolio and contracts with National Electricity Market participants for demand side response services.
Amcor also used their demand side aggregator to provide demand side response services in Western Australia, using 1.7 MW of load that could be turned off at short notice. The demand side aggregator aggregated Amcor’s capacity into a reliable portfolio and contracts for reserve capacity with the Western Australian Independent Market Operator through the Reserve Capacity Mechanism.
Amcor received capacity (or ‘standby and availability’) payments from the demand side aggregator for offering demand side response capacity. Amcor also received payments when responding to a ‘dispatch’ instruction from the demand side aggregator.
Reducing energy use at peak times is called peak shaving or peak clipping. Peak shaving can realise a range of benefits when it coincides with peak demand, and therefore peak prices, in the wholesale market.
Peak shaving can be achieved by shedding load or using onsite standby generation facilities during peak times. Reducing usage at peak times can enable you to stay within your contract’s maximum demand and optimise network and retail tariff costs.
Peak shaving is most appropriate when:
- total load on a site is approaching the agreed maximum demand, enabling you to avoid penalty charges
- the load on the distribution network is approaching its maximum.
When load on the distribution network is approaching its maximum, end-users can enter into an arrangement with the distribution network service provider to ease congestion on the system and enhance network reliability.
These types of arrangements should be discussed with your retailer to ensure changes in your demand profile do not adversely impact their energy supply arrangements and result in you paying higher energy prices because your load appears to be more volatile.
Capturing the benefits of peak shaving
There are a number of ways for end users to capture the benefits of peak shaving:
- By agreeing to a demand-side response clause with your retailer you can shed load at times of high underlying spot prices in return for a pre-agreed compensation.
- By purchasing all or part of your energy requirements directly from the wholesale electricity market, and avoiding loads when the spot price exceeds a certain level, you can achieve a lower average cost for energy. This approach requires:
- careful assessment of the opportunities and risks
- investment in suitable monitoring and control systems
- thorough training of production staff and management personnel.
- In the gas market, end users on a fixed price retail energy contract can re-sell unused energy created by load shedding back into the spot market, either directly or through a demand side aggregator.
Industry case study: Oxford Cold Storage - shedding load to stay under maximum demand
Oxford Cold Storage’s main demand management focus was to ensure its main site did not exceed total demand level and that total demand was reduced.
The company managed demand using the thermal mass of their cold storage facilities.
Freezers could be switched off for periods of up to 24 hours. The duration of the downtime depended on a range of factors, such as:
- insultation of individual freezer unit buildings
- frequency and duration that doors are opened
- ambient outside temperature.
By switching off freezer units, the company was able to halve its load within 15 minutes. Once a freezer was switched off for a period of time, it was necessary to increase energy use above normal operating levels to return contents to the appropriate temperature.